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For very high-net worth individuals, does it make sense to not have insurance? | While a lot of the answers focus on cost to replace and how much money you should have for tangible goods. There are a few more issues to consider. However before we get started, these issues are not related to ones net worth. They are related to other factors. Having money certainly helps, but someone worth only $10 may not need to insure their stuff under some circumstances. Insurance is a risk avoidance strategy. As such, it should be used to avoid risks that would otherwise cause issues for you. The normal example is a house. If you lost your house due to fire, would you be able to "make it" while you paid the mortgage off, and got a new mortgage to pay for a new house? This is a relatively simple view, but a good one. These days people tend to look at insurance as a savings account. I payed in X so I am entitled to Y. Heath insurance (a bit more on this later) is exacerbating the issue by selling it's self that way, but it simply isn't true. What your paying the premium for to avoid the risk of loss. Not so you can have a pool of money to draw from in time of need, but so that a time of need should never arise. Which brings us back to, should you get insurance? Tangible Assets Let's assume you have no legal or contractual obligation to have insurance. If you put the money you were spending aside would you have enough money to secure a new asset should your current one just vanish? This is the normal argument. But it has a second side. Do you need the asset at all, or can you just accept the loss. Lets pick on a red neck for a second. While certainly not millionaires, or "well off" by conventional means, the guy with 6 cars on bricks in his lawn does not need to insure 6 cars. If one were to vanish, it may make a hardship but hey, he's got 5 more. So with tangible goods it's more of a question of can you afford to replace the item, do you need to replace the item, and how big a risk is it to you to loose the item? What would you rather loose, the item, or the cost of the insurance? Non-tangible Assets I am going to try to keep this as un-rant like as I can manage, but be aware that I am biased. There are two big examples of non-tangible assets that are commonly insured. Life Insurance, and Health insurance. There are others, but it's very hard to get people to pay money to insure something that they don't actually have. Ideas can be insured, for example, but in order to insure an idea you have to spell it out, at that point why not just file for the patent etc. etc. Keep in mind that a lot of people and companies will insure against losses due to IP theft or other such intangible things. Largely these follow the same rules as tangible assets. This section is meant to focus on those insurances that do not. Life Insurance Life insurance is a bit odd. Were all going to die, so it seems like a "good bet" but what your insuring against with life insurance is an early death. For term life insurance it's a gamble. Will you die before your term runs out. For full life insurance (with no term) it's a different gamble. Will you die before you have paid in what they agreed to pay out. In many cases it's also a gamble that you will miss a payment or two and cancel the policy before you die. If the risk of your death worth the insurance. Usually while young the answer is yes. Do you leave your Family short one earner? Will they make it without the insurance? But as you get older, as life insurance becomes more of a sure thing it also becomes less needed. Your kids move out, there not dependent on you any more. You have retirement accounts setup so your partner need not worry should something happen. What risk exactly are your trying to avoid at this point. You will die. You have planned for that eventuality, it's not a risk anymore, it's a fact. Heath Insurance Is another beast all together. Historically you insured against some catastrophic event, that you couldn't really plan for. Say a heart attack. Surgery and treatment would run in the tens of thousands, so it would ruin you if you didn't have insurance to cover that. That was the risk that you were avoiding. A big, expensive event, causing financial ruin. However, over time it has shifted into something else. The general concept is still there, insure to avoid a risk. But the "risk" has been widened to include all manor of things that are not actually risks. For example a flu. You would go to your doctor, pay your co-pay, and your insurance would pay the rest of the visit. Then you would go to the drug store and get the drugs, pay your co-pay and the insurance pays the rest. But what risk, in this instance are you insuring against? That you can't cover the cost of a doctors visit? That you can't cover the cost of the medication? In this example, a common one, historically the "mother of the house" would go you have a flu, have some chicken noodle soup and go to bed. That would be the end of it. Cost of care is a day's lost wages (or maybe a weeks) and a few cans of soup. However today, because we choose to, the cost of care is much higher. We go to the doctor, pay our co-pays, the insurance has to pay it's part. The doctors office has to carry the cost of the staff it takes to see you, and the staff it takes to handle the claims with the insurance company. And now your flu, cost $1,500. But again that's not exactly true either. With heath insurance and "normal" medical care (like sprained ankles, and colds, etc.) the insurance only really covers the cost of having insurance. In that same flu example, if you went to the doctor as a "self pay" (no insurance) you would often time get a much lower, and reasonable rate. Frequently, under the cost of your standard co-pay. This seems like the doctors being "bad" but it's not. They don't have to file a claim, they don't have to keep track of it. They get immediate payment, not payment 6 months down the line that they need to share with other businesses. With "critical" or "catastrophic" care, heath insurance is still a good thing. If you have a big, unforeseen event, then heath insurance is great at helping you avoid that risk. With chronic (long term) care, your back in the same boat as the flu. Often times you can get better, and cheaper, care as a self pay patent, then as a insured patent. That is not always the case however. So you have to measure your own circumstance, and decide if insurance is right for you. But remember insurance is about risk avoidance, and not about paying less. You will ALWAYS pay more for insurance. It's designed that way. Even if the cost is hidden in many ways. (Taxes, spread out over visits, or prescriptions, etc.) |
I'm currently unemployed and have been offered a contract position. Do I need to incorporate myself? How do I do it? | Do you need to incorporate? This depends on whether the company prefers you to be incorporated. If you are going through a recruiting company, some of them are willing to deal with non-incorporated people (Sole Proprietor) and withhold taxes from your cheques for you. If you do want to incorporate, you can do it yourself, go through a paralegal, or you can even do it online. I did mine in Ontario for about $300 (no name search - i just have a numbered corporation like 123456 Ontario Inc.) through www.oncorp.com - there are other sites that do it as well. Things to consider - if you're contracting through a corporation you most likely need to: Talk to an accountant about these for clarification - most of them will give you an initial consultation for free. Generally speaking, accountant fees for corporate filing taxes averages about $1000-2000 a year. |
What type of pension should I get? | If your new employer has a Final Salary or defined benefit type pension scheme, join it. DB plans are attractive because they are often less a risk for the employee. If your employer has a defined contribution scheme and contributes to it, join it and contribute at least up to the maximum amount that they will match – otherwise you are leaving free money on the table. You also probably need to sit down with an independent adviser for what to do with your existing pension (is it a DC or DB) and if you want to have a pension outside of your employer. |
For a car, what scams can be plotted with 0% financing vs rebate? | The car deal makes money 3 ways. If you pay in one lump payment. If the payment is greater than what they paid for the car, plus their expenses, they make a profit. They loan you the money. You make payments over months or years, if the total amount you pay is greater than what they paid for the car, plus their expenses, plus their finance expenses they make money. Of course the money takes years to come in, or they sell your loan to another business to get the money faster but in a smaller amount. You trade in a car and they sell it at a profit. Of course that new transaction could be a lump sum or a loan on the used car... They or course make money if you bring the car back for maintenance, or you buy lots of expensive dealer options. Some dealers wave two deals in front of you: get a 0% interest loan. These tend to be shorter 12 months vs 36,48,60 or even 72 months. The shorter length makes it harder for many to afford. If you can't swing the 12 large payments they offer you at x% loan for y years that keeps the payments in your budget. pay cash and get a rebate. If you take the rebate you can't get the 0% loan. If you take the 0% loan you can't get the rebate. The price you negotiate minus the rebate is enough to make a profit. The key is not letting them know which offer you are interested in. Don't even mention a trade in until the price of the new car has been finalized. Otherwise they will adjust the price, rebate, interest rate, length of loan, and trade-in value to maximize their profit. The suggestion of running the numbers through a spreadsheet is a good one. If you get a loan for 2% from your bank/credit union for 3 years and the rebate from the dealer, it will cost less in total than the 0% loan from the dealer. The key is to get the loan approved by the bank/credit union before meeting with the dealer. The money from the bank looks like cash to the dealer. |
Is there data and proof that a diversified portfolio can generate higher returns than the S&P 500 Index? | Is it POSSIBLE? Of course. I don't even need to do any research to prove that. Just some mathematical reasoning: Take the S&P 500. Find the performance of each stock in that list over whatever time period you want to use for your experiment. Now select some number of the best-performing stocks from the list -- any number less than 500. By definition, the X best must be better than or equal to the average. Assuming all the stocks on the S&P did not have EXACTLY the same performance, these 10 must be better than average. You now have a diversified portfolio that performed better than the S&P 500 index fund. Of course as they always say in a prospectus, past performance is not a guarantee of future performance. It's certainly possible to do. The question is, if YOU selected the stocks making up a diversified portfolio, would your selections do better than an index fund? |
Should I collect receipts after paying with a card? | It is probably safe to throw away the receipt. Without a system to process and store receipts, they are of little use. With regards to personal finances I'm guilty of preaching without practicing 100% of the time, but here are some arguments for keeping receipts. To reconcile your statement to receipts before paying the credit card bill - people make mistakes all the time. I bet if you have an average volume of transactions, you will find at least one mistake in 12 months. To establish baseline spending and calculate a realistic budget. So many people will draft a budget by 'estimating' where their money goes. When it comes to this chore, I think people are about as honest with themselves as exercise and counting calories. Receipts are facts. To abide by record keeping requirements for warranty, business, IRS, etc... Personally, the only thing I've caught so far is Bank of America charging me interest when I pay my bill in full every month! |
How to motivate young people to save money | I recommend pulling up a retirement calculator and having an honest conversation about how long term savings works, and the power of compound interest. Just by playing around with the sliders on an online calculator, you can demonstrate how the early years are the most important. Depending on how much they make now and are considering saving, delaying 5-10 years can easily leave 6-7 figures on the table. If it's specifically a child or close family member, I recommend pulling up your retirement account. Talk with them about how you managed it, and how much you were putting in. Perhaps show them how much is the principal and how much is interest. If you did well, tell them how. If you didn't do as well as you liked, tell them what you would have done differently. Finally, discuss a bit of psychology. Even if they don't have a professional job and are making minimum wage, getting into the habit of saving makes it easier when they eventually make more. A couple of dollars a month isn't much, but getting into the habit makes it easier to save a couple hundred dollars a month later on. |
Is A Company Abusing The Tax Code When It Does This, And How Does The IRS Prevent It? | A rather good IRS paper on the topic states that a donation of a business' in-kind inventory would be Under IRC 170(e)(1), however, the fair market value must be reduced by the amount of gain that would not be long-term capital gain if the property had been sold by the donor at the property's fair market value (determined at the time of the contribution). Under this rule, deductions for donated inventory are limited to the property's basis (generally its cost), where the fair market value exceeds the basis. There are references to IRC regulations in a narrative context you may find helpful: This paper goes on for 16 pages describing detailed exceptions and the political reasons for the exceptions (most of which are concerned with encouraging the donation of prepared food from restaurants/caterers to hunger charities by guaranteeing a value for something that would otherwise be trashed valueless); and a worked out example of fur coats that had a cost of goods of $200 and a market value of $1000. |
What is market order's relation to bid ask spread? | Because in the case for 100/101, if you wanted to placed a limit buy order at top of the bid list you would place it at 101 and get filled straight away. If placing a limit buy order at the top of 91 (for 90/98) you would not get filled but just be placed at the top of the list. You might get filled at a lower price if an ask comes in matching your bid, however you might never get filled. In regards to market orders, with the 100/101 being more liquid, if your market order is larger than the orders at 101, then the remainder of your order should still get filled at only a slightly higher price. In regards to market orders with the 90/98, being less liquid, it is likely that only part of your order gets filled, and any remained either doesn't get filled or gets filled at a much higher price. |
Is there a tax deduction for renting office space in service of employer? | According to this post on TurboTax forums, you could deduct it as an "Unreimbursed Employee" expense. This would seem consistent with the IRS Guidelines on such deductions: An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business. An expense does not have to be required to be considered necessary. Office rent is not listed explicitly among the examples of deductible unreimbursed employee expenses, but this doesn't mean it's not allowed. Of course you should check with a tax professional if you want to be sure. |
What is the best way to help my dad consolidate his credit card debt at a lower rate? | I agree with you that you need to consolidate this debt using a loan. It may be hard to find a bank or credit organization that will give you an unsecured personal loan for that much money. I know of one, called Lending Club (Disclaimer - I'm an investor on this platform. Not trying to advertise, it's just the only place I know of off the top of my head) that facilitates loans like this, but instead of a bank financing the loan, the loan is split up accross hundreds of investors who each contribute a small amount (such as $25). They have rates anywhere between 5-30%, based on your credit profile(s), and I believe they have some loan amounts that go up to the area that you're discussing. Regarding buying the house - The best thing you can do when trying to buy a house is to save up a 20% downpayment, if at all possible. Below this amount, you may be asked to pay for 'PMI' - Private Mortgage Insurance. This is a charge that doesn't go away for quite a while (until you've paid them 20% of the appraised value of the home), where you pay a premium because you didn't have the 20% downpayment for the house. I would suggest you try to eliminate your credit card debt as soon as possible, and would recommend the same for your father. Getting your utilization down and reconsolidating the large debts with a loan will help to reduce interest charges and get you a reasonable, fixed payment. Whether you decide to pay off your own balances using your savings account is up to you; if it were me, personally, I'd do so immediately rather than trying to pay it off over time. But if you lose money to taxes by withdrawing the money from your 'tax free savings account', it may not be a beneficial situation. Treat debt, especially credit card debt, like an emergency at all times, and you'll find yourself in a better place as a result. Credit card debt and balances are and should be temporary, and their rates and fees are structured that way. If, for any reason, you expect that a credit card's balance will remain for an extended period of time, you may want to consider whether it would be advantageous for you to consolidate the debt into a loan, instead. |
No-line-of-credit debit card? | Having worked at a financial institution, this is a somewhat simple, two-part solution. 1) The lendor/vendor/financial institution simply turns off the overdraft protection in all its forms. If no funds are available at a pin-presented transaction, the payment is simply declined. No fee, no overdraft, no mess. 2) This sticking point for a recurring transaction, is that merchants such as Netflix, Gold's Gym etc, CHOOSE to allow payments like this, BECAUSE they are assured they are going to get paid by the financial institution. It prevents them from having issues. Only a gift card will not cost you more money than you put in, BUT I know of several institutions, that too many non-payment periods can cause them to cease doing business with you in the future. TL:DR/IMO If you don't want to pay more than you have, gift cards are the way to go. You can re-charge them whenever you choose, and should you run into a problem, simply buy a new card and start over. |
Reducing taxable income in US in December | Assuming that what you want to do is to counter the capital gains tax on the short term and long term gains, and that doing so will avoid any underpayment penalties, it is relatively simple to do so. Figure out the tax on the capital gains by determining your tax bracket. Lets say 25% short term and 15% long term or (0.25x7K) + (0.15*8K) or $2950. If you donate to charities an additional amount of items or money to cover that tax. So taking the numbers in step 1 divide by the marginal tax rate $2950/0.25 or $11,800. Money is easier to donate because you will be contributing enough value that the IRS may ask for proof of the value, and that proof needs to be gathered either before the donation is given or at the time the donation is given. Also don't wait until December 31st, if you miss the deadline and the donation is counted for next year, the purpose will have been missed. Now if the goal is just to avoid the underpayment penalty, you have two other options. The safe harbor is the easiest of the two to determine. Look at last years tax form. Look for the amount of tax you paid last year. Not what was withheld, but what you actually paid. If all your withholding this year, is greater than 110% of the total tax from last year, you have reached the safe harbor. There are a few more twists depending on AGI Special rules for farmers, fishermen, and higher income taxpayers. If at least two-thirds of your gross income for tax year 2014 or 2015 is from farming or fishing, substitute 662/3% for 90% in (2a) under the General rule, earlier. If your AGI for 2014 was more than $150,000 ($75,000 if your filing status for 2015 is married filing a separate return), substitute 110% for 100% in (2b) under General rule , earlier. See Figure 4-A and Publication 505, chapter 2 for more information. |
Got charged ridiculous amount for doctor's walk in visit. What are my options? | To answer the specific question of whether you can get the bill reduced without hurting your credit, yes, as long as the bill never goes to collections, there's no reason it should ever show up on your credit report. Will they reduce your bill without sending it to collections first? Maybe. All you can do is ask. |
Is it common in the US not to pay medical bills? | While it is not common, it is also not "uncommon." A subtle distinction. If you are poor, you almost certainly get some kind of government assistance (not even talking about Obamacare or Trumpcare, but just general assistance.) If you are middle class or rich, that is where you get hit the most. They seem to realize you "can't get blood from a stone" and don't try to get payment out of poor people. But middle class and rich people, yes it just takes longer but they do hang in there with billing. My own experience is that years and years ago (way before Obamacare) I had a time in the hospital with a lot of tests, but I was poor and sleeping on a relatives floor at the time. I got all the tests I needed, and they took great care of me, and the hospital wrote it off as "charity care." |
How to sell option with no volume | A few observations - A limit order can certainly work, as you've seen. I've put in such an order far beyond the true value, and gotten back a realistic bid/ask within 10 minutes or so. That at least gave me an idea where to set my limit. When this doesn't work, an exercise is always another way to go. You'll get the full intrinsic value, but no time value, by definition. Per your request in comment - You own a put, strike price $100. The stock (or ETF) is trading at $50. You buy the stock and tell the broker to exercise the put, i.e. deliver the stock to the buyer of the put. |
Is my financial plan for buying a house logically sound | As a rental, this is not an ideal set of numbers. You manage to show a $255 'gain' but $275 is from payment to principal. So, from the start, you're out $20/wk. This ignores the $170K down payment, which has an opportunity cost, however you calculate it. You can assign the same rate as the mortgage, and it's nearly $10K/yr. Or the rate you feel your choice of stock market or alternate investment would rise. Either way, you can't ignore this money. Your mortgage rate isn't fixed. A 1% rise and it would jump to $1663 ($842/week) Ideally, a rental property is cash positive without counting principal paydown or even the tax refund. It's a risky proposition to buy and count on everything going right. I didn't mean to scare you off with "1%" but you should research the costs of repair and maintenance. Last year my Heat/AC system needed replacement. US$10K. This year, it's time to paint, and replace rotting trim, $7000. In the US we have property tax that can range from 1-2% of the house value. If you don't have this tax, that's great, just please confirm this. |
Merchant dispute with airline over missed flight, and which credit cards offer protection? | You have no grounds for a refund. The flight took off on time, and you chose not to be on board. The fact that the airline could not guarantee ahead of time that the flight would leave on time is not relevant. You can certainly try to dispute the charge with the airline, and it sounds like you have done so. The airline correctly indicates that your dispute is unfounded. You can call up your credit card company and explain the situation, and they may accept your dispute. However, I am not aware of any credit card that would reimburse you (that is, issue a chargeback) in this situation. I'm not trying to be unsympathetic. It sucks that you felt you could not rely on the airline, and are now out some money. Fundamentally, though, this was your choice. The airline would be obligated to reimburse you the cost of your flight, or book you on another flight, if the flight was cancelled due to bad weather or other issues, but they owe you nothing if the flight took off on schedule. |
How should residents of smaller economies allocate their portfolio between domestic and foreign assets? | why should I have any bias in favour of my local economy? The main reason is because your expenses are in the local currency. If you are planning on spending most of your money on foreign travel, that's one thing. But for most of us, the bulk of our expenses are incurred locally. So it makes sense for us to invest in things where the investment return is local. You might argue that you can always exchange foreign results into local currency, and that's true. But then you have two risks. One risk you'll have anywhere: your investments may go down. The other risk with a foreign investment is that the currency may lose value relative to your currency. If that happens, even a good performing investment can go down in terms of what it can return to you. That fund denominated in your currency is really doing these conversions behind the scenes. Unless the bulk of your purchases are from imports and have prices that fluctuate with your currency, you will probably be better off in local investments. As a rough rule of thumb, your country's import percentage is a good estimate of how much you should invest globally. That looks to be about 20% for Australia. So consider something like 50% local stocks, 20% local bonds, 15% foreign stocks, 5% foreign bonds, and 10% local cash. That will insulate you a bit from a weak local currency while not leaving you out to dry with a strong local currency. It's possible that your particular expenses might be more (or less) vulnerable to foreign price fluctuations than the typical. But hopefully this gives you a starting point until you can come up with a way of estimating your personal vulnerability. |
Do I still need to file taxes with the Canadian government if I am working in the U.S. on a TN visa for a few years? | The other answer has mentioned "factual resident", and you have raised the existence of a U.S./Canada tax treaty in your comment, and provided a link to a page about determining residency. I'd like to highlight part of the first link: You are a factual resident of Canada for tax purposes if you keep significant residential ties in Canada while living or travelling outside the country. The term factual resident means that, although you left Canada, you are still considered to be a resident of Canada for income tax purposes. Notes If you have established ties in a country that Canada has a tax treaty with and you are considered to be a resident of that country, but you are otherwise a factual resident of Canada, meaning you maintain significant residential ties with Canada, you may be considered a deemed non-resident of Canada for tax purposes. [...] I'll emphasize that "considered to be a resident of Canada for income tax purposes" means you do need to file Canadian income tax returns. The Notes section does indicate the potential treaty exemption that you mentioned, but it is only a potential exemption. Note the emphasis (theirs, not mine) on the word "may" in the last paragraph above. Please don't assume "may" is necessarily favorable with respect to your situation. The other side of the "may" coin is "may not". The Determining your residency status page you mentioned in your comment says this: If you want the Canada Revenue Agency's opinion on your residency status, complete either Form NR74, Determination of Residency Status (Entering Canada) or Form NR73, Determination of Residency Status (Leaving Canada), whichever applies, and send it to the International and Ottawa Tax Services Office. To get the most accurate opinion, provide as many details as possible on your form. So, given your ties to Canada, I would suggest that until and unless you have obtained an opinion from the Canada Revenue Agency on your tax status, you would be making a potentially unsafe assumption if you yourself elect not to file your Canadian income tax returns based on your own determination. You could end up liable for penalties and interest if you don't file while you are outside of Canada. Tax residency in Canada is not a simple topic. For instances, let's have a look at S5-F1-C1, Determining an Individual’s Residence Status. It's a long page, but here's one interesting piece: 1.44 The Courts have stated that holders of a United States Permanent Residence Card (otherwise referred to as a Green Card) are considered to be resident in the United States for purposes of paragraph 1 of the Residence article of the Canada-U.S. Tax Convention. For further information, see the Federal Court of Appeal's comments in Allchin v R, 2004 FCA 206, 2004 DTC 6468. [...] ... whereas you are in the U.S. on a TN visa, intended to be temporary. So you wouldn't be exempt just on the basis of your visa and the existence of the treaty. The CRA would look at other circumstances. Consider the "Centre of vital interests test": Centre of vital interests test [...] “If the individual has a permanent home in both Contracting States, it is necessary to look at the facts in order to ascertain with which of the two States his personal and economic relations are closer. Thus, regard will be had to his family and social relations, his occupations, his political, cultural or other activities, his place of business, the place from which he administers his property, etc. The circumstances must be examined as a whole, but it is nevertheless obvious that considerations based on the personal acts of the individual must receive special attention. If a person who has a home in one State sets up a second in the other State while retaining the first, the fact that he retains the first in the environment where he has always lived, where he has worked, and where he has his family and possessions, can, together with other elements, go to demonstrate that he has retained his centre of vital interests in the first State.” [emphasis on last sentence is mine] Anyway, I'm acquainted with somebody who left Canada for a few years to work abroad. They assumed that living in the other country for that length of time (>2 years) meant they were non-resident here and so did not have to file. Unfortunately, upon returning to Canada, the CRA deemed them to have been resident all that time based on significant ties maintained, and they subsequently owed many thousands of dollars in back taxes, penalties, and interest. If it were me in a similar situation, I would err on the side of caution and continue to file Canadian income taxes until I got a determination I could count on from the people that make the rules. |
Am I still building a credit score if I use my credit card like a debit card? | Regardless of how it exactly impacts the credit score, the question is does it help improve your credit situation? If the score does go up, but it goes up slowly that was a lot of effort to retard credit score growth. Learning to use a credit card wisely will help you become more financially mature. Start to use the card for a class of purchases: groceries, gas, restaurants. Pick one that won't overwhelm your finances if you lose track of the exact amount you have been charging. You can also use it to pay some utilities or other monthly expenses automatically. As you use the card more often, and you don't overuse it, the credit card company will generally raise your credit limit. This will then help you because that will drop your utilization ratio. Just repeat the process by adding another class of charges to you credit card usage. This expanded use of credit will in the long run help your score. The online systems allow you to see every day what your balance is, thus minimizing surprises. |
Issuing bonds at discount - computing effective interest rate | In this case the market interest rate is the discount rate that sets equal the market price (current value) of the bond to its present value. To find the market interest rate which is also referred to as promised yield YTM you would have solve for the interest rate in the bond price formula A market price of bond is the sum of discounted coupons and the terminal value of the bond. Most spreadsheet programs and calculators have a RATE function that makes possible finding this market interest rate. First see this for finding a coupon paying bond price The coupon payments are discounted so is the par value of the bond and sum of such discounts is the market price of the bond. The TVM functions in Excel and calculators make this possible using the following equation Let us take your data, 9% $100,000 coupon with 5 years remaining to maturity with market interest rate of 10%. Bonds issued in the US mostly pay two coupons per year. Thus we are finding the present value of 10 coupons each worth $4500 and par value of $100,000. The semi-annual market interest rate is 10%/2 or 5% The negative sign indicate money going out of hand Now solving for RATE is only possible using numerical methods and the RATE function is programmed using Newton-Raphson method to find one of the roots of the bond price equation. This rate will be the periodic rate in this case semi-annual rate which you have to multiply by 2 to get the annual rate. Do remember there is a difference between annual nominal rate and an annualized effective rate. To find the market interest rate If you don't have Excel or a financial calculator then you may opt to use my version of these financial functions in this JavaScript library tadJS |
If I had no income due to a net operating loss, will I be refunded the Social Security and Medicare taxes withheld? | If you have a CPA working for you already - this is a question you should be asking that CPA. Generally, NOL only affects the tax stemming from the Internal Revenue Code (Title 26 Subtitle A of the US Code). Social Security and Medicare, while based on income, are not "income tax", these are different taxes stemming from different laws. Social Security and Medicare withheld from your salary are FICA taxes (Title 26 Subtitle C of the US Code). They're deducted at source and not on your tax return, so whatever changes you have in your taxable income on the tax return - FICA taxes are not affected by it. Self Employment tax (Schedule SE) on your Schedule C earnings in the carry-back years will also not be affected, despite being defined in the IRC, because the basis of the tax is the self-employment income while the carryback reduces the AGI. |
What are some good ways to control costs for groceries? | Please stay away from snakes. Don't use a credit card to buy your food. Those credit companies will eat you alive. Those are reward points they're giving you. It's like the casino giving you a free $50 to start out with. They designed the game. They are going to win. As for groceries, if you are a coupon clipper, check out thegrocerygame.com: "Teri's List is a weekly publication of the lowest-priced products at your supermarket or drugstore matched with manufacturers' coupons and specials - advertised and unadvertised. Teri does all the hard work and research, and presents it to you in a straightforward format. Log in each week and print your list!" Nathon HouseholdBudgetNerd.com Family Budgets for Both of Us |
If earning as freelancer, is it better to be a Sole Trader or Limited Company? | As I understand it (please correct me if i'm wrong, i've looked at this before and i've been a sole trader briefly but I've never formed a LTD company) there are pros and cons to forming a limited company. Pros Cons |
How to get a grip on finance? | I think this question is perfectly on topic, and probably has been asked and answered many times. However, I cannot help myself. Here are some basics however: Personal Finance is not only about math. As a guy who "took vector calculus just for fun", I have learned that superior math skills do not translate into superior net worth. Personal finance is about 50% behavior. Take a look at the housing crisis, car loans, or payday lenders and you will understand that the desire to be accepted by others often trumps the math surrounding a transaction. Outline your goals What is it that you want in life? A pile of money or to retire early? What does your business look like? How much cash will you need? Do you want to own a ton of rental properties? How does all this happen (set intermediate goals). Then get on a budget A budget is a plan to spend your money in advance. Stick to it. From there you can see how much money you have to implement various goals. Are your goals to aggressive? This is really important as people have a tendency to spend more money then they have. Often times when people receive a bonus at work, they spend that one bonus on two or three times over. A budget will prevent this from happening. Get an Emergency Fund Without an emergency fund, you be subject to the financial whims of people involved in your own life and that of the broader marketplace. Once you have one, you are free to invest with impunity and have less stress in a world that deals out plenty. Bad things will happen to you financially, protect against them. The best first investments are simple: Invest in yourself. Find a way to make a very healthy income with upward mobility. Also get out and stay out of debt. These things are not sexy, but they pay off in the long run. The next best investment is also simple: Index funds. These become the bench mark for all other investments. If you do not stand a good chance of beating the S&P 500 index fund, why bother? Just dump the money in the fund and sleep well at night. |
Stock not available at home country nor at their local market - where should I buy it | Theoretically, it shouldn't matter which one you use. Your return should only depend on the stock returns in SGD and the ATS/SGD exchange rate (Austrian Schillings? is this an question from a textbook?). Whether you do the purchase "through" EUR or USD shouldn't matter as the fluctuations in either currency "cancel" when you do the two part exchange SGD/XXX then XXX/ATS. Now, in practice, the cost of exchanging currencies might be higher in one currency or the other. Likely a tiny, tiny amount higher in EUR. There is some risk as well as you will likely have to exchange the money and then wait a day or two to buy the stock, but the risk should be broadly similar between USD and EUR. |
Safe and cheap way to send money from Canada to South America | The catch with any exchange service is that you're going to involve some sort of business and they're going to want to get paid for their service. These services all come with their own exchange rates, fees, waiting periods, or requirements to even use said service. Commonly, pros towards one of those comes at the cost of another— e.g. fast transfers have higher fees or worse exchange rates. Over the past few months I needed a service and ended up using USForex. Since you're going from CAD to USD, you'd likely need to use CanadianForex. Pros: Cons: Overall, this option was far better than the $97.00 I was quoted from WesternUnion; or the $25.00-45.00 I was quoted from BMO Harris, which would have required I open a saving account with them. I wasn't provided a clean exchange rate between these two to know how all three compared. The only bit of advice I can say with any service is compare exchange rates. If you're transferring more than a few hundred dollars, the exchange rate can be seen as a "hidden" fee when it's unreasonably low. I'm not affiliated with or accommodated by any of the exchange services mentioned. |
Would it make sense to take a loan from a relative to pay off student loans? | I will start with the assumption that you will never have any late payments and will fully pay off the loan. This may be a big assumption, but if you can't assume that, then you wouldn't have asked the question in the first place. The answer depends on your income: You should calculate how much student loan interest you can deduct before and after the switch, and adjust the interest rate accordingly to compensate for any difference. |
What's the most correct way to calculate market cap for multi-class companies? | From their 10-K pulled directly from Edgar: As of October 22, 2015, there were 291,327,781 shares of Alphabet Inc.’s (the successor issuer pursuant to Rule 12g-3(a) under the Exchange Act as of October 2, 2015) (Alphabet) Class A common stock outstanding, 50,893,362 shares of Alphabet's Class B common stock outstanding, and 345,504,021 Alphabet's Class C capital stock outstanding. From here just do the math. The shares outstanding are listed on the first page of the 10-Q and 10-K reports. Edit: I believe Class B shares in this instance are not traded on the market and therefore would not be included. |
Where do countries / national governments borrow money from? | There no legal framework that allows states like the US or countries in Europe to default on their debt. Should congress pass a law to default the US supreme court is likely to nullify the law. |
What do these options trading terms mean? | Can anyone explain what each of them mean and how they're different from each other? When you "buy to open", you are purchasing an option and opening a new position. When you "sell to open", you are creating a brand new options contract and selling it. "Covered" means that you have assets in your account to satisfy the terms of the options contract. A "covered call" is a call option for which you own shares of the underlying stock that you will sell to the buyer at the option's strike price if he exercises the option. If you previously made a "sell to open" trade to create a new position, and you want to close the position, you can buy back the option. If you previously made a "buy to open" trade, you can "sell to close" which will sell back your option and close your position. In summary: |
Reconciling transactions reimbursing myself for expenses as self-employed (UK) | Any money that ScottMcGready gives to the company is a personal loan that must be repaid by the company at some point without tax consequences. Any money that the company gives to ScottMcGready is either salary (Scott pays income tax, company counts this as cost), or a dividend (Scott pays dividend tax), or a loan (Scott must repay the loan). |
Why can I see/trade VIX but not S&P/TSX 60 VIX? | S&P/TSX 60 VIX (CAD) is an equation and as the implied volatility of two close to the money TSX 60 options change, the output changes. This is why the intra-day price fluctuates on a graph like a traded product. Although VIXC can't be traded, it can still be used as an important signal for traders. The excerpt is from slide 12, more information can be found here. https://www.m-x.ca/f_publications_en/vixc_presentation_en.pdf Futures (stage 2) Options, ETFs, OTC Products (stage 3) have not been implemented. |
Should I get cash from credit card at 0% for 8 months and put it on loans? | If there is any fee at all on the cash advance, and zero interest on the student loans (for now), it's not worth it mathematically. And for only 8 months of "free" money, it's rare for it to be worth it overall. You need to save a significant amount either by having a good net interest rate (e.g., saving 20% on another card and not paying any interest on the new loan) or by saving a lot on principal (e.g., paying off $100k now and not paying the interest on that for the next 8 months). I wouldn't worry about it hurting your credit score unless your credit is going to be evaluated during the time you're maxing your card. Part of your score (20-30% IIRC) is your credit utilization ratio, which is how much you have available vs. how much you're using. It's separate from the part that accounts for history, so it's only relevant at the time you're looked up. |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | I estimated that the mean expected cash value of a $ 1.00 MegaMillions ticket in the July 5, 2016 drawing was about $ 1.23 = $ 0.18 consolation prizes + 258,890,850:1 chance of winning part of a cash jackpot that increased from about $ 289.6 million to about $ 313.3 million. I estimated that the mean expected cash value of a $ 2.00 Powerball ticket in the January 13, 2016 drawing was about $ 1.65. I estimated this as follows: 17.= (9). Chance of another roll-over: 15.4 % . (about two-thirteenths). This estimate does not take taxes into account. (There are ways to minimize the tax bill.) And of course, almost 96% of tickets win nothing. Notes: . . Updated for July 5, 2016 MegaMillions draw. |
Can you depreciate assets differently between Federal, State, and Local? | In general, you most definitely can. In some cases you must. However for each State you'll have to check whether you can choose how to depreciate. Many States require you to take the same depreciation as on the Federal schedule, including Sec. 179, others won't allow Sec. 179 at all. Specifically to PA, I haven't found any current guidance, but the rules from 2012 put PA in the bucket that requires you to take the same Sec. 179 on the State return as appears on your Federal return. If you elect to expense Section 179 Property for FIT purposes, you are required to expense the property for PIT purposes. However PA limit for Sec. 179 is $25K, so if your Federal deduction is larger - you can depreciate the rest. Check with a PA-licensed CPA or EA for a more reliable opinion, since I'm not a tax adviser. Just googled it. |
40 year old A and J makes 1M a year. What is the best investment to save on tax? | There is nothing legal you can do in the United States to avoid the tax burden of income earned as an employee other than offsetting it with pre-tax contributions (which it sounds like you're already doing), making charitable contributions, or incurring investment losses (which is cutting off your nose to spite your face). So that $660K can't be helped. As for the $80K in stock dividends, you could move those investments into "growth" companies rather than "value" companies. Growth companies are those that pay less in dividends, where the primary increase in wealth occurs only in share price increase. This puts off your tax bill until you finally sell your shares, and (depending on how the tax laws are at that time) your tax bill will be lower on those capital gains than they are currently on these dividends. Regarding rental income I know nothing, but I think you're entitled to depreciate your property's value over time and count that against the taxes you owe on the rents. And you can deduct all the upkeep expenses. As with employment income, intentionally incurring rental losses to lower your tax bill is not logical: for every dollar you earn, you only have to give about 50 cents to the government, whereas for every dollar you lose, you've lost a dollar. |
Is it safe to accept money in the mail? | Another option is to set up an accoutn with Western Union Bill Payment Solutions, where your customer could go to one of their locations and pay in cash and then the cash is transferred to your account. See "Walk in Cash Payments" on their site. |
Is there any site you can find out about the 'bonus features' of credit cards? | Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team |
Why doesn’t every company and individual use tax-havens to pay less taxes? | Ditto @GradeEhBacon, but let me add a couple of comments: But more relevantly: GradeEhBacon mentioned transaction costs. Yes. Many tax shelters require setting up accounts, doing paperwork, etc. Often you have to get a lawyer or accountant to do this right. If the tax shelter could save you $1 million a year in taxes, it makes sense to pay a lawyer $10,000 to set it up right. If it could save you $100 a year in taxes, paying $10,000 to set it up would be foolish. In some cases the tax savings would be so small that it wouldn't be worth the investment of spending $20 on a FedEx package to ship the paperwork. Inconvenience. Arguably this is a special case of transaction costs: the cost of your time. Suppose I knew that a certain tax shelter would save me $100 a year in taxes, but it would take me 20 hours a year to do the paperwork or whatever to manage it. I probably wouldn't bother, because my free time is worth more than $5 an hour to me. If the payoff was bigger or if I was poorer, I might be willing. Complexity. Perhaps a special case of 3. If the rules to manage the tax shelter are complicated, it may not be worth the trouble. You have to spend a bunch of time, and if you do it wrong, you may get audited and slapped with fines and penalties. Even if you do it right, a shelter might increase your chance of being audited, and thus create uncertainty and anxiety. I've never intentionally cheated on my taxes, but every year when I do my taxes I worry, What if I make an honest mistake but the government decides that it's attempted fraud and nails me to the wall? Qualification. Again, as others have noted, tax shelters aren't generally, "if you fill out this form and check box (d) you get 50% off on your taxes". The shelters exist because the government decided that it would be unfair to impose taxes in this particular situation, or that giving a tax break encourages investment, or some other worthy goal. (Sometimes that worthy goal is "pay off my campaign contributors", but that's another subject.) The rules may have unintended loopholes, but any truly gaping ones tend to get plugged. So if, say, they say that you get a special tax break for investing in medical research, you can't just declare that your cigarette and whiskey purchases are medical research and claim the tax break. Or you talked about off-shore tax havens. The idea here is that the US government cannot tax income earned in another country and that has never even entered the US. If you make $10 in France and deposit it in a French bank account and spend it in France, the US can't tax that. So American companies sometimes set up bank accounts outside the US to hold income earned outside the US, so they don't have to bring it into the US and pay the high US tax rate. (US corporate taxes are now the highest of any industrialized country.) You could, I suppose, open an account in the Caymans and deposit the income you earned from your US job there. But if the money was earned in the US, working at a factory or office in the US, by a person living in the US, the IRS is not going to accept that this is foreign income. |
IS it the wrong time to get into the equity market immediately after large gains? | Its best to dollar cost average adding say 5%-10% a quarter into the fund. That's what Clark Howard would suggest. Also make sure you do not need the money for 5 years, then you should be okay. Its tough to lose money if you keep your money there for a long period of time. |
Credit card expenses showing as Liabilities in QuickBooks | Is it normal in QuickBooks to have credit card expenses being shows as liabilities? Is there a way I can correct this? If they are expenses they shouldn't be negative liabilities unless you overpaid your credit card by that amount. It sounds like perhaps when you linked the account the credit/debit mapping may have been mixed up. I've not used QB Online, but it looks like you might have to un-link the account, move all the existing transactions to 'excluded' and then link the account again and flip-flop the debit/credit mapping from what it is now. Hopefully there's an easier way. This QB community thread seems to address the same issue. |
How do markets “factor in” a future event? | At the most fundamental level, every market is comprised of buyers and selling trading securities. These buyers and sellers decide what and how to trade based on the probability of future events, as they see it. That's a simple statement, but an example demonstrates how complicated it can be. Picture a company that's about to announce earnings. Some investors/traders (from here on, "agents") will have purchased the company's stock a while ago, with the expectation that the company will have strong earnings and grow going forward. Other agents will have sold the stock short, bought put options, etc. with the expectation that the company won't do as well in the future. Still others may be unsure about the future of the company, but still expecting a lot of volatility around the earnings announcement, so they'll have bought/sold the stock, options, futures, etc. to take advantage of that volatility. All of these various predictions, expectations, etc. factor into what agents are bidding and asking for the stock, its associated derivatives, and other securities, which in turn determines its price (along with overall economic factors, like the sector's performance, interest rates, etc.) It can be very difficult to determine exactly how markets are factoring in information about an event, though. Take the example in your question. The article states that if market expectations of higher interest rates tightened credit conditions... In this case, lenders could expect higher interest rates in the future, so they may be less willing to lend money now because they expect to earn a higher interest rate in the future. You could also see this reflected in bond prices, because since interest rates are inversely related to bond prices, higher interest rates could decrease the value of bond portfolios. This could lead agents to sell bonds now in order to lock in their profits, while other agents could wait to buy bonds because they expect to be able to purchase bonds with a higher rate in the future. Furthermore, higher interest rates make taking out loans more expensive for individuals and businesses. This potential decline in investment could lead to decreased revenue/profits for businesses, which could in turn cause declines in the stock market. Agents expecting these declines could sell now in order to lock in their profits, buy derivatives to hedge against or ride out possible declines, etc. However, the current low interest rate environment makes it cheaper for businesses to obtain loans, which can in turn drive investment and lead to increases in the stock market. This is one criticism of the easy money/quantitative easing policies of the US Federal Reserve, i.e. the low interest rates are driving a bubble in the stock market. One quick example of how tricky this can be. The usual assumption is that positive economic news, e.g. low unemployment numbers, strong business/residential investment, etc. will lead to price increases in the stock market as more agents see growth in the future and buy accordingly. However, in the US, positive economic news has recently led to declines in the market because agents are worried that positive news will lead the Federal Reserve to taper/stop quantitative easing sooner rather than later, thus ending the low interest rate environment and possibly tampering growth. Summary: In short, markets incorporate information about an event because the buyers and sellers trade securities based on the likelihood of that event, its possible effects, and the behavior of other buyers and sellers as they react to the same information. Information may lead agents to buy and sell in multiple markets, e.g. equity and fixed-income, different types of derivatives, etc. which can in turn affect prices and yields throughout numerous markets. |
What Happens to Bank Stocks If Country Defaults | Most national banks are required by the regulations of their host countries to hold significant reserves in the form of government debt. A default would likely wipe out their capital and your common stock would become worthless. The common stock only has positive value today because of the option value based on the possibility the host country will evade a default. |
As an investor what are side effects of Quantitative Easing in US and in EU? | Well if your looking to explain inflation to children, I would use this example. Take two fruits they like IE: Apples and Oranges. Give them both 2 of each. Ask them how many of your apples would you give for 1 orange and how many apples would you want to get 1 orange(most likely they will say 1). Now give them 5 more apples each. Then ask them the same question. In economics and finance many things can not be proven, so to tell you what QE will do for a fact can't be said, you can only be told theories. There are to many variables. |
Can I buy IPO stock during the pre-market trading on the day of IPO? | The first moment of trading usually occurs even later than that. It may take a few hours to balance the current buy/sell orders and open the stock. Watch CNBC when a hot IPO is about to open and you'll see the process in real time. If you miss it, look at a one day Yahoo chart to see when the open occurred. |
Why don't banks allow more control over credit/debit card charges? | Actually in Finland on some bank + debit/credit card + online retailer combinations you type in your card details as you normally do, but after clicking "Buy" you get directed to your own bank's website which asks you to authenticate yourself with online banking credentials. It also displays the amount of money and to which account it is being paid to. After authentication you get directed back to the retailer's website. Cannot say why banks in US haven't implemented this. |
How come the government can value a home more than was paid for the house? | From my perspective I suspect that if the government use the paid price, people will start to buy at very low nominal prices in order to pay less taxes, and will repay the seller by other means. |
Can I participate in trading Facebook shares on their IPO day from any brokerage? | Any retail equity brokerage will give you access to the NYSE, and thus Facebook shares as they become available. However, it is important to note that you nor any retail investor will be able to purchase FB at the IPO prices ($33-38 IIRC). The only people who will be able to buy in at that price are the underwriting investment banks and major investors who have subscribed to the IPO. You, and all the other retail investors will only be able to buy in as those major investors offer shares on the secondary market. This being Facebook, there will probably be a significant premium over the IPO price, both due to demand and systemic underpricing of IPOs to encourage the opening 'pop'. So, if you're intent on buying in at the IPO, pay close attention as the date approaches. Look at how the recent big IPOs have performed (GRPN, LNKD come to mind). Know how much you're willing to commit and what price you want. However, no one is going to know what the opening market price will be come Friday morning. Be watching your financial data source / analysis of choice and be prepared to make a judgement. |
Is there any instance where less leverage will get you a better return on a rental property? | Leverage means you can make more investments with the same amount of money. In the case of rental properties, it means you can own more properties and generate more rents. You exchange a higher cost of doing business (higher interest fees) and a higher risk of total failure, for a larger number of rents and thus higher potential earnings. As with any investment advice, whenever someone tells you "Do X and you are guaranteed to make more money", unless you are a printer of money that is not entirely true. In this case, taking more leverage exposes you to more risk, while giving you more potential gain. That risk is not only on the selling front; in fact, for most small property owners, the risk is primarily that you will have periods of time of higher expense or lower income. These can come in several ways: If you weather these and similar problems, then you will stand to make more money using higher leverage, assuming you make more money from each property than your additional interest costs. As long as you're making any money on your properties this is likely (as interest rates are very low right now), but making any money at all (above and beyond the sale value) may be challenging early on. These sorts of risks are magnified for your first few years, until you've built up a significant reserve to keep your business afloat in downturns. And of course, any money in a reserve is money you're not leveraging for new property acquisition - the very same trade-off. And while you may be able to sell one or more properties if you did end up in a temporarily bad situation, you also may run into 2008 again and be unable to do so. |
What happens to a company when it issues preference shares? | In most cases , preferential sharesholders are paid dividends first before common shareholders are paid . In the event of a company bankruptcy , preferential shareholders have the right to be paid first before common shareholders. In exchange for these benefits , preferential shareholders do not have any voting rights. The issuing of preferential shares has no impact on share prices or issuing of bonuses , it is a mere coincidence that the stock price went up |
What is the options industry changing about option symbols in February, 2010? | Here is what I could find on the net: http://education.wallstreetsurvivor.com/options-symbol-changes-coming-february-12th-2010 So it sounds like it does not affect how you invest in options but only how you look them up. I remember using a Bloomberg terminal and it wasn't clear what the expiry date of the option you were looking at was. It looks like the new quote system addresses this. HTH. |
What's the best application, software or tool that can be used to track time? | Time Tracker I'm a software engineer and have been using this tool. It is free and has a good user interface. I believe it can very well be used by professional of other areas too. It does support the features that you're looking for regarding project and task tracking. |
Selling To Close | At the higher level - yes. The value of an OTM (out of the money) option is pure time value. It's certainly possible that when the stock price gets close to that strike, the value of that option may very well offer you a chance to sell at a profit. Look at any OTM strike bid/ask and see if you can find the contract low for that option. Most will show that there was an opportunity to buy it lower at some point in the past. Your trade. Ask is meaningless when you own an option. A thinly traded one can be bid $0 /ask $0.50. What is the bid on yours? |
What options are available for a home loan with poor credit but a good rental history? | Why not just do an FHA loan? The minimum credit score is 580, and you can sometimes even go lower than that. Another alternative is to consider a rent-to-own agreement with his landlord, since it sounds like if he doesn't buy he'd continue renting there anyway. |
Can I get a mortgage from a foreign bank? | You definitely used to be able to (see this BBC article from 2006), and I would imagine that you still can, although I also imagine that it would be more difficult than it used to be, as with all mortgages. EDIT: And here's an article from last year about Chinese banks targeting the UK mortgage market. |
Deferring claim of significant purchase of RRSPs | You can defer RRSP deductions like you've suggested. Here's an article from the CBC about it: http://www.cbc.ca/news/business/taxseason/story/2010/03/15/f-taxseason-delay.html |
Should I take out a bigger mortgage, or pay a greater cash deposit? | At a minimum, I would save 20-30k, because you need to have both a safety net and some money for home repairs. Very few people move into a house and then do zero repairs - painting, usually, at a minimum, and there's almost always something that comes up pretty soon after. Even if you're buying a condo, you'll want to be sure you can fix anything that needs fixing within that first year or two. Beyond that, you have to decide based on your risk tolerance and your other details, like your income. Taking a smaller mortgage means a guaranteed 3% to 4% return, right now. That's not quite what you'll probably get on the market over the long term, but how did your investments do last year? My 401(k) was down slightly... In order to do better than that 3-4%, you're going to have to invest in stocks (or ETFs or similar), meaning you could have 10+% swings potentially year over year, which if that's your only (extra) 50k might be more than you can tolerate. If you're very risk tolerant and mostly looking to make money over the long term, then it may be worth it to you. But if a larger mortgage makes it harder to pay the monthly payments (a meaningfully smaller buffer), or if your job is such that you might end up having to sell those investments at a loss to cover your mortgage for a few months because you (didn't make enough|got laid off|etc.), then you may want the smaller mortgage to make that less of a risk (though still setting aside the safety net in something minimally risky). |
How to invest Rs.10k in India | Rs 10,000 is a small but good amount to begin with. I would suggest you start by investing in some good mutual funds. Do some research, a balance mutual fund is less risky less returns compared to a equity mutual fund. The other option is directly investing in stock market, however this needs some experience and you would need to open demat and trading accounts that would cost money to open and maintain. |
Are there any statistics that support the need for Title Insurance? | When I bought the house I had my lawyer educate me about everything on the forms that seemed at all unclear, since this was my first time thru the process. On of the pieces of advice that he gave was that title insurance had almost no value in this state unless you had reason to believe the title might be defective but wanted to buy the property anyway. In fact I did get it anyway, as an impulse purchase -- but I'm fully aware that it was a bad bet. Especially since I had the savings to be able to self-insure, which is always the better answer if you can afford to risk the worst case scenario. Also: Ask the seller whether they bought title insurance. Often, it is transferrable at least once. |
How can I investigate historical effect of Rebalancing on Return and Standard Deviation? | From Vanguard's Best practices for portfolio rebalancing: |
What gives non-dividend stocks value to purchasers? [duplicate] | Yes, I agree with you. Saying that the value of the stock will grow as the company grows and acquires more assets ... I don't see why. Okay, I'm a nice guy and I want to see other people do well, but what do I care how much money they're making if they're not giving any of it to ME? Frankly I think it's like people who buy commemorative plates or beanie babies or other "collectibles" as an investment. As long as others are also buying them as an investment, and buying and reselling at a profit, the value will continue to go up. But one day people say, Wait, is this little stuffed toy really worth $10,000? and the balloon bursts. Confer Dutch tulips: http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/ As I see it, what gives a non-dividend-paying stock value is mostly the expectation that at some time in the future it will pay dividends. This is especially true of new start-up companies. As you mentioned, there's also the possibility of a takeover. It wouldn't have to be a hostile takeover, any takeover would do. At that point the buying company either buys the stock or exchanges it for shares of their own. In the first case you now have cash for your investment and in the second case you now have stock in a dividend-paying company -- or in another non-dividend-paying company and you start the cycle over. |
What happens to my stocks when broker goes bankrupt? | Here is my perception of the situation, obtained from reading Degiro's Client Agreement. If Degiro shuts down, it will notify you about the fact at least one month in advance, and you will have enough time to order a transfer of your positions to a different broker. If Degiro shuts down unexpectedly, your assets will remain to be held at SPV, a separate legal entity which Degiro uses to hold the financial instruments belonging to the clients. Since SPV does nothing else but holding the assets, it is very unlikely that something bad will happen with it on its own. With some help from Degiro and/or the regulator (AFM) you should be able to transfer your assets from SPV to a different custodian and broker and thus regain control over them. If you have a non-Custody account, you have slightly higher chances of losing your assets, because Degiro can borrow your securities held at SPV. If both the client for whom Degiro borrowed a security and Degiro itself go bankrupt at the same time, the lent security will not be returned to SPV, there will arise a shortage, which will be proportionally distributed among the accounts of the clients holding this particular security. However, then the investor compensation scheme should kick in and help you recover up to 20000 EUR of your losses. |
Finance algebra | With the following variables the periodic (annual) repayment is given by The recurrence equation for the balance b at the end of month x is derived from b[x + 1] = b[x] (1 + r) - d where b[0] = s giving The interest portion of the final payment is b[n - 1] r and the total principal repaid at the end of period n - 1 is s - b[n - 1] Solving simultaneously n = 8.9998 and s = 7240 The principal repaid at the end of the first period is s - b[1] or d - r s = 479.74 |
What is the best way to save money from inflation and currency devaluation? | Devaluation is a relative term, so if you want to protect yourself against devaluation of your currency against dollars - just buy dollars. Inflation is something you cannot protect yourself against because it is something that describes the purchasing power of the money. You will still need to purchase, and usually with money. A side effect of inflation is usually devaluation against other currencies. So one of the ways to deal with inflation is not to keep the money in your currency over time, and only convert from a more stable currency when you need to make purchases. Another way is to invest in something tangible that can easily be sold (for example, jewelery and precious metals, but it has other risks). Re whats legal and illegal in your country - we don't really know because you didn't tell what country that is to begin with, but the usual channels like travelers' checks or bank transfer should work. Carrying large amounts of cash are usually either illegal or strictly regulated. |
Why are American Express cards are not as popular as Visa or MasterCard? | My experience is in the United States only. In the past, American Express marketed its products as more exclusive and prestigious than other cards. There was an attempt to give the impression that cardholders were more qualified financially. In return, fees were higher both to merchants and to cardholders. At the time (early 1990's), it was not common to use credit cards for small purchases, such as groceries or fast food. Credit cards were used for larger purchases such as jewelry or electronics or dinner in a nicer restaurant. Once it became popular to use credit cards for everyday purchases, the demand for customers using credit cards changed to the highest number of people instead of people of higher status. At that point, Visa (and to a lesser extent Mastercard) transaction volume increased dramatically. Merchants needed the largest number of customers with cards, not the most financially stable. As Visa volume grew, and people started using Visa for small purchases, the use of American Express decreased as their habits changed (once someone got used to pulling out Visa, they did it in every situation). Merchants are less willing to go through the extra hassle of accepting cards that are used by fewer people. Over time, I suspect this process led to the gap between Visa and American Express. As a merchant, in order to accept credit cards, you have to set up a bank account and maintain a merchant account. Accepting Visa, MC and Discover can all be done through one account, but American Express has traditionally required a separate relationship, as well as its own set of rules and fees that were generally higher. Since there are relatively few American Express cardholders compared to Visa, there is doubt about whether it is worth it accept the card. It depends upon the customer base. Fine restaurants still generally accept American Express. |
Buying a home with down payment from family as a “loan” | I would recommend against loans from family members. But if you decide to go down that path take care of the basics: This is a business decision so treat it like one. I would add that the situation you describe sounds extremely generous to your family member. I'd look at standard loan agreements (ie. in the marketplace) and model your situation more on them - if you do this, even with you paying a premium, you'd never come up with something as generous as what you have described. |
Good book-keeping software? | I like Quicken for personal use, and they have a small business edition if you don't want to move into QuickBooks. |
Fringe Benefits (Lodging) for single member S-Corp | If you use "a room or other separately identifiable space" within your apartment exclusively for your business, then you might be able to recoup a fraction of your rent for that. Check the rules for home office at the IRS and adopt a consistent and well-documented approach. (I would pay your full rent out of your personal account, and then do an "expense report" for the portion that's legitimately business related, but that's not a unique approach.) Other than that, I agree with the answer by litteadv - You cannot reduce your tax by the full amount of your rent just by having the S Corp pay, and trying to do so is probably playing with fire. Generally speaking, don't comingle business and personal expenses like that. |
I was given a 1099-misc instead of a w-2 what are my next steps? | I agree that you should have received both a 1099 and a W2 from your employer. They may be reluctant to do that because some people believe that could trigger an IRS audit. The reason is that independent contractor vs employee is supposed to be defined by your job function, not by your choice. If you were a contractor and then switched to be an employee without changing your job description, then the IRS could claim that you should have always been an employee the entire time, and so should every one of the other contractors that work for that company with a similar job function. It's a hornet's nest that the employer may not want to poke. But that's not your problem; what should you do about it? When you say "he added my Federal and FICA W/H together", do you mean that total appears in box 4 of your 1099? If so, it sounds like the employer is expecting you to re-pay the employer portion of FICA. Can you ask them if they actually paid it? If they did, then I don't see them having a choice but to issue a W2, since the IRS would be expecting one. If they didn't pay your FICA, then the amount this will cost you is 7.65% of what would have been your W2 wages. IMHO it would be reasonable for you to request that they send you a check for that extra amount. Note: even though that amount will be less than $600 and you won't receive a 1099 in 2017 for it, legally you'll still have to pay tax on that amount so I think a good estimate would be to call it 10% instead. Depending on your personality and your relationship with the employer, if they choose not to "make you whole", you could threaten to fill out form SS-8. Additional Info: (Thank you Bobson for bringing this up.) The situation you find yourself in is similar to the concept of "Contract-to-Hire". You start off as a contractor, and later convert to an employee. In order to avoid issuing a 1099 and W2 to the same person in a single tax year, companies typically utilize one of the following strategies: Your particular situation is closest to situation 2, but the reverse. Instead of retroactively calling you a W2 employee the entire time, your employer is cheating and attempting to classify you as a 1099 contractor the entire time. This is frowned upon by the IRS, as well as the employee since as you discovered it costs you more money in the form of employer FICA. From your description it sounds like your employer was trying to do you a favor and didn't quite follow through with it. What they should have done was never switch you to W2 in the first place (if you really should have been a contractor), or they should have done the conversion properly without stringing you along. |
How can we determine how much income our savings could generate if we purchase an annuity? | Note that it isn't always clear that "turning it all into an annuity" is the right answer. Annuities are essentially insurance policies -- you're paying them a share of your income to guarantee a specific payout. If you outlive the actuarial tables, that may be a win. If the market crashes, that may be a win. But I'm increasingly hearing the advice that staying in investments (albeit in a very conservative position) may pay better longer. There are tools which will do monte-carlo modelling based on what the market has done in the past. You give them your estimate of how much in today's dollars would be needed to "maintain your lifestyle", and they'll tell you how much savings you need -- and what form you might want to keep those savings in -- to have good odds of being able to live entirely off the earnings and never touch the capital My employer makes such a tool available to us, and in fact Quicken has a simpler version built into it; it's nice that the two agree. |
How do I Fundamentally Analyze this Stock so I may see if the Company is Running Well? | a) Nothing would support this company going back to $.50 per share b) Fundamentally the market for this sectors has been obliterated and the fundamentals don't look like they will improve. Similar companies experience what this one is and will be going through, they borrow the hilt and hope they can pump enough oil and sell the oil at a high price. Oil goes below, WAYYY below the price they can sell it at and even break even, so they are burning cash until they declare bankruptcy. This company is not an exception. So here is what to look at on their balance sheet: assets and liabilities. Liabilities are debt. Their debt is over 50% of their assets, that debt has interest and there is NO WAY they are making a profit. Their website's last financial statement is from September 30th.. LOL, so they haven't even released a quarterly financial statement in two quarters straight, so have they released anything? Given what we know about the dire state of the entire oil drilling industry, lets see if these guys are the exception to the rule (spoiler; they aren't) February 15th, 2015 http://www.marketwatch.com/story/strategic-oil-gas-ltd-provides-operations-update-2015-02-19-16173591 The Company prudently elected to stop the winter Muskeg drilling program in order to preserve capital. So now they aren't even getting new assets to resale, they aren't making any money from that operation, their debt still has interest payments though. Approximately 700 Boe/d of production has been shut-in by suspending operations at Bistcho, Cameron Hills and Larne, which are not economic at current commodity prices. Predictable. Also, you should notice from their actual financial statements (from 6 months ago, lol) (when the price of oil was over 100% higher than it is today, lol), this company already wasn't a good performer. They have been financing themselves by doing private placements, by issuing shares to investors that are not you, and diluting the share value of ALL OTHER SHAREHOLDERS. Dead in the water. I got this from skimming their financial report, without even being familiar with how canadian companies report. Its just bad news. You shouldn't be married to this investment. |
Insider Trading? | I am a flight attendant on a private jet and I hear a bank CEO discussing a merger or a buyout. I proceed to purchase that stock before the announcement. The CEO did not tell me to buy it, I just overheard him. If you are a flight attendant on a private jet that is operated by one of the principals, probably including a bank, attorney, consultant, broker, etc., in the merger or buyout, then you probably have a fiduciary duty to safeguard the information and are prohibited from trading. Please see: http://www.kiplinger.com/article/investing/T052-C008-S001-would-you-be-guilty-of-insider-trading.html You’re a janitor at a major company. You hear members of the company’s board convening outside the room you’re cleaning and decide to hide in the closet. The board okays a deal to sell the company for a fat premium to the current share price. You load up on the shares. Illegal insider trading? Definitely. This is not a public place, and “you’d be in a position to understand that confidential information was being disclosed, which changes the calculus,” says Andrew Stoltmann, a Chicago-based securities lawyer. Also see: http://meyersandheim.com/how-to-win-an-insider-trading-case/ However, between these two extremes of a bystander with no duty to the corporation and a corporate officer with a clear duty to the corporation stood a whole group of people such as printers, lawyers and others who were involved in non-public transactions that did not necessarily have a duty to the company whose securities they traded. To address this group of people the courts developed the misappropriation theory. The misappropriation theory covers people who posses inside information and who are prohibited from trading on such information because they owe a duty to a third party and not the corporation whose securities are traded. Yours is the perfect example. You owe a duty to your employer to operate in its best interests. As for the broader, more common example, where you overhear information in an elevator, restaurant, in line at the coffee shop, etc., trading on such information was found not to be insider trading in SEC v. Switzer: http://law.justia.com/cases/federal/district-courts/FSupp/590/756/2247092/ In this case, Mr. Switzer overheard information at a track meet and traded on it with profits. The court found: The information was inadvertently overheard by Switzer at the track meet. Rule 10b-5 does not bar trading on the basis of information inadvertently revealed by an insider. On the basis of the above findings of fact and conclusions of law, the court orders judgment in favor of defendants. |
How does start-up equity end up paying off? | Equity could mean stock options. If that's the case if the company makes it big, you'll have the option to buy stocks cheap (which can then be sold at a huge profit) How are you going to buy those without income? 5% equity is laughable. I'd be looking for 30-40% if not better without salary. Or even better, a salary. To elaborate, 5% is fine, and even normal for an early employee taking a mild pay cut in exchange for a chance at return. That chance of any return on the equity is only about 1/20 (94% of startups fail) There is no reason for an employee to work for no pay. An argument could be made for a cofounder, with direct control and influence in the company to work for equity only, but it would be a /lot/ more (that 30-40%), or an advisory role (5% is reasonable) I also just noticed you mentioned "investing" in the startup with cash. As an angel investor, I'd still expect far more than 5%, and preferred shares at that. More like 16-20%. Read this for more info on how equity is usually split. |
Where should I invest to hedge against the stock market going down? | If you were certain you would probably do best by short selling an ETF that tracked the index for the market you think was about to tank. You'd certainly make a lot more money on that strategy than precious metals. If you were feeling super confident and want to make your money earn even more, you could also buy a bunch of put options on those same ETF funds. Obligatory Warning: Short selling and options can be extremely risky. While most investments cap your potential losses to your total investment, a short sale has no theoretical limit to the amount of money you can lose. |
Little hazy on how the entire RSU's and etrade works | Is the remaining amount tax free? As in, if the amount shown (which I can sell) on etrade is $5000 then if I sell the entire shares will my bank account be increased by $5000? The stocks they sell are withholding. So let's say you had $7000 of stock and they sold $2000 for taxes. That leaves you with $5000. But the actual taxes paid might be more or less than $2000. They go in the same bucket as the rest of your withholding. If too much is withheld, you get a refund. Too little and you owe them. Way too little and you have to pay penalties. At the end of the year, you will show $7000 as income and $2000 as withheld for taxes from that transaction. You may also have a capital gain if the stock increases in price. They do not generally withhold on stock sales, as they don't necessarily know what was your gain and what was your loss. You usually have to handle that yourself. The main point that I wanted to make is that the sale is not tax free. It's just that you already had tax withheld. It may or may not be enough. |
What does “Yield Curve” mean? | Great question! A Yield Curve is a plot of the yields for different maturities of debt. This can be for any debt, but the most common used when discussing yield curves is the debt of the Federal Government. The yield curve is observed by its slope. A curve with a positive slope (up and to the right) or a steepening curve, i.e. one that's becoming more positively sloped or less negatively sloped, may indicate several different situations. The Kansas City Federal Reserve has a nice paper that summarizes various economic theories about the yield curve, and even though it's a bit dated, the theories are still valid. I'll summarize the major points here. A positively sloped yield curve can indicate expectations of inflation in the future. The longer a security has before it matures, the more opportunities it has to be affected by changes in inflation, so if investors expect inflation to occur in the future, they may demand higher yields on longer-term securities to compensate them for the additional inflationary risk. A steepening yield curve may indicate that investors are increasing their expectations of future inflation. A positively sloped yield curve may also reflect expectations of deprecation in the dollar. The publication linked before states that depreciation of the dollar may have increased the perceived risk of future exchange rate changes and discouraged purchases of long-term Treasury securities by Japanese and other foreign investors, forcing the yields on these securities higher. Supply shocks, e.g. decreases in oil prices that lead to decreased production, may cause the yield curve to steepen because they affect short-term inflation expectations significantly more than long-term inflation. For example, a decrease in oil prices may decrease short-term inflation expectations, so short-term nominal interest rates decline. Investors usually assume that long-term inflation is governed more by fundamental macroeconomic factors than short-term factors like commodity price swings, so this price shock may lead short-term yields to decrease but leave long-term relatively unaffected, thus steepening the yield curve. Even if inflation expectations remain unchanged, the yield curve can still change. The supply of and demand for money affects the "required real rate," i.e. the price of credit, loans, etc. The supply comes from private savings, money coming from abroad, and growth in the money supply, while demand comes from private investors and the government. The paper summarizes the effects on real rates by saying Lower private saving, declines in the real money supply, and reduced capital inflows decrease the supply of funds and raise the required real rate. A larger government deficit and stronger private investment raise the required real rate by increasing the demand for funds. The upward pressure on future real interest rates contributes to the yield curve's positive slope, and a steepening yield curve could indicate an increasing government deficit, declines in private savings, or reduced capital coming in from abroad (for example, because of a recession in Europe that reduces their demand for US imports). an easing of monetary policy when is economy is already producing near its capacity ... would initially expand the real money supply, lowering required short-term real interest rates. With long-term real interest rates unchanged, the yield curve would steepen. Lower interest rates in turn would stimulate domestic spending, putting upward pressure on prices. This upward price pressure would probably increase expected inflation, and as the first bullet point describes, this can cause long-term nominal interest rates to rise. The combination of the decline in short-term rates and the rise in long-term rates steepens the yield curve. Similarly, an inverted yield curve or a positively sloped yield curve that is becoming less steep may indicate the reverse of some or all of the above situations. For example, a rise in oil prices may increase expectations of short-term inflation, so investors demand higher interest rates on short-term debt. Because long-term inflation expectations are governed more by fundamental macroeconomic factors than short-term swings in commodity prices, long-term expectations may not rise nearly as much as short term expectations, which leads to a yield curve that is becoming less steep or even negatively sloped. Forecasting based on the curve slope is not an exact science, just one of many indicators used. Note - Yield Curve was not yet defined here and was key to my answer for What is the "Bernanke Twist" and "Operation Twist"? What exactly does it do? So I took the liberty of ask/answer. |
Are there contracts for fixed pay vs. fixed pay rates? | In general the other party will expect you to keep your promises. If you promise to do something for a fixed amount of money, you take on a risk and it is no longer their problem if you work slower than you planned. In principle it could even be the case that you take on a project and fail, after which the company may not have to pay at all. So regardless of how things should be written in your books (For example a theoretical pay above minimum wage but a loss for your private company): An important thing to note is that if you are worried about ending up below minimum wage, you are definitely asking a fee that is too low. You should keep in mind that your fee should include a fair compensation for the expected work, and a fair compensation for the risk that you have taken on. |
Portfolio Diversity : invest $4000 into one account or $1000 into 4 accounts? | You spread money/investment across different accounts for different reasons: All this is in addition to diversification reasons. Investing all your money into one stock, bond, Mutual fund, ETF is risky if that one segment of the economy/market suffers. There is a drawback to diversification of accounts. Some have minimum amounts and fee structures. In the original question you asked about 1,000 per account. That may mean that some accounts may be closed to you. In other cases they will charge a higher percentage for fees for small accounts. Those issues would disappear long before you hit the 1,000,000 per account you mentioned in your comment. One problem can occur with having too much diversification. Having dozens of funds could mean that the overlap between the funds might result in over investing in a segment because you didn't realize that one stock segment appeared in 1/3 of the funds. |
Should I charge my children interest when they borrow money? | Would you expect your parents to charge you interest if you borrowed from them? Yes, if they said so when the money was borrowed. No, if there were no terms communicated when the money was borrowed. Expectations need to be clearly laid out up-front. What is your advice? I think you are asking the wrong question of whether or not you should charge interest. The real issue is that you are concerned about the 'borrowing', which are really turning out to be 'gifts'. The money amounts are not the issue as much as the lack of responsibility. Going back to your children and asking for interest will not fix this issue. This is my advice: This is a difficult process, and may not go over well with your children. Remember that this is not hurting them. You are actually hurting them more by allowing them to put off developing good habits, independence, and maturity. It is hard to see someone make choices that hurt themselves and others, but you cannot prevent them from making that choice. If they never feel the results of that choice, they will lack the motivation to change. |
Is it better for a public company to increase its dividends, or institute a share buyback? | In some sense, the share repurchasing program is better if the company does not foresee the same profit levels down the road. Paying a dividend for several years and then suddenly not paying or reducing a dividend is viewed as a "slap in the face" by investors. Executing a share repurchase program one year and then not the next is not viewed as negatively. From an investor's standpoint, I would say a dividend is preferred over a share repurchase program for a similar reason. Typically companies that pay a dividend have been doing so for quite some time and even increasing it over time as the company increases profits. So, it can be assumed that if a company starts paying a dividend, it will do so for the long-run. |
How to start investing for an immigrant? | I am in a similar situation (sw developer, immigrant waiting for green card, no debt, healthy, not sure if I will stay here forever, only son of aging parents). I am contributing to my 401k to max my employer contribution (which is 3.5%, you should find that out from your HR). I don't have any specific financial goal in my mind, so beside an emergency fund (I was recommended to have at least 6 months worth of salary in cash) I am stashing away 10% of my income which I invest with a notorious robot-adviser. The rate is 80% stocks, 20% bonds, as I don't plan to use those funds anytime soon. Should I go back to my country, I will bring with me (or transfer) the cash, and leave my investments here. The 401K will keep growing and so the investments, and perhaps I will be able to retire earlier than expected. It's quite vague I know, but in the situation we are, it's hard to make definite plans. |
Why would you not want to rollover a previous employer's 401(k) when changing jobs? | The biggest reason why one might want to leave 401k money invested in an ex-employer's plan is that the plan offers some superior investment opportunities that are not available elsewhere, e.g. some mutual funds that are not open to individual investors such as S&P index funds for institutional investors (these have expense ratios even smaller than the already low expense ratios of good S&P index funds) or "hot" funds that are (usually temporarily) closed to new investors, etc. The biggest reason to roll over 401k money from an ex-employer's plan to the 401k plan of a new employer is essentially the same: the new employer's plan offers superior investment opportunities that are not available elsewhere. Of course, the new employer's 401k plan must accept such roll overs. I do not believe that it is a requirement that a 401k plan must accept rollovers, but rather an option that a plan can be set up to allow for or not. Another reason to roll over 401k money from one plan to another (rather than into an IRA) is to keep it safe from creditors. If you are sued and found liable for damages in a court proceeding, the plaintiff can come after IRA assets but not after 401k money. Also, you can take a loan from the 401k money (subject to various rules about how much can be borrowed, payment requirements etc) which you cannot from an IRA. That being said, the benefits of keeping 401k money as 401k money must be weighed against the usually higher administrative costs and usually poorer and more limited choices of investment opportunities available in most 401k plans as Muro has said already. |
Unusual real estate market with seemingly huge rental returns | The way to resolve your dilemma is to consult the price-to-rent ratio of the property. According to smartasset.com: The price-to-rent ratio is a measure of the relative affordability of renting and buying in a given housing market. It is calculated as the ratio of home prices to annual rental rates. So, for example, in a real estate market where, on average, a home worth $200,000 could rent for $1000 a month, the price-rent ratio is 16.67. That’s determined using the formula: $200,000 ÷ (12 x $1,000). Smartasset.com also goes on to give a table comparing different cities' price-to-rent ratio and then claim that the average price-to-rent ratio is currently 19.21. If your price-to-rent ratio is lower than 19.21, then, yes, your rents are more expensive than the average house. Smartasset.com claims that a high price-to-rent ratio is an argument in favor of tenants "renting" properties while a low price-to-rent ratio favors people "buying" (either to live in the property or to just rent it out to other people). So let's apply the price-to-rent ratio formula towards the properties you just quoted. There's a specific house I could buy for 190 (perhaps even less) that rents for exactly 2000 / month. 190K/(2000 * 12) = 7.92 There's a house for sale asking 400 (been on the market 2 yrs! could probably get for 350) which rents for 2800 /month. (400K)/(2800*12) = 11.90 (350K)/(2800*12) = 10.42 One can quite easily today buy a house for 180k-270k that would rent out for 1700-2100 / month. Lower Bound: (180K)/(1700*12) = 8.82 Upper Bound: (270K)/(2100*12) = 10.71 Even so, the rental returns here seem "ridiculously high" to me based on other markets I've noticed. Considering how the average price-to-rent ratio is 19.21, and your price-to-rent ratio ranges from 7.92 to 11.90, you are indeed correct. They are indeed "ridiculously high". Qualification: I was involved in real estate, and used the price-to-rent ratio to determine how long it would take to "recover" a person's investment in the property. Keep in mind that it's not the only thing I care about, and obviously the price-to-rent ratio tends to downplay expenses involved in actually owning properties and trying to deal with periods of vacancy. There's also the problem of taking into account demand as well. According to smartasset.com, Detroit, MI has the lowest price-to-rent ratio (with 6.27), which should suggest that people should buy properties immediately in this city. But that's probably more of a sign of people not wanting to move to Detroit and bid up the prices of properties. EDIT: I should also say that just because the properties are "ridiculously expensive" right now doesn't mean you should expect your rents to decrease. Rather, if rents keep staying at their current level, I'd predict that the property values will slowly increase in the future, thereby raising the price-to-rent ratio to 'non-ridiculous' mode. |
Where can I find information on the percentage of volume is contributed by shorts? | I believe that it's not possible for the public to know what shares are being exchanged as shorts because broker-dealers (not the exchanges) handle the shorting arrangements. I don't think exchanges can even tell the difference between a person selling a share that belongs to her vs. a share that she's just borrowing. (There are SEC regulations requiring some traders to declare that trades are shorts, but (a) I don't think this applies to all traders, (b) it only applies to the sells, and (c) this information isn't public.) That being said, you can view the short interest in a symbol using any of a number of tools, such as Nasdaq's here. This is often cited as an indicator similar to what you proposed, though I don't know how helpful it would be from an intra-day perspective. |
How smart is it to really be 100% debt free? | My take is that there are many factors to consider when deciding whether to accelerate payment of a debt beyond the require minimum. Ideally you would want to be debt-free with a home owned outright, a pension big enough to lead a nice life for the rest of your days and plenty of savings to cover any unexpected expenses. Being debt-free is not a bad thing but it should not come at the expense of your overall financial health. |
What is this fund? | SMID CAP FUND is Fidelity's way of saying SMALL to MID CAP FUND. Small to Medium is self explanatory. Cap is capitalization, and it basically means how much the sum of all the existing shares of the company are worth. Fidelity names the funds inside their 401k plans according to who provides the fund. They also provide management resources for funds chosen by your employer. There should be more available about the fund you're interested in on your Fidelity 401(k) site. |
How do ETF fees get applied? | The ETF price quoted on the stock exchange is in principle not referenced to NAV. The fund administrator will calculate and publish the NAV net of all fees, but the ETF price you see is determined by the market just like for any other security. Having said that, the market will not normally deviate greatly from the NAV of the fund, so you can safely assume that ETF quoted price is net of relevant fees. |
Outstanding car bill, and I am primary but have not driven it for 2 years | Sounds like you need to contact your ex and sort it out. If you have co-signed the loan, changes are you are equally responsible even if on party chooses not to pay, then the bank will come after the other one. If you no longer wish to be part of the arrangement and your ex still wants the car, she will have to buy you out of the car and become fully responsible for the liability. |
1099 Misc for taking care of foreign exchange students | According to Intuit, you cannot claim the $50 charitable contribution, so the entire $2000 / month will be taxable instead of $1900. That's only an extra $35 if your combined tax rate is 35%. As TTT mentioned, do this for the experience, not for the money. My wife and I have been hosting international students for 10 years now. https://ttlc.intuit.com/questions/3152069-i-received-a-1099-misc-employee-compensation-for-hosting-a-foreign-exchange-student-can-i-complete-a-schedule-c-for-the-expenses |
Optimal pricing of close to zero marginal cost content | Software or any online service fits this category I suppose. There are two apps I pay for that are "free." Evernote and Pandora. Evernote is free for 40MB, $45/yr for 500MB/mo transfer. Pandora is free for 40hrs/mo, $36/yr unlimited. When I use a free product and hit the limit it's a sign to me that I value that product and the owners deserve to get paid. To me, both products provide value that's well above the cost they are asking. In this case, both products are annual subscriptions, but offer monthly as well. You don't mention the type of product you have, the two I listed are similar in billing type, but very difference end uses. The question is - How do you provide value and make your customers want to pay you? BTW - the ~$40/yr give or take, seems a good price point. Under $50, it feels a fair price to pay for a useful product. |
A friend wants to use my account for a wire transfer. Is this a scam or is it legitimate? | I know people who work in the gulf and most contracts are of the 14 days on/ 14 days (or so) off flavor. I've never heard of someone being onboard a ship or platform for a year. I bet this is a scam. |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | We aim to keep 6 months of expenses. The rationale is that its enough time to recover from most serious illnesses (that you can recover from) or a redundancy or pay for a large unexpected problem not covered by the insurance (e.g. the boiler dying). It also gives us enough time to reorganise finances if needed. For example we could get out of contracts (like mobile phones, sky TV), sell the car, and maybe even find a cheaper house if needed in that time. It will take a good chunk of time to build up that amount and it's worth considering how many commitments you have (kids, wife, mortgage, car...) as the fewer you have the less you need. If you have fewer commitments you can be comfortable with much less contingency. When I lived in rented accomodation and didn't run a car or have many possessions, I just maintained enough cash to cover my bills for about 6 weeks, this would give me enough time to find another job, and if I didn't get one I could always crash round a friend's house. |
Can extra mortgage payments be made to lower the monthly payment amount? | Typically, this is not an option, as the monthly payments are fixed. It depends on the willingness of your financing bank for such a change. You probably will have to refinance (with them or another lender); which is not a bad thing, as you even can get a lower interest rate potentially (as of Jan 2017 - this will change). Consider too: It could be a better solution to instead invest the 25000, and use the investment returns to fill up the difference every month. Certainly more effort, but you probably come out ahead financially. |
irr calculation on stock with dividends | I use the following method. For each stock I hold long term, I have an individual table which records dates, purchases, sales, returns of cash, dividends, and way at the bottom, current value of the holding. Since I am not taking the income, and reinvesting across the portfolio, and XIRR won't take that into account, I build an additional column where I 'gross up' the future value up to today() of that dividend by the portfolio average yield at the date the dividend is received. The grossing up formula is divi*(1+portfolio average return%)^((today-dividend date-suitable delay to reinvest)/365.25) This is equivalent to a complex XMIRR computation but much simpler, and produces very accurate views of return. The 'weighted combined' XIRR calculated across all holdings then agrees very nearly with the overall portfolio XIRR. I have done this for very along time. TR1933 Yes, 1933 is my year of birth and still re investing divis! |
At what percentage drop should you buy to average down | TL;DR; There is no silver bullet. You have to decide how much to invest and when on your own. Averaging down definition: DEFINITION of 'Average Down' The process of buying additional shares in a company at lower prices than you originally purchased. This brings the average price you've paid for all your shares down. BREAKING DOWN 'Average Down' Sometimes this is a good strategy, other times it's better to sell off a beaten down stock rather than buying more shares. So let us tackle your questions: At what percentage drop of the stock price should I buy more shares. (Ex: should I wait for the price to fall by 5% or 10% to buy more.) It depends on the behaviour of the security and the issuer. Is it near its historical minimum? How healthy is the issuer? There is no set percentage. You can maximize your gains or your losses if the security does not rebound. Investopedia: The strategy is often favored by investors who have a long-term investment horizon and a contrarian approach to investing. A contrarian approach refers to a style of investing that is against, or contrary, to the prevailing investment trend. (...) On the other side of the coin are the investors and traders who generally have shorter-term investment horizons and view a stock decline as a portent of things to come. These investors are also likely to espouse trading in the direction of the prevailing trend, rather than against it. They may view buying into a stock decline as akin to trying to "catch a falling knife." Your second question: How many additional shares should I buy. (Ex: Initially I bought 10 shares, should I buy 5,10 or 20.) That depends on your portfolio allocation before and after averaging down and your investor profile (risk apettite). Take care when putting more money on a falling security, if your portfolio allocation shifts too much. That may expose you to risks you shouldn't be taking. You are assuming a risk for example, if the market bears down like 2008: Averaging down or doubling up works well when the stock eventually rebounds because it has the effect of magnifying gains, but if the stock continues to decline, losses are also magnified. In such cases, the investor may rue the decision to average down rather than either exiting the position or failing to add to the initial holding. One of the pitfalls of averaging down is when the security does not rebound, and you become too attached to be able to cut your losses and move on. Also if you are bullish on a position, be careful not to slip the I down and add a T on said position. Invest with your head, not your heart. |
Why are big companies like Apple or Google not included in the Dow Jones Industrial Average (DJIA) index? | In addition to the answers provided above, the weight the Dow uses to determine the index is not the market capitalization of the company involved. That means that companies like Google and Apple with very high share prices and no particular inclination to split could adversely effect the Dow, turning it into essentially the "Apple and Google and then some other companies" Industrial Average. The highest share price Dow company right now, IIRC, is IBM. Both Google and Apple would have three times the influence on the Index as IBM does now. |
Avoiding sin stock: does it make a difference? | Yes, it does matter. You are right that lower demand for a stock will drive its price down. Lower stock prices can hurt the company. Take a look at Fixee's answer to this question: a declining share price will make it hard to secure credit, attract further investors, build partnerships, etc. Also, employees are often holding options or in a stock purchase plan, so a declining share price can severely dampen morale. In an extreme case, if share prices plummet too far, the company can be pressured to reverse-split the shares, and (eventually) take the company private. This recently happened to Playboy. If you do not want to support a company, for whatever reason, then it is wise to avoid their stock. |
How long should I keep my tax documents, and why? | How long you need to keep tax records will depend on jurisdiction. In general, if you discard records in a period of time less than your tax authority recommends, it may create audit problems down the road. ie: if you make a deduction supported by business expense receipts, and you discard those receipts next year, then you won't be able to defend the deduction if your tax authority audits you in 3 years. Generally, how long you keep records would depend on: (a) how much time your tax authority has to audit you; and (b) how long after you file your return you are allowed to make your own amendments. In your case (US-based), the IRS has straight-forward documentation about how long it expects you to keep records: https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records Period of Limitations that apply to income tax returns Keep records for 3 years if situations (4), (5), and (6) below do not apply to you. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return. Keep records indefinitely if you do not file a return. Keep records indefinitely if you file a fraudulent return. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later. Note that the above are the minimum periods to keep records; for your own purposes you may want to keep them for longer periods than that. For example, you may be in a position to discover that you would like to refile a prior tax return, because you forgot to claim a tax credit that was available to you. If you would have been eligible to refile in that period but no longer have documentation, you are out of luck. |
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