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What is the difference between equity and assets? | Equity does not represent production divisions in a company (i.e. chocolate, strawberry, and vanilla does not make sense). In Sole proprietorship, equity represents 1 owner. In Partnership, equity has at least two sub-accounts, namely Partner 1 and Partner 2. In Corporations, equity may have Common Stockholders and Preferred Stockholders, or even different class of shares for insiders and angel investors. As you can see, equity represents who owns the company. It is not what the company does or manufactures. First and foremost, define the boundary of the firm. Are your books titled "The books of the family of Doe", "The books of Mr & Mrs Doe", or "The books of Mr & Mrs Doe & Sons". Ask yourself, who "owns" this family. If you believe that a marriage is perpetual until further notice then it does not make any sense to constantly calculate which parent owns the family more. In partnership, firm profits are attributed to partner's accounts using previously agreed ratio. For example, (60%/40% because Partner 1 is more hard working and valuable to the firm. Does your child own this family? Does he/she have any rights to use the assets, to earn income from the assets, to transfer the assets to others, or to enforce private property rights? If they don't have a part of these rights, they are certainly NOT part of Equity. So what happens to the expenses of children if you follow the "partnership" model? There are two ways. The first way is to attribute the Loss to the parents/family since you do not expect the children to repay. It is an unrecoverable loss written off. The second way is to create a Debtor(Asset) account to aggregate all child expense, then create a separate book called "The books Children 1", and classify the expense in that separate book. I advise using "The family of Doe" as the firm's boundary, and having 1 Equity account to simplify everything. It is ultimately up to you to decide the boundaries. |
Do corporate stock splits negate share repurchase programs? | No, I think you are misunderstanding the Math. Stock splits are a way to control relatively where the price per share can be for a company as companies can split or reverse split shares which would be similar to taking dimes and giving 2 nickels for each dime, each is 10 cents but the number of coins has varied. This doesn't create any additional value since it is still 10 cents whether it is 1 dime or 2 nickels. Share repurchase programs though are done to prevent dilution as executives and those with incentive-stock options may get shares in the company that increase the number of outstanding shares that would be something to note. |
Should the price of fuel in Australia at this point be so high? | First price isn't artificially maintained at a level. When a refining company signs a contract to buy crude from a supplier, it promises to buy at a certain price with options for increase and decrease due to the fluctuating prices in the market. And it buys crude to build up a certain buffer to supply itself for a certain duration, in case of supply problems. As it had bought oil at a higher price, it would be reluctant to lower the prices even if the current crude it buys is at a lower cost. If it buys oil from the open market, it has no other option than to pass on the hike on to the consumers, so a more intense fluctuation in the prices of oil at the point, where you buy it. Some airlines used hedging to take care of the spurts in the price of oil, to mantian their operating margins. And moreover refining and distribution is a very low margin business, so the company has an incentive to sell at a higher cost if required. |
Accidentally opened a year term CD account, then realized I need the money sooner. What to do? | In my experience, the only penalty to breaking a CD is to lose a certain amount of accumulated interest. Your principal investment will be fine. Close the CD. A few days of interest is nothing. |
Can I trust the Motley Fool? | Upselling you is how they make money. That's the price of the free content. Test their recommendations. Pretend to buy the stocks they say. How do they do? Do they ever say to sell the stocks after their buy recommendations? There are lots and lots of opinions out there. I doubt people really hear about the good ones because (a) the good ones have paid newsletters and/or (b) the good ones aren't telling a soul because they're absolutely cleaning it up. Warren Buffett doesn't announce his intentions. He's been buying for a while before anyone finds out. |
Is it unreasonable to double your investment year over year? | Yes. The definition of unreasonable shows as "not guided by or based on good sense." 100% years require a high risk. Can your one stock double, or even go up three fold? Sure, but that would likely be a small part of your portfolio. Overall, long term, you are not likely to beat the market by such high numbers. That said, I had 2 years of returns well over 100%. 1998, and 1999. The S&P was up 26.7% and 19.5%, and I was very leverage in high tech stock options. As others mentioned, leverage was key. (Mark used the term 'gearing' which I think is leverage). When 2000 started crashing, I had taken enough off the table to end the year down 12% vs the S&P -10%, but this was down from a near 50% gain in Q1 of that year. As the crash continued, I was no longer leveraged and haven't been since. The last 12 years or so, I've happily lagged the S&P by a few basis points (.04-.02%). Also note, Buffet has returned an amazing 15.9%/yr on average for the last 30 years (vs the S&P 11.4%). 16% is far from 100%. The last 10 year, however, his return was a modest 8.6%, just .1% above the S&P. |
How to decide on limits when purchasing/selling stocks? | You said your strategy was to put it into a index fund. But then you asked about setting stock limits. I'm confused. Funds usually trade at their price at the end of the day, so you shouldn't try to time this at all. Just place your order. If you are buying ETFs, there is going to be so much volume on the market that your small trade is going to have no impact on the price. You should just place a market order. A market order is an order to buy or sell a stock at the current market price. A limit order is an order to buy or sell a security at a specific price. In the US, when you place a trade with any broker, you can either place a limit order or a market order. A market order just fills your order with the next best sellers in line. If you place an order for 100 shares, the sellers willing to sell 100 shares at the lowest price will be matched with your order (sometimes you may get 50 shares at one price and 50 shares at a slightly different price). If your stock has a lot of volatility and you place a market order for a small amount of shares, you will get the best price. If you place a limit order, you specify the price at which you want to buy shares. Your order will then only be filled with sellers willing to sell at that price or lower (i.e. they must be at least as good as you specified). This means you could place an order at a limit that does not get filled (the stock could move in a direction away from your limit price). If you really want to own the stock, you shouldn't use a limit order. You shouldn't only use a limit order if you want to tell your broker "I will only buy this stock at this price or better." p.s. Every day that passes is NOT a waste. It's just a day that you've decided investing in cash is safer than investing in the market. |
What is an “Options Account”? | Options are a derivative product, and in this case, derive their value from an underlying security, a traded stock. An option gives you the right, but not the obligation, to buy a stock at a given price (the strike price) by a given time (the expiration date.) What I just described is a call option. The opposite instrument is a put, giving you the right, but not the obligation, to sell the stock at a given price. Volumes have been written on the subject, but I'd suggest that for a custodial Roth, I'd not activate the ability to trade options. How to get started with options investing? offers a nice introduction to trading options. In my response, I offer an example of a trade that's actually less risky due to the option component. |
How can the Samsung Upgrade Programme offer 0% APR? | The financing is built into the price. I do not have hard facts, but I strongly suspect that very few people buy brand-new smartphones at full price upfront. Most pay a monthly installment to the carrier or retailer equal to 1/24 of the full price, which in effect is "0% financing for 2 years". Samsung might be able to advertise a lower retail price and then offer financing at some rate of interest, but from a marketing standpoint, offering "0%" financing makes it feel like you're getting "free money", when in fact it's built into the overall price. Which sounds better, buying an $840 phone with 0% financing for two years or buying an $800 phone at 4.85% APR for two years (both have a $35 monthly payment)? |
Indian citizen working from India as freelancer for U.S.-based company. How to report the income & pay tax in India? | There is no reason for you to open a firm. However, it will help you, if you operate separate bank account for business and personal purposes. You can run your business as proprietorship business. Your inward remittance is your income. You can deduct payment made to your colleagues as salary. You should pay them by way of cheques or bank transfer only. You are also entitled to deduct other business expenses provided you keep proper receipt of the same such as broadband connection charges, depreciation on equipment and more importantly, rent on your house. If your total receipt from such income exceeds INR 60,00,000 you will need to withhold tax on payment made to your colleagues as also subject to audit of your accounts. If you want to grow your business, suggest you should take an Import / Export Code in your own name. You can put any further question in this regard. |
Why do some people say a house “not an investment”? | With an investment, you tend to buy it for a very specific purpose, namely to make you some money. Either via appreciation (ie, it hopefully increases value after you take all the fees and associated costs into account, you sell the investment, realise the gains) or via a steady cashflow that, after you subtracted your costs, leaves you with a profit. Your primary residence is a roof over your head and first and foremost has the function of providing shelter for yourself and your family. It might go up in value, which is somewhat nice, but that's not its main purpose and for as long as you live in the house, you cannot realise the increase in value as you probably don't want to sell it. Of course the remortgage crowd would suggest that you can increase the size of the mortgage (aka the 'home atm') but (a) we all know how that movie ended and (b) you'd have to factor in the additional interest in your P&L calculation. You can also buy real estate as a pure investment, ie with the only objective being that you plan to make money on this. Normally you'd buy a house or an apartment with a view of renting it out and try to increase your wealth both due to the asset's appreciation (hopefully) and the rent, which in this scenario should cover the mortgage, all expenses and still leave you with a bit of profit. All that said, I've never heard someone use the reasoning you describe as a reason not to buy a house and stay in an apartment - if you need a bigger place for your family and can afford to buy something bigger, that falls under the shelter provision and not under the investment. |
How accurate is Implied Volatility in predicting future moves? | How accurate is Implied Volatility in predicting future moves? How would you measure this? If the implied volatility says that there's a 1% chance that a stock will double, and it doubles, was it "right"? You could also say that it says there's a 99% change that it doesn't double, so was it "wrong"? What you could measure is the variance of daily returns over a time period, and see how well that compares to implied volatility, but there's no way to compare IV with the absolute price movement. If a stock goes up 0.01 each day, then the variance is 0 (the daily returns are the same each day), but over 250 the stock would go up $2.50. |
Why does ExxonMobil's balance sheet show more liabilities than assets? | Even assuming you were reading the balance sheet correctly it means nothing. What banks mostly care about is cash flow. Do they have enough extra money to make the payments on whatever they borrow? I have never had a credit card company ask me about assets--they don't care. They care about income with which to pay the credit card bill. Have a solid record of paying your bills and enough income to pay back what you are trying to borrow and you'll have an excellent credit rating no matter what your net worth. Whether you are one person or a megacorporation makes no difference. |
Asset allocation when retirement is already secure | You will hear a lot about diversifying your portfolio, which typically means having a good mix of investment types, areas of investments, etc. I'd like to suggest that you should also diversify your sources. Sad to say but the defined benefit pension is not a rock solid, sure fire source of security in your retirement planning. Companies go bankrupt, government agencies are reorganized, and those hitherto-untouchable assets are destroyed overnight. So, treat your new investment strategy as if you were starting over, and invest accordingly, for example, aggressively for a few years, then progressively safer as you get older. There are other strategies too, depending on factors like your taste for risk: you might prefer to be conservative until you reach some safety threshold to reach "certain safety" and then start making riskier investments. You may also consider different investment vehicles and techniques such as index funds, dollar cost averaging, and so on. |
What is the effect of a cancelled stock order on a stock and the market? | That article, like almost any article written by a non-expert and quoting only "research" from lobbying groups, hugely misses the point. The vast majority of orders that end up being cancelled are cancelled as a standard part of exchanges' official market-maker programs. Each exchange wants you and me to know that it has liquidity -- that when we go to buy or sell some stock, there will be someone waiting on the other side of the trade. So the exchange pays (via lowered fees or even rebates) hundreds of registered market makers to constantly have orders resting in each product's order book within a few ticks of the current NBBO or the last trade price. That way, if everyone else should suddenly disappear from the market, you and I will still be able to trade our shares for a price somewhat close to the last trade price. But market makers who are simply acting in this "backstop" role don't actually want to have their orders filled, because those orders will almost always lose them money. So as prices rise and fall (as much as tens of times per second), the market makers need to cancel their resting orders (so they don't get filled) and add new ones at new prices (so they meet their obligations to the exchange). And because the number of orders resting in any given product's order book is vastly larger than the number of actual trades that take place in any given time period, naturally the number of cancellations is also going to hugely outweigh the number of actual trades. As much as 97% to 3% (or even more). But that's completely fine! You and I don't have to care about any of that. We almost never need the market makers to be there to trade with us. They're only there as a backstop. There's almost always plenty of organic liquidity for us to trade against. Only in the rare case where liquidity completely dries up do we really care that the registered market makers are there. And in those cases (ideally) the market makers can't cancel their orders (depending on how well the exchange has set up its market maker program). So, to answer your question, the effect of standard order cancellation on a stock is essentially none. If you were to visualize the resting orders in a product's book as prices moved up and down, you would essentially see a Gaussian distribution with mean at the last trade price, and it would move up and down with the price. That "movement" is accomplished by cancellations followed by new orders. P.S. As always, keep in mind that your and my orders almost never actually make it to a real stock exchange anymore. Nowadays they are almost always sent to brokers' and big banks' internal dark pools. And in there you and I have no idea what shenanigans are going on. As just one example, dark pools allow their operators and (for a fee) other institutional participants access to a feature called last look that allows them to cancel their resting order as late as after your order has been matched against it! :( Regarding the question in your comment ... If Alice is sending only bona fide orders (that is, only placing an order at time T if, given all the information she has at time T, she truly wants and intends for it to be filled) then her cancellation at a later time actually adds to the effectiveness of and public perception of the market as a tool for price discovery (which is its ultimate purpose). [In the following example imagine that there are no such things as trading fees or commissions or taxes.] Let's say Alice offers to buy AAPL at $99.99 when the rest of the market is trading it for $100.00. By doing so she is casting her vote that the "fair value" of a share of AAPL is between $99.99 and $100.00. After all, if she thought the fair value of a share of AAPL was higher -- say, between $100.00 and $100.01 -- then she should be willing to pay $100.00 (because that's below fair value) and she should expect that other people in the market will not soon decide to sell to her at $99.99. If some time later Alice does decide that the fair value of AAPL is between $100.00 and $100.01 then she should definitely cancel her order at $99.99, for exactly the reason discussed above. She probably won't get filled at $99.99, and by sitting there stubbornly she's missing out (potentially forever) on the possibility to make a profit. Through the simple act of cancelling her $99.99 order, Alice is once again casting a vote that she no longer thinks that's AAPL's fair value. She is (very slightly) altering the collective opinion of the entire market as to what a share of AAPL is worth. And if her cancellation then frees her up to place another order closer to her perceived fair value (say, at $100.00), then that's another vote for her honest optinion about AAPL's price. Since the whole goal of the market is to get a bunch of particpants to figure out the fair value of some financial instrument (or commodity, or smart phone, or advertising time, etc.), cancellations of honest votes from the past in order to replace them with new, better-informed honest votes in the present can only be a good thing for the market's effectiveness and perceived effectiveness. It's only when participants start sending non-honest votes (non bona fide orders) that things start to go off the rails. That's what @DumbCoder was referring to in his comment on your original question. |
Individual Investor Safe Reinvest Gains Strategy? | Your idea is a good one, but, as usual, the devil is in the details, and implementation might not be as easy as you think. The comments on the question have pointed out your Steps 2 and 4 are not necessarily the best way of doing things, and that perhaps keeping the principal amount invested in the same fund instead of taking it all out and re-investing it in a similar, but different, fund might be better. The other points for you to consider are as follows. How do you identify which of the thousands of conventional mutual funds and ETFs is the average-risk / high-gain mutual fund into which you will place your initial investment? Broadly speaking, most actively managed mutual fund with average risk are likely to give you less-than-average gains over long periods of time. The unfortunate truth, to which many pay only Lipper service, is that X% of actively managed mutual funds in a specific category failed to beat the average gain of all funds in that category, or the corresponding index, e.g. S&P 500 Index for large-stock mutual funds, over the past N years, where X is generally between 70 and 100, and N is 5, 10, 15 etc. Indeed, one of the arguments in favor of investing in a very low-cost index fund is that you are effectively guaranteed the average gain (or loss :-(, don't forget the possibility of loss). This, of course, is also the argument used against investing in index funds. Why invest in boring index funds and settle for average gains (at essentially no risk of not getting the average performance: average performance is close to guaranteed) when you can get much more out of your investments by investing in a fund that is among the (100-X)% funds that had better than average returns? The difficulty is that which funds are X-rated and which non-X-rated (i.e. rated G = good or PG = pretty good), is known only in hindsight whereas what you need is foresight. As everyone will tell you, past performance does not guarantee future results. As someone (John Bogle?) said, when you invest in a mutual fund, you are in the position of a rower in rowboat: you can see where you have been but not where you are going. In summary, implementation of your strategy needs a good crystal ball to look into the future. There is no such things as a guaranteed bond fund. They also have risks though not necessarily the same as in a stock mutual fund. You need to have a Plan B in mind in case your chosen mutual fund takes a longer time than expected to return the 10% gain that you want to use to trigger profit-taking and investment of the gain into a low-risk bond fund, and also maybe a Plan C in case the vagaries of the market cause your chosen mutual fund to have negative return for some time. What is the exit strategy? |
Is person-person lending/borrowing protected by law? | By protected you mean what exactly? In the US, generally you'd get a promissory note signed by B saying "B promises to repay A such and such amount on such and such terms". In case of default you can sue in a court of law, and the promissory note will be the evidence for your case. In case of B declaring bankruptcy, you'd submit the promissory note to the bankruptcy court to get in line with all the other creditors. Similarly in all the rest of the world, you make a contract, you enforce the contract in courts. |
Buying a house. I have the cash for the whole thing. Should I still get a mortgage to get the homeowner tax break? | Not for the tax break, no; as others have said that still costs you money. However, with rates being low right now and brought a bit lower by the tax break, this is an opportunity for the safest form of leveraged investing you will ever find. If you invest that money, the returns on investment will probably be better than the mortgage rate, and that leaves you with a net profit. There is some risk if the market collapses, but it's less risk than any other form of borrowing to invest. That also leave you with more flexibility if you need cash in a hurry; you can draw down the investments rather than taking another loan. If the risk bothers you, you can do what I did and split the difference. I put 50% down and financed the rest. I sometimes regret not having pushed it harder, since it has worked out well for me ... but that was the level of risk I was comfortable with. |
Cash flow implications of converting primary mortgaged residence to rental | The rental income is indeed taxable income, but you reduce the taxable portion of it by deducting expenses (including mortgage interest, maintenance, insurance, HOA, real estate tax, and of course depreciation). Due to the depreciation, you may end up breaking even, or having very little taxable income. Note that when you sell the property, your basis is reduced by the depreciation you were allowed to deduct (even if you haven't deducted it for whatever reason), and also the personal residence exclusion might no longer be applicable - i.e.: you'll have to pay capital gains tax. You will not be able to deduct a loss though if you sell now, so it may be better to depreciate it as a rental, rather then sell at a loss that won't affect your taxes. Also, consider the fact that the basis for the depreciation is not the basis you currently have in the property (because you're under water). You have to remember that when calculating the taxes. This is not a tax advice, and you should seek a professional help. |
If the U.S. defaults on its debt, what will happen to my bank money? | You must mean the current debt ceiling debacle. The meaning of it is: US government is constantly borrowing money (by issuing treasury bonds) and constantly repaying some of the bonds that come to maturity, and also has other obligations it has to meet by law all the time - such as Social Security checks, bonds interest, federal employees' salaries and pensions, etc. By law, total amount of money that can be borrowed at the same time is capped. That means, there can be situation where the government needs to borrow money to pay, say, interest on existing bonds, but can not, since the limit is reached. Such situation is called a default, since the government promised to pay the interest, but is unable to do so. That does not mean the government has no money at all and will completely collapse or couldn't raise money on the market if it were permitted by law to do so (currently, the market is completely willing to buy the debt issued by US government, and with interest that is not very high, though of course that may change). It also does not mean the economy ceases to function, dollars cease to have value or banks instantly go bankrupt. But if the government breaks its promises to investors, it has various consequences such as raising the costs of borrowing in the future. Breaking promises to other people - like Social Security recipients - would also look bad and probably hurt many of them. Going back to your bank account, most probably nothing would happen to the money you store there. Even if the bank had invested 100% of the money in US treasury bonds (which doesn't really happen) they still can be sold on the open market, even if with some discount in the event of credit rating downgrade, so most probably your account would not be affected. As stated in another answer, even if the fallout of all these calamities causes a bank to fail, there's FDIC and if your money is under insured maximums you'll be getting your money back. But if your bank is one of the big ones, nothing of the sort would happen anyway - as we have seen in the past years, government would do practically anything to not allow any big bank failures. |
Where can I find announcements of official GDP figures for the US and other countries? | For press releases about economic data, the Bureau of Economic Analysis press release page is helpful. Depending on the series, you could also look at the Bureau of Labor Statistics press release page. For time series of both historical and present data, the St. Louis Federal Reserve maintains a database such data, including numerous measures of GDP, called FRED. They list nearly 15,000 series related to GDP alone. FRED is extremely useful because it allows you to make graphs that indicate areas of recession, like this: On the series' homepage, there's a bold link on the left side to download the data. If you simply need the most recent data, it's listed below the graph on that page. If you're interested in a more in-depth analysis, you can use the Bureau of Economic Analysis as well, specifically the National Income and Product Accounts, which are most of the numbers that feed into the calculation of GDP. FRED also archives some of these data. Both FRED and the BEA compile data on numerous other economic benchmarks as well. Other general sources for a wide range of announcements are the Yahoo, Bloomberg, and the Wall Street Journal economic calendars. These provide the dates of many economic announcements, e.g. existing home sales, durable orders, crude inventories, etc. Yahoo provides links to the raw data where available; Bloomberg and the WSJ provide links to their article where appropriate. This is a great way to learn about various announcements and how they affect the markets; for example, the somewhat disappointing durable orders announcement recently pushed markets down a few points. For Europe, look at Eurostat. On the left side of the page, they list links to common data, including GDP. They list the latest releases on the home page that I previously linked to. For the sake of keeping this question short, I'm lumping the rest of the world into this paragraph. Data for many other countries is maintained by their governments or central banks in a similar fashion. The World Bank's databank also has relevant data like Gross National Income (GNI), which isn't identical to GDP, but it's another (less common) macroeconomic indicator. You can also look at the economic calendar on livecharts.co.uk or xe.com, which list events for the US, Europe, Australasia, and some Latin American countries. If you're only interested in the US, the Bloomberg or Yahoo calendars may have a higher signal-to-noise ratio, but if you're interested in following how global markets like currency markets respond to new information, a global economic calendar is a must. Dailyfx.com also has a global economic calendar that, according to them, is specifically geared towards events that affect the forex market. As I said, governments and central banks compile a lot of this data, so to make searching easier, here are a few links to statistical agencies and central banks for major countries. I compiled this list a while ago on my personal machine, so although I think all the links are accurate, leave a comment if something isn't quite right. Statistics Australia / Brazil / Canada / Canada / China / Eurostat / France / Germany / IMF / Japan / Mexico / OECD / Thailand / UK / US Central banks Australia / Brazil / Canada / Chile / China / ECB / Hungary / India / Indonesia / Israel / Japan / Mexico / Norway / Russia / Sweden / Switzerland / Thailand / UK / US |
Are 'no interest if paid in in x months' credit cards worth it? | It has been reported in consumer media (for example Clark Howard's radio program) that the "no interest for 12 months" contracts could trick you with the terms and the dates on the contract. Just as an example: You borrow $1000 on 12/1/2013, same as cash for 12 months. The contract will state the due date very clearly as 12/1/2014. BUT they statements you get will take payment on the 15th of each month. So you will dutifully pay your statements as they come in, but when you pay the final statement on 12/15/2014, you are actually 14 days late, have violated the terms, and you now owe all the interest that accumulated (and it wasn't a favorable rate). That doesn't happen all the time. Not all contracts are written that way. But you better read your agreement. Some companies use the same as cash deal because they want to move product. Some do it because they want to trick you with financing. Bottom line is, you better read the contract. |
What is the difference between speculating and investing? | Speculation means putting your money on a hunch that some event may occur, depending on current circumstances and some future circumstances. So either you win huge or lose a lot. Investment is a conscious decision made on well defined research and grounded on good reasons i.e. economy, industry, company reports etc. Here is a link on wikipedia with more details on Speculation. |
What's the point of a benchmark? | One reason it matters whether or not you're beating the S&P 500 (or the Wilshire 5000, or whatever benchmark you choose to use) is to determine whether or not you'd be better off investing in an index fund (or some other investment vehicle) instead of pursuing whatever your current investment strategy happens to be. Even if your investment strategy makes money, earning what the S&P 500 has averaged over multiple decades (around 10%) with an index fund means a lot more money than a 5% return with an actively managed portfolio (especially when you consider factors like compound interest and inflation). I use the S&P 500 as one of my criteria for judging how well (or poorly) my financial adviser is doing for me. If his recommendations (or trading activity on my behalf, if authorized) are inferior to the S&P 500, for too long, then I have a basis to discontinue the relationship. Check out this Wikipedia entry on stock market indices. There are legitimate criticisms, but on the whole I think they are useful. As an aside, the reason I point to index funds specifically is that they are the one of the lowest-cost, fire-and-forget investment strategies around. If you compare the return of the S&P 500 index over multiple decades with most actively managed mutual funds, the S&P 500 index comes out ahead. |
Want to buy expensive product online. Credit line on credit cards not big enough. How do “Preferred Account” programs work? | First and foremost - make sure where you are purchasing the product is a reputable organization. Secondly (coming from a biased computer geek) - be aware that Apple is a content trap. Now on to my answer to your question... How do "Preferred Account" programs work? They're "Preferred" because they tend to bring in more money to the lender. It may say No payments for 6 months but the fine print may have you being charged interest during those 6 months, meaning your new shiny computer will be costing more than the sticker price. The good side is that you don't have to send in any actual payments for 6 months, but be aware that you'll probably be paying more than advertised. What are the different ways I can do it? Your listed options 1 & 2 are both good ways to pay for your new computer. Yes, option 1 will charge you sales tax, but are you sure paying online excludes sales tax? Some states mandate it. Option 2 is a viable option too - probably your best option. 1st - there is possibly no sales tax with purchases made online, although there may be a delivery charge. 2nd - you're not committing to an additional monthly bill, you are essentially paying with cash, just directly from your bank account. No interest charge! 3rd - that little Visa logo is your friend. Purchases made through Visa & MasterCard (whether it's a credit or debit card) normally have an auto-extended warranty feature (you may want to verify with Visa before taking my word on it). Typically they double any manufacture's warranty. Lastly - you can always set up a PayPal account and link it to your bank account. Assuming the site you plan on purchasing the computer from accepts PayPal. |
Are there capital gains taxes or dividend taxes if I invest in the U.S. stock market from outside of the country? | The country from which you purchase stock cannot charge you tax on either income or capital gains. Taxation is based on residency, so even when you purchase foreign stock its the tax laws of Malaysia (as your country of residence) that matter. At the time of writing, Malaysia does not levy any capital gains tax and there is no income tax charged on dividends so you won't have to declare or pay any tax on your stocks regardless of where you buy them from. The only exception to this is Dividend Withholding Tax, which is a special tax taken by the government of the country you bought the stock from before it is paid to your account. You do not need to declare this tax as it his already been taken by the time you receive your dividend. The US withholding tax rate on dividends is 30%, although this can be reduced to 15% if there as a tax treaty in place between the US and your country of residence. Malaysia does have a double taxation agreement with the US (see here: http://www.mida.gov.my/env3/index.php?page=double-taxation-agreement) but it is flagged as a "limited" agreement. You'd need to find the full text of the agreement to see whether a reduced rate of dividend withholding tax would be available in the Malaysia/US treaty. See my other answer for more details on withholding taxes and how to partially reclaim under a double tax treaty: What is the dividend tax rate for UK stock Note: Although the taxation rules of both countries are similar, I am a resident of Singapore not Malaysia so I can't speak from first hand experience, but current Malaysia tax rates are easy to find online. The rest of this information is common to any non-US/UK resident investor (as long as you're not a US person). |
Why do employer contributions count against HSA limits? | am I comparing apples and oranges? Yes - different purposes, different laws, different regulations. One rationale could be that HSA benefits are immediate while retirement benefits are deferred, so the benefit of employer contributions are not felt until retirement and thus do not need as stringent a limit, but that's a complete guess. |
What are 'business fundamentals'? | From http://financial-dictionary.thefreedictionary.com/Business+Fundamentals The facts that affect a company's underlying value. Examples of business fundamentals include debt, cash flow, supply of and demand for the company's products, and so forth. For instance, if a company does not have a sufficient supply of products, it will fail. Likewise, demand for the product must remain at a certain level in order for it to be successful. Strong business fundamentals are considered essential for long-term success and stability. See also: Value Investing, Fundamental Analysis. For a stock the basic fundamentals are the second column of numbers you see on the google finance summary page, P/E ratio, div/yeild, EPS, shares, beta. For the company itself it's generally the stuff on the 'financials' link (e.g. things in the quarterly and annual report, debt, liabilities, assets, earnings, profit etc. |
Boyfriend is coowner of a house with his sister, he wants to sell but she doesn't | That ain't nothing. It's really easy to get "whipped up" into a sense of entitlement, and forget to be grateful for what you do have. If this house doesn't exist, what would his costs of housing be elsewhere? Realistically. Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better? What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors? It's entirely possible he has a sweet deal here, and just doesn't make enough money. If your credit rating is poor, your housing options really suck. Banks won't lend you money for a house unless you have a huge ton of upfront cash. Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism. In this day and age, there are lots of ways to make money with a property you own. In fact, I believe very firmly in Robert Allen's doctrine: Never sell. That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke. Keep the property forever, keep it working for you. If he doesn't know how, learn. To "get bootstrapped" he can put it up on AirBnB or other services. Or do "housemate shares". When your house is not show-condition, just be very honest and relatable about the condition. Don't oversell it, tell them exactly what they're going to get. People like honesty in the social sharing economy. And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB? Can he carve out an "in-law unit" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright. This is what the new sharing economy is all about. Of course, sister might show up with her hand out, wanting half the revenue since it's half her house. Tell her hell no, this pays the mortgage and you don't! She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it! And if she wants to go to court, get a judge to tell her that. Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him. "Owning it on paper" doesn't mean you own it. There's a mortgage on it, which means you don't own all of it. The amount you own is the value of the house minus the mortgage owed. This is called your equity. Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements, MINUS the cost of cosmetically making the house presentable. But when you actually sell, there's also the 6% Realtors' commission and other closing costs. This is where the mortgage is more than the house is worth. This is a dangerous situation. If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale. If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell. And that is leverage he has over her. I imagine a "Winter's bone" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died. That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale. The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt. |
Why don't banks allow more control over credit/debit card charges? | The other answers touch on why having two-factor auth or some other additional system is not worth it compared to simple reactive systems (cancelling lost cards, reversing fraudulent charges etc), but it should also be noted that this goal can be achieved with a method similar to what you describe. My bank (TD Canada Trust) has an app (I'm on android) that gives you a notification immediately after your card is charged (even test charges like at the gas station). It's really simple, does not slow down authorization, and makes fraud detection super easy. (I'm sure some other banks have similar apps). |
Will a credit card issuer cancel an account if it never incurs interest? | No, they won't cancel it because you pay your card on time. When a company offers a promotion like that they are banking on making money on average, not in every case. On average including all the benefits including transaction fees, deals for partnering with best buy, etc. Of course some people pay their credit card in full each month and never incur interest charges. However, credit card companies more than cover that with other people who aren't responsible. If it wasn't worth while they would end the card program or change it. |
How does the Dow Jones Industrial Average (DJIA) divisor change to account for dividends? | Scrip dividends are similar to stock splits. With a stock split, 100 shares can turn into 200 shares; with scrip dividends they might turn into 105 shares. |
Am I doing the math for this covered call/long put strategy correctly? What risks do I run with this strategy? | FYI: GM has an earnings announcement on April 24th. I think you were trying to create a safe trade by profiting if GM's price fell within a probable range. The chart of the Iron Condor captures just about a standard deviation of movement. So as long as GM is between 31.28 - 37.22 in 34 days you keep the max profit of $110. Note this trade is a net credit, when placing it you get $110 less fees. Also by selling the deep in the money call I take it you were trying to make the most of your capital. The chart below shows a standard covered call compared to short put vertical. Note the short put vertical simulates the covered call position and it is a net credit trade as well. When you drop the order you get $111 less fees. |
What are the options for a 19-year-old college student who only has about $1000? | The "$1000 is no money at all" people are amusing me. Way back in the mists of time, a very young me invested on the order of ~$500 in a struggling electronics manufacturer I had a fondness for. An emotional investment, not much money, but enough that I could get a feel for what it was like owning stock in something. That stock's symbol was AAPL. This is admittedly a rare outcome, but $1000 invested over the long term isn't not worth doing. If for no other reason then when the OP has "real" money, he'll have X+$1000 invested rather than X, assuming 0% return, which I doubt. It's a small enough amount that there are special considerations, but it's a solid opportunity for learning how the market works, and making a little money. Anyway, my advice to the OP is as follows: |
How to avoid tax when taking a windfall in small chunks? | How can I avoid this, so we are taxed as if we are making the $60k/yr that we want to receive? You can't. In the US the income is taxed when received, not when used. If you receive 1M this year, taking out 60K doesn't mean the other 940K "weren't received". They were, and are taxable. Create a pension fund in the corporation, feed it all profits, and pay out $60k/yr of "pension". I doubt that the corporation could deduct a million a year in pension funding. You cannot do that. You can only deposit to a pension plan up to 100% of your salary, and no more than $50K total (maybe a little more this year, its adjusted to inflation). Buy a million dollars in "business equipment" of some sort each year to get a deduction, then sell it over time to fund a $60k/yr salary. I doubt such a vehicle exists. If there's no real business purpose, it will be disallowed and you'll be penalized. Your only purpose is tax avoidance, meaning you're trying to shift income using your business to avoid paying taxes - that's illegal. Do crazy Section 79 life insurance schemes to tax-defer the income. The law caps this so I can only deduct < $100k of the $1 million annually, and there are other problems with this approach.\ Yes. Wouldn't go there. Added: From what I understand, this is a term life insurance plan sponsored by the employer for the employee. This is not a deferral of income, but rather a deduction: instead of paying your term life insurance with your own after tax money, your employer pays with their pre-tax. It has a limit of $50K per employee, and is only available for employees. There are non-discrimination limitations that may affect your ability to use it, but I don't see how it is at all helpful for you. It gives you a deduction, but its money spent, not money in your pocket. End added. Do some tax avoidance like Facebook does with its Double Irish trick, storing the income in some foreign subsidiary and drawing $60k/yr in salary to be taxed at $60k/yr rates. This is probably cost-prohibitive for a $1MM/yr company. You're not Facebook. What works with a billion, will not work with a million. Keep in mind that you're a one-man business, things that huge corporations like Google or Facebook can get away with are a no-no for a sole-proprietor (even if incorporated). Bottom line you'll probably have to pay the taxes. Get a good tax professional to help you identify as much deductions as possible, and if you can plan income ahead - plan it better. |
Bed and Breakfast, Same Day Capital Gains UK | The 'same day rule' in the UK is a rule for matching purposes only. It says that sales on any day are matched firstly with purchases made on the same day for the purposes of ascertaining any gain/loss. Hence the phrase 'bed-and-breakfast' ('b&b') when you wish to crystalise a gain (that is within the exempt amount) and re-establish a purchase price at a higher level. You do the sale on one day, just before the market closes, which gets matched with your original purchase, and then you buy the shares back the next day, just after the market opens. This is standard tax-planning. Whenever you have a paper gain, and you wish to lock that gain out of being taxed, you do a bed-and-breakfast transaction, the idea being to use up your annual exemption each and every year. Of course, if your dealing costs are high, then they may outweigh any tax saved, and so it would be pointless. For the purpose of an example, let's assume that the UK tax year is the same as the calendar year. Scenario 1. Suppose I bought some shares in 2016, for a total price of Stg.50,000. Suppose by the end of 2016, the holding is worth Stg.54,000, resulting in a paper gain of Stg.4,000. Question. Should I do a b&b transaction to make use of my Stg.11,100 annual exemption ? Answer. Well, with transaction costs at 1.5% for a round-trip trade, suppose, and stamp duty on the purchase of 0.5%, your total costs for a b&b will be Stg1,080, and your tax saved (upon some future sale date) assuming you are a 20% tax-payer is 20%x(4,000-1,080) = Stg584 (the transaction costs are deductible, we assume). This does not make sense. Scenario 2. The same as scenario 1., but the shares are worth Stg60,000 by end-2016. Answer. The total transaction costs are 2%x60,000 = 1,200 and so the taxable gain of 10,000-1,200 = 8,800 would result in a tax bill of 20%x8,800 = 1,760 and so the transaction costs are lower than the tax to be saved (a strict analysis would take into account only the present value of the tax to be saved), it makes sense to crystalise the gain. We sell some day before the tax year-end, and re-invest the very next day. Scenario 3. The same as scenario 1., but the shares are worth Stg70,000 by end-2016. Answer. The gain of 20,000 less costs would result in a tax bill for 1,500 (this is: 20%x(20,000 - 2%x70,000 - 11,100) ). This tax bill will be on top of the dealing costs of 1,400. But the gain is in excess of the annual exemption. The strategy is to sell just enough of the holding to crystallise a taxable gain of just 11,100. The fraction, f%, is given by: f%x(70,000-50,000) - 2%xf%x70,000 = 11,100 ... which simplifies to: f% = 11,100/18,600 = 59.68%. The tax saved is 20%x11,100 = 2,220, versus costs of 2%x59.58%x70,000 = 835.52. This strategy of partial b&b is adopted because it never makes sense to pay tax early ! End. |
What mix of credit lines and loans is optimal for my credit score? | I think you are interpreting their recommended numbers incorrectly. They are not suggesting that you get 13-21 credit cards, they are saying that your score could get 13-21 points higher based on having a large number of credit cards and loans. Unfortunately, the exact formula for calculating your credit score is not known, so its hard to directly answer the question. But I wouldn't go opening 22+ credit cards just to get this part of the number higher! |
Why does short selling require borrowing? | It's actually quite simple. You're actually confusing two concept. Which are taking a short position and short selling itself. Basically when taking a short position is by believing that the stock is going to drop and you sell it. You can or not buy it back later depending on the believe it grows again or not. So basically you didn't make any profit with the drop in the price's value but you didn't lose money either. Ok but what if you believe the market or specific company is going to drop and you want to profit on it while it's dropping. You can't do this by buying stock because you would be going long right? So back to the basics. To obtain any type of profit I need to buy low and sell high, right? This is natural for use in long positions. Well, now knowing that you can sell high at the current moment and buy low in the future what do you do? You can't sell what you don't have. So acquire it. Ask someone to lend it to you for some time and sell it. So selling high, check. Now buying low? You promised the person you would return him his stock, as it's intangible he won't even notice it's a different unit, so you buy low and return the lender his stock. Thus you bought low and sold high, meaning having a profit. So technically short selling is a type of short position. If you have multiple portfolios and lend yourself (i.e. maintaining a long-term long position while making some money with a short term short-term strategy) you're actually short selling with your own stock. This happens often in hedge funds where multiple strategies are used and to optimise the transaction costs and borrowing fees, they have algorithms that clear (match) long and short coming in from different traders, algorithms, etc. Keep in mind that you while have a opportunities risk associated. So basically, yes, you need to always 'borrow' a product to be able to short sell it. What can happen is that you lend yourself but this only makes sense if: |
What do these options trading terms mean? | With stocks, you can buy or sell. If you sell first, that's called 'shorting.' As in "I think linkedin is too high, I'm going to short it." With options, the terminology is different, the normal process is to buy to open/sell to close, but if you were shorting the option itself, you would first sell to open, i.e you are selling a position to start it, effectively selling it short. Eventually, you may close it out, by buying to close. Options trading is not for the amateur. If you plan to trade, study first and be very cautious. |
Buying insurance (extended warranty or guarantee) on everyday goods / appliances? | I usually say "no thank you", but if the salesperson gets pushy I say "if I need insurance, I guess I won't buy the product because I only want to buy quality that will last a good long while" I have never actually walked away from a purchase because I generally research these things ahead of time, but I think I mean it when I say it. |
Do I need to prove 'Garage Sale' items incurred a loss | -Alain Wertheimer I'm a hobbyist... Most (probably all) of those older items were sold both prior to my establishing the LLC This is a hobby of yours, this is not your business. You purchased all of these goods for your pleasure, not for their future profit. The later items that you bought after your LLC was establish served both purposes (perks of doing what you love). How should I go about reporting this income for the items I don't have records for how much I purchased them for? There's nothing you can do. As noted above, these items (if you were to testify in court against the IRS). "Losses from the sale of personal-use property, such as your home or car, aren't tax deductible." Source Do I need to indicate 100% of the income because I can't prove that I sold it at a loss? Yes, if you do not have previous records you must claim a 100% capital gain. Source Addition: As JoeTaxpayer has mentioned in the comments, the second source I posted is for stocks and bonds. So at year begin of 2016, I started selling what I didn't need on eBay and on various forums [January - September]. Because you are not in the business of doing this, you do not need to explain the cost; but you do need to report the income as Gross Income on your 1040. Yes, if you bought a TV three years ago for a $100 and sold it for $50, the IRS would recognize you earning $50. As these are all personal items, they can not be deducted; regardless of gain or loss. Source Later in the year 2016 (October), I started an LLC (October - December) If these are items that you did not record early in the process of your LLC, then it is reported as a 100% gain as you can not prove any business expenses or costs to acquire associated with it. Source Refer to above answer. Refer to above answer. Conclusion Again, this is a income tax question that is split between business and personal use items. This is not a question of other's assessment of the value of the asset. It is solely based on the instruments of the IRS and their assessment of gains and losses from businesses. As OP does not have the necessary documents to prove otherwise, a cost basis of $0 must be assumed; thus you have a 100% gain on sale. |
Will a credit card issuer cancel an account if it never incurs interest? | While technically true, a card issuer can cancel your card for almost any reason they want, it's highly unlikely they'll cancel it because you pay your bills! There are many, many people out there that pay their bills in full every month without ever paying a cent in credit card interest. I wouldn't ever purposefully incur any interest on a credit card. Related anecdote: I used to have a credit card that I only used for gas purchases because they gave 5% off for fuel. The issuer eventually discontinued the program (I assume because people like me took advantage of it.) So while they didn't cancel my card, the bonus eventually went away. I miss that card. My conclusion: if you can take advantage of promotional rates, by all means, go for it. You don't owe them any favors. Enjoy it as long as it lasts. |
Can a Roth IRA be used as a savings account? | Sounds like a bad idea. The IRA is built on the power of compounding. Removing contributions will hurt your retirement savings, and you will never be able to make that up. Instead, consider tax-free investments. State bonds, Federal bonds, municipal bonds, etc. For example, I invest in California muni bonds fund which gives me ~3-4% annual dividend income - completely tax free. In addition - there's capital appreciation of your fund holdings. There are risks, of course, for example rate changes will affect yields and capital appreciation, so consult with someone knowledgeable in this area (or ask another question here, for the basics). This will give you the same result as you're expecting from your Roth IRA trick, without damaging your retirement savings potential. |
Getting (historical) Standard & Poor Stock Guides | Log in to your Scottrade account, and goto Markets --> Analyst Views --> Click the PDF link for the company. Also, there is also the 'Views and News' part of the web page which has additional information beyond what exist in the reports. |
What are the reasons to get more than one credit card? | 3 reasons I can think of: I once worked for a bank and when credit scoring for loans, if you had been approved by different institutions, you were given a better score. So if you held a Visa and Mastercard (as opposed to two Visa cards) your credit score would go higher. More than 6 cards though looked suspicious and your score would take a big hit. Having more than card has helped me when getting special offers multiple times from some websites where it was limited to "one per customer" though most just used your address or email account. If you owed $1000 in total which you can't pay off in one go, it is better to have that split across two cards. You would be paying interest on $500 on each card but when you have one card paid off, the interest you would be paying on the other would be based on the original debt to that one card of $500 (not $1000). I hope that makes sense. |
Why is the stock market price for a share always higher than the earnings per share? | What you have to remember is you are buying a piece of the company. Think of it in terms of buying a business. Just like a business, you need to decide how long you are willing to wait to get paid back for your investment. Imagine you were trying to sell your lemonade stand. This year your earnings will be $100, next year will be $110, the year after that $120 and so on. Would you be willing to sell it for $100? |
What actions can I take against a bank for lack of customer service? | Figure out who regulates the bank. Complain to your state banking/consumer affairs department. Complain to your state Attorney General. The Feds regulate most banks too, there are several different agencies, and I believe the way they regulate banks has changed recently. Try contacting the US Comptroller of the Currency. |
What does “profits to the shareholders jumped to 15 cents a share” mean? | It's a way to help normalize the meaning of the earnings report. Some companies like Google have a small number of publicly traded shares (322 Million). Others like Microsoft have much larger numbers of shares (8.3 Billion). The meaning depends on the stock. If it's a utility company that doesn't really grow, you don't want to see lots of changes -- the earnings per share should be stable. If it's a growth company, earnings should be growing quickly, and flat growth means that the stock is probably going down, especially if slow growth wasn't expected. |
How do I find a good mutual fund to invest 5K in with a moderately high amount of risk? | Vanguard has a lot of mutual fund offerings. (I have an account there.) Within the members' section they give indications of the level of risk/reward for each fund. |
How does a public company turn shares into cash? | how do they turn shares into cash that they can then use to grow their business? Once a Company issues an IPO or Follow-On Public Offer, the company gets the Money. Going over the list of question tagged IPO would help you with basics. Specifically the below questions; How does a company get money by going public in an IPO? Why would a company care about the price of its own shares in the stock market? Why would a stock opening price differ from the offering price? From what I've read so far, it seems that pre-IPO an investment bank essentially buys the companies public shares, and that bank then sells them on the open market. Is the investment bank buying 100% of the newly issued public shares? And then depositing the cash equivalent into the companies bank account? Additionally, as the stock price rises and falls over the lifetime of the company how does that actually impact the companies bank balance? Quite a bit on above is incorrect. Please read the answers to the question tagged IPO. Once an IPO is over, the company does not gain anything directly from the change in shareprice. There is indirect gain / loss. |
Why invest in IRA while a low-cost index fund is much simpler? | Lots of good answers. I'll try and improve by being more brief. For each option you will pay different taxes: Index Fund: Traditional IRA Roth IRA You can see that the Roth IRA is obviously better than investing in a taxable account. It may not be as obvious that the traditional IRA is better as well. The reason is that in the traditional account you can earn returns on the money that otherwise would have gone to the government today. The government taxes that money at the end, but they don't take all of it. In fact, for a given investment amount X and returns R, the decision of Roth vs Traditional depends only on your tax rate now vs at retirement because X(1-tax)(1+R_1)(1+R_2)...(1+R_n) = X(1+R_1)(1+R_2)...(1+R_n)(1-tax) The left hand side is what you will have at retirement if you do a Roth and the right hand side is what you will have at retirement if you do traditional. Only the tax rate differences between now and retirment matter here. An index fund investment is like the left hand side but has some additional tax terms on your capital gains. It's clearly worse than either. |
Is dividend included in EPS | EPS is often earnings/diluted shares. That is counting shares as if all convertible securities (employee stock options for example) were converted. Looking at page 3 of Q4 2015 Reissued Earnings Press Release we find both basic ($1.13) and diluted EPS ($1.11). Dividends are not paid on diluted shares, but only actual shares. If we pull put this chart @ Yahoo finance, and hovering our mouse over the blue diamond with a "D", we find that Pfizer paid dividends of $0.28, $0.28, $0.28, $0.30 in 2015. Or $1.14 per share. Very close to the $1.13, non-diluted EPS. A wrinkle is that one can think of the dividend payment as being from last quarter, so the first one in 2015 is from 2014. Leaving us with $0.28, $0.28, $0.30, and unknown. Returning to page three of Q4 2015 Reissued Earnings Press Release, Pfizer last $0.03 per share. So they paid more in dividends that quarter than they made. And from the other view, the $0.30 cents they paid came from the prior quarter, then if they pay Q1 2016 from Q4 2015, then they are paying more in that view also. |
For very high-net worth individuals, does it make sense to not have insurance? | The general answer to this is "yes". When you're dealing with single-digit millionaires, the answer is that their insurance habits and needs are basically the same as everyone else. When you get into the double digit and triple digit millionaires, or people worth billions, they have additional options, but those basically boil down to using "self-insurance" rather than paying a company for an insurance policy. The following is based on both what I've read and a fair deal of personal experience working for or with various stripes of millionaire, and even one billionaire. Addressing the types of insurance you mention: This is generally used to provide survivors with a replacement for income you can no longer provide when dead, in addition to paying for costs associated with dying (funeral, hospital/hospice bills, etc). Even millionaires and billionaires have this, yes, but the higher your net worth, the less value it has. If you're worth 9 or 10 figures, you probably already have trust funds set up for your family members, so an extra payout from an insurance policy is probably going to represent a small fraction of the wealth you're leaving your survivors, and as has been noted, insurance makes a profit, so the expectation by the insurance company is that they'll make more money on the policy than they'll have to pay out on death. That being said, the members of the 9+ figure club I've worked for all had multi-million dollar life insurance policies on them, which were paid for or heavily subsidized by the companies they owned or worked for. I doubt they would have held those policies if they had to pay the full cost, but when it's free or cheap, why not? Absolutely. As health insurance in America is an untaxed employment benefit, owing to regulations from World War II, all the wealthy folks I've had contact with got outrageously good plans as part of the companies they work for or owned. Having said that, even their trust fund beneficiaries held health insurance, because this type of insurance (in America, at least) is actually not really insurance, it's more of a pre-payment plan for medical expenses, and as such, it provides broader access to health care than you'd get from simply having enough money to pay for whatever treatments you need. If you walk into a hospital as a millionaire and state that you'll definitely be able to pay for your open-heart surgery with cash, you'll get a very different response than if you walk in with your insurance card and your "diamond-level" coverage. So, in this case, it's not as much as about the monetary benefits (although this is a type of "insurance" that's generally free or heavily discounted to the individual, so that's a factor) as it is about easier access to health care. Although this is required by law, it's one of the common forms of insurance that the very wealthy can, and often do handle differently than the rest of us. Most (if not all) US states have a provision to allow motorists to self-insure themselves, which amount to putting up a bond to cover claims against them. Basically, you deposit the minimum amount the state determines is required for auto insurance with the responsible state organization, get a certificate of self-insurance and you're good to go. All the high wealth individuals I know when this route, for two reasons - first of all, they didn't have to deal with insurance companies (or pay sky-high rates on account of all the speeding tickets they picked up) and secondly, they made their deposit with government bonds they had in their portfolios anyway, and they could still collect the interest on their self-insurance deposits. Of course, this meant that if they wrecked or dinged up their Maserati or Bentley or whatever, they'd be out of pocket to repair or replace it... but I guess if you can afford one $200,000 car, you can afford to buy a second one if you wreck it, or get by riding one of your other luxury automobiles instead. Since someone else mentioned kidnapping insurance, I'll point out here that what Robert DeNiro did in Casino when he put a couple million dollars into a safety deposit box for his wife to use if he was kidnapped or needed to pay off a government official is essentially the same thing as "self-insurance". Putting money away somewhere for unexpected events in lieu of buying an insurance policy against them. In real life, the very wealthy will often do this with US treasuries, government bonds and other interest-bearing, safe investments. They make a little money, diversify their portfolios and at the same time, self-insure against a potential big loss. This is another insurance area where even the very wealthy are remarkably similar to the rest of us, in that they all generally have it, yes, although the reason is a little different. For normal folks, the home they own is generally the largest part of their net worth, or at least a very substantial fraction, for those older folks with retirement savings that exceed the value of their homes. So for us, we have home owners insurance to prevent a catastrophic event from wiping out the lion's share of our net worth. If you're an ultra-wealthy individual who can afford an 8 figure home, that's not really the case (at least with the ones I've dealt with, who made their fortunes in business and are good managing their wealth and diversifying their assets - could be different for sports stars or the entertainment industry), and these people generally own multiple homes anyway, so it's not as big a deal if they lose one. However, no one actually buys a multi-million dollar home by writing a multi-million dollar check. They get a mortgage, just like the rest of us. And to get a mortgage, insurance on the property is a requirement. So yes, even the ultra wealthy generally have insurance on their home(s). There is an element of not wanting to shell out another 20 million if the place burns down, or someone breaks in and steals your valuables, but the bigger part of the reason is that it's required to get a mortgage in the first place, which is generally done for financial reasons - interest on your mortgage is a tax deduction, and you don't want to sink millions of dollars all at once into buying a property that's not going to appreciate in value, when you can get a mortgage and invest those millions of dollars to make more money instead. |
What are my best options if I don't have a lot of credit lines for housing loans? | The short answer is, with limited credit, your best bet might be an FHA loan for first time buyers. They only require 3.5% down (if I recall the number right), and you can qualify for their loan programs with a credit score as low as 580. The problem is that even if you were to add new credit lines (such as signing up for new credit cards, etc.), they still take time to have a positive effect on your credit. First, your score takes a bit of a hit with each new hard inquiry by a prospective creditor, then your score will dip slightly when a new credit account is first added. While your credit score will improve somewhat within a few months of adding new credit and you begin to show payment history on those accounts, your average age of accounts needs to be two years or older for the best effect, assuming you're making all of the payments on time. A good happy medium is to have between 7 and 10 credit lines on your credit history, and to make sure it's a mix of account types, such as store cards, installment loans, and credit cards, to show that you can handle various types of credit. Be careful not to add TOO much credit, because it affects your debt-to-income ratio, and that will have a negative effect on your ability to obtain mortgage financing. I really suggest that you look at some of the sites which offer free credit scores, because some of them provide great advice and tips on how to achieve what you're trying to do. They also offer credit score simulators, which can help you understand how your score might change if, for instance, you add new credit cards, pay off existing cards, or take on installment loans. It's well worth checking out. I hope this helps. Good luck! |
How to pay with cash when car shopping? | I usually get a cashiers check to cover about 90% - 95% of the expected amount (whatever I think is just below my wet-dream-price), and bring the rest in cash. That doesn't require so much cash to be carried. Alternatively you can write a personal check for the exact reminder, or go to the bank for the reminder after the deal is made - with the majority already paid in a cashiers check nobody would disagree. |
In a competitive market, why is movie theater popcorn expensive? | I think this question has more to do with the business model of cinema. If I remember correctly. Most of the money from ticket sales goes back to the studios. Something like the newer a movie is the greater percentage goes back to the movie studios and the older a movie is the greater percentage of ticket price goes to the cinema. So high priced popcorn and candy is often the only place where the individual theaters make any money. This may not be true for every movie but I believe it was the case for films like James Cameron's Avatar. |
Can I open a Solo 401(k) if I am an independent contractor but also work part-time as an employee? | I'm in a similar situation as I have a consulting business in addition to my regular IT job. I called the company who has my IRA to ask about setting up the Individual 401k and also mentioned that I contribute to my employer's 401k plan. The rep was glad I brought this up because he said the IRS has a limit on how much you can contribute to BOTH plans. For me it would be $24K max (myAge >= 50; If you are younger than 50, then the limit might be lower). He said the IRS penalties can be steep if you exceed the limit. I don't know if this is an issue for you, but it's something you need to consider. Be sure to ask your brokerage firm before you start the process. |
What is the median retirement savings in the United States today? | If you dig deeper and look at the original study, what's being measured is "retirement-plan participation": specifically, money in 401(k) plans and IRAs. This omits every other possible source of retirement money: things such as general savings, non-retirement investments, property ownership, pensions, etc. As an extreme example, I know someone who's retired with property worth a million dollars, another million dollars in stock, a pension providing thousands of dollars a month plus health insurance, and not one penny of what the study would consider "retirement savings". Yes, the average American family is under-prepared for retirement. But it's nowhere near as bad as the article makes it sound. |
Is it possible to influence a company's actions by buying stock? | Energy Transfer Partners, LP (stock symbol ETP) is the parent company of Dakota Access LLC, the developer of the Dakota Access Pipeline. Since ETP is a publicly traded company, it is certainly possible to purchase the stock. To answer your questions: Would it not be possible to buy their stocks, bring down the price of the stocks and keep it there until investors pull out because it is financially unwise to these investors? You cannot artificially bring the price of a stock down by buying the stock. Purchasing large enough amounts would theoretically cause the price to go up, not down. You could theoretically cause the stock to go down by shorting the stock (borrowing shares and then selling them), but it would take a lot of shares to do this, and may not be successful. If not successful, your losses are potentially unlimited. Would it alternatively be possible to buy enough stock to have a voice in the operations of the company? Yes, you could theoretically purchase enough of the stock to control the company. The market capitalization of ETP is currently $17.9 Billion; if you owned half of the stock, you would have complete control of the company. But buying that much stock would certainly influence the price of the stock, so it would cost you more than half of that amount to buy that much stock. You could get yourself a voice at the table for less without owning a full half of the stock, but you would not have full control, and would need support from others to get the outcome you want. Alternatively, someone determined to exert their influence could theoretically make an offer to purchase the Dakota Access subsidiary from ETP, which might be less costly than purchasing half of the entire corporation. Even if an extremely wealthy person were to try one of these options and destroy this company, it wouldn't necessarily stop another company from building something similar. The investors you purchased the company from would have billions of dollars to do so with. |
A check I received was lost. My options? | Lost checks happen occasionally, and there are procedures in place (banking & business) to handle the situation. First and foremost you need to: Note: The money is legally yours, so the company is obligated to work with you here. If they refuse to cancel or reissue the check, at a minimum you'll want to contact the state government and let them know about the company's actions, if small claims court is not an option. Businesses aren't permitted to keep 'forfeited funds' in most states, instead they are required to turn them over to the government who would then return them to you when you ask for it. It's rather scummy of the government bureaucrats, because it puts them in the sole position to benefit from forgotten money, but that's the system we've given ourselves. Since you've moved overseas since the last time you worked with this company, you might need to exercise a little patience and be willing to jump through some hoops to get this resolved. Be prepared to provide them proof of who you are, and be ready to pay for extra security such as certified mail / FedEx so that you're both sure that the new check is delivered to you and only you. Last of all, learn from your mistake this time and be a little more cautious / proactive in keeping track of checks and depositing them in the future. |
Why would a company care about the price of its own shares in the stock market? | Investors are typically a part of the board of directors of the company. Because of their ownership in the company, they have a vested interest in its stock price. The same is true for management also in cases where they hold a certain percentage of equity in the company. Their incentives also get aligned to the stock price. |
find stock composition of a publicly traded fund | The big websites, Yahoo and the like, only give the 10 biggest positions of any fund. Download the annual report of the fund, go to page 18, you will find the positions on the 31st of December. However the actual positions could be different. The same applies to all funds. You need the annual report. |
Understanding the Nasdaq insider trading information | Their argument is mostly nonsense. Take someone like Tim Cook, CEO of Apple. He has a not very large salary, and makes a lot more money through stock bonuses. You would never, ever expect him to buy Apple shares. And assuming that he doesn't want to end up one day as the richest man in the cemetery, you would expect him to sell significant numbers of shares, independent on whether he expects Apple to go up or down. |
Can somebody give a brief comparison of TSP and IRAs? | Ideally, one would contribute the maximum amount you're allowed to both the TSP and an IRA. For the 2015 tax year, that would be $18,000 for the TSP and $5,500 for the IRA (if you're 50 or older, then you can add an additional catch up amount of $6,000 to the TSP and $1,000 to the IRA). If, like most people, you cannot contribute the maximum to both, then I would recommend the TSP over an IRA, until you've maximized your TSP. Unquestionably, you should contribute at least enough to the TSP to get the maximum agency match. Beyond that, there is a case to be made to contribute to an IRA for certain investors. Benefits of TSP, compared to IRA: Benefits of IRA, compared to TSP: So, for an investor who wants simplicity, I would recommend just doing the TSP (unless you can invest more, in which case an IRA is a smart choice). For a knowledgeable and motivated investor, it can make sense to also have an IRA to gain access to asset classes not in the TSP's basic index funds. |
Zero volatility stocks in intraday trading in India | Find a stock screener that has data for the BSE and NSE. You may be able to look directly at volatility but a good stock screener will have the technical analysis indicator called "average true range", ATR for short. This will let you see the average range of price moves over several days. |
Did my salesman damage my credit? What can I do? | This shows the impact of the inquiries. It's from Credit Karma, and reflects my inquiries over the past two years. In my case, I refinanced 2 properties and the hit is after this fact, so my score at 766 is lower than when approved. You can go to Credit Karma and see how your score was impacted. If in fact the first inquiry did this, you have cause for action. In court, you get more attention by having sufficient specific data to support your claim, including your exact damages. |
How can I live outside of the rat race of American life with 300k? | Consider buying a legal "mother daughter" property, rent out the top part, and live in the "mother" component. |
What's a reliable way for a non-permanent resident alien in the USA to get an auto loan? | I took @littleadv 's recommendation that online apps only ask for citizenship due to post-9/11 legislation. I applied to 2 banks in person (one big, one small), and at the dealership. None of my in-person applications ever touched on the issue of citizenship. I even applied in person at the same bank that insta-rejected me online, and told them up front, "I applied online but you rejected me because I'm not a permanent resident." The banker nodded, said "that shouldn't matter here", and continued processing my application. I did find it very hard to get a loan. I have a credit score in the "excellent" range, but have only 1 open credit card (for 5 years). Apparently, most lenders want to see more open credit before writing an auto loan. The big bank said outright "We want to see 3-5 credit cards open". However, the dealership did find a bank willing to extend me a loan. So: The most reliable way for a non-permanent resident alien to get an auto loan in the US is to avoid online applications. Also, if possible, establish a wide credit history before you try. |
Is it better to pay an insurance deductible, or get an upgrade? | If you repair your phone, when your current balance is paid off, could you get the same coverage for less money? Or would your monthly payment remain the same regardless? That would be the easiest comparison to make. ie: Pay an extra $49 to have the phone replaced [ie: the cost of using the insurance program for $149, vs the cost of buying out your plan for $100], get a slightly worse phone instead of upgrading, but save $15 / month for the next 2 years. This would pay off economically within 3-4 months, but the phone would be older (not sure if you care about that). |
Calculating Future Value: Initial deposit and recurring deposits of a fixed but different Value | Illustrating with a shorter example: Suppose I deposit 1,000 USD. Every year I deposit another 100 USD. I want to know how much money will be on that savings account in 4 years. The long-hand calculation is Expressed with a summation And using the formula derived from the summation (as shown by DJohnM) So for 20 years Note in year 20 (or year 4 in the shorter example) the final $100 deposit does not have any time to accrue interest before the valuation of the account. |
I am looking for software to scan and read receipts | Scanning receipts is easy and any decent scanner will do a good job for you. The difficult part is the software that 'extracts' the data. Today there is no software that can do this really well because there is just too great a range of receipts (e.g. handwritten receipts, receipts in foreign languages, etc.). For this reason services like Shoeboxed (in the US) and Receipt Bank (in Europe) are very popular. (Added disclosure: Michael Wood's profile web site link indicates he is associated with Receipt Bank.) |
Apartment Security Deposit refunds in Maryland | In Maryland, a landlord must hold your security deposit in an escrow account and pay you interest when returning the deposit. The interest is simple interest; it does not compound. The interest rate that they must pay has changed over the last 43 years. Before October 1, 2004, the rate was 4%. Until January 1, 2015, the rate was 3%. Currently, the rate is 1.5% OR the simple interest rate accrued at the daily U.S. Treasury yield curve rate for one year, as of the first business day of each year, whichever is greater. (This year, the rate is 1.5%.) Maryland's Department of Housing and Community Development has a Security Deposit Calculator for easy calculation of this interest; however, it only works for deposits since January 1, 2015. It is unclear to me whether the interest rate in effect is the one that was in place when the security deposit was made, or if the rate changes over the years. At most, if you get 4% interest every year, I would expect you to receive $429.76, which is $158 + ($158 * 4% * 43). The interest is accrued every 6 months, so you would not get any interest for the 3 months that you rented in your 44th year. (With the new law that took effect this year, interest is accrued monthly.) At least, if the interest rate changes with the new laws, I would expect you to receive $413.18, which is $158 + ($158 * 4% * 32.5) + ($158 * 3% * 10.25) + ($158 * 1.5% * 0.5). Some text on the Security Deposit Calculator suggests that the laws for Prince George's County are different than the rest of the state. If you are in that county, you'll need to check the local ordinances to see what security deposit policies apply. |
Should withheld income tax be included as income? | Does it make sense to report withheld tax income as an additional income? Is it required by the IRS? Is $T deductible? This is what is called imputed income. The ticket is an income for you, but the company doesn't want you to pay tax on it. But you have to. But they want to be nice to you and give you the ticket on their buck. But that's the law. So what have the accountants invented? Imputed income. The company raises your salary in the amount of taxes paid (+some, but that's negligible), in addition to the actual ticket. So it seems, to you, that you got the ticket for free. The IRS doesn't see the ticket, it just sees that you got a $T+$X bonus and paid $T taxes. The fact that the $X you got in form of a ticket doesn't matter to them. Re your edit - you cannot deduct anything, since you can only deduct unreimbursed expenses, whereas $X is not at all an expense for you (you didn't buy that ticket, the company did), and $T is taxes, which are not deductible (its not an expense). In other words, had C not have been nice, I would be in a better position! No. Your net pay shouldn't be affected, technically, so from your perspective you just got a plane ticket for free. Had C not been nice, you would still not be able to deduct the whole cost of $X, because unreimbursed employee expenses have a 2% AGI threshold. |
What options do I have at 26 years old, with 1.2 million USD? | Buy a land and build a house. Then plant wine trees. Hire people after like 5 years and start to do and sell wine. A beautiful business :-) A second opation is to buy a houses in a city and rent rooms. |
What is the tax treatment of scrip dividends in the UK? | The HMRC website would explain it better to you. There is a lot of factors and conditions involved, so refer to the HMRC website for clarification. If your question had more details, it could have been easy to pinpoint the exact answer. Do I declare the value of shares as income Why would you do that ? You haven't generated income from that yet(sold it to make a profit/loss), so how can that be declared as income. |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | It's possible the recipient of the payment is not setup to receive funds form PayPal from a credit card, too. |
meaning of qualifying/disqualifying distribution as separate from capital gains implications | A qualifying distribution seems guaranteed to fall under long term capital gains. But a disqualifying distribution could also fall under long term capital gains depending on when it is sold. So what's the actual change that occurs once something becomes a qualifying as opposed to a disqualifying distribution? Yes a qualifying distribution always falls under long term capital gain. The difference between qualifying and disqualifying is how the "bargain element" of benefit is calculated. In case of disqualifying distribution it is always the discount offered, Irrespective of the final sale price of the stock. In case of qualifying distribution it is lower of actual discount or profit. Thus if you sell the stock at same price or slightly lower price than the price on exercise date, your "bargain element" is less. This is not the case with disqualifying distribution. |
Could someone place an independent film on the stock market? | Stock is a part ownership of a business. First there has to be a business that people want to own part of because they expect to make a profit from that ownership. Nobody is going to be interested if the business isn't worth anything. In other words: sure, you could try to start a movie production house to make this film and others... But unless you are already a major player AND already have a lot of money invested in the studio, forget it. This isn't GoFundMe or Kickstarter. Nobody is going to buy stock because they want a copy of the DVD that you promise will be available in two years' time. |
Free, web-based finance tracking with tag/label support? | hledger fits your criteria, have you tried it ? Here's the web interface. |
What is the opposite of a hedge? | I guess the opposite of being hedged is being unhedged. Typically, a hedge is an additional position that you would take on in order to mitigate the potential for losses on another position. I'll give an example: Say that I purchase 100 shares of stock XYZ at $10 per share because I believe its price will increase in the future. At that point, my full investment of $1000 is at risk, so the position is not hedged. If the price of XYZ decreases to $8, then I've lost $200. If the price of XYZ increases to $12, then I've gained $200; the profit/loss curve has a linear relationship to the future stock price. Suppose that I decide to hedge my XYZ position by purchasing a put option. I purchase a single option contract (corresponding to my 100 shares) with a strike price of $10 and an expiration date in January 2013 for a price of $0.50/share. This means that until the contract expires, I can always sell my XYZ shares for a minimum of $10. Therefore, if the price of XYZ decreases to $8, then I've only lost $50 (the price of the option contract), compared to the $200 that I would have lost if the position was unhedged. Likewise, however, if the price increases to $12, then I've only gained a net total of $150 due to the money I spent on the hedge. (the details of how much money you would actually lose in the hedged scenario are simplified out above; even out-of-the-money options retain some value before expiration, but pricing of options is outside of the scope of this post) So, as a more pointed answer to your question, I would say that the hedged/unhedged status of a position can be characterized by its potential for loss. If you don't have any other assets that will increase in value to offset losses on your position of interest, I would call it unhedged. |
Clarification on 529 fund | You are faced with a dilemma. If you use a 529 plan to fund your education, the short timeline of a few years will limit your returns that are tax free. Most people who use a 529 plan either purchase years of tuition via lump sum, when the child is young; or they put aside money on a regular basis that will grow tax deferred/tax free. Some states do give a tax break when the contribution is made by a state taxpayer into a plan run by the state. The long term plans generally use a risk profile that starts off heavily weighted in stock when the child is young, and becomes more fixed income as the child reaches their high school years. The idea is to protect the fund from big losses when there is no time to recover. If you choose the plan with the least risk the issue is that the amount of gains that are being protected from federal tax is small. If you pick a more aggressive plan the risk is that the losses could be larger than the state tax savings. Look at some of the other tax breaks for tuition to see if you qualify Credits An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit. Who Can Claim an Education Credit? There are additional rules for each credit, but you must meet all three of the following for either credit: If you’re eligible to claim the lifetime learning credit and are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. You can't claim the AOTC if you were a nonresident alien for any part of the tax year unless you elect to be treated as a resident alien for federal tax purposes. For more information about AOTC and foreign students, visit American Opportunity Tax Credit - Information for Foreign Students. Deductions Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education. The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction, reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high. You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax. |
How to chose index funds, mutual funds from a plethora of options (TD Ameritrade) | One thing to be aware of when choosing mutual funds and index ETFs is the total fees and costs. The TD Ameritrade site almost certainly had links that would let you see the total fees (as an annual percentage) for each of the funds. Within a category, the lowest fees percentage is best, since that is directly subtracted from your performance. As an aside, your allocation seems overly conservative to me for someone that is 25 years old. You will likely work for 40 or so years and the average stock market cycle is about 7 years. So you will likely see 5 or so complete cycles. Worrying about stability of principal too young will really cut into your returns. My daughter is your age and I have advised her to be 100% in equities and then to start dialing that back in about 25 years or so. |
Should I charge my children interest when they borrow money? | This is largely a cultural issue. I would be appalled at the very idea that my parents would charge me interest for lending me money. Just as they would be appalled if I were to do so if lending them money. I find the idea of attempting to make money off of your children fundamentally wrong. I realize that you only want to do this to teach them, that you have their best interests in mind and not your own profit. Nevertheless, what will actually happen were you to charge them interest is that you would accrue a monetary gain at the expense of your children. Is that really something you would be comfortable with? Now, as I stated at the beginning, this is clearly a cultural issue. Based on the other answers here, many cultures, probably including your own, find nothing wrong with this. I've even heard of people charging their adult children rent when they come home for the holidays, something that is completely baffling to me. The point I am trying to make is that asking other people's opinions on whether you should do this is not very useful unless those people share your own cultural background. My family and culture are such that the idea of charging interest to one's family members seems downright immoral to me. Given that you are asking here, it seems like you might be on the fence about it yourself. However, I freely admit that my answer is colored by my own cultural prejudices and may very well not be applicable to you. Still, ask yourself, is a relatively small amount of money in the grand scheme of things—or, for that matter, an entire fortune—worth jeopardizing your relationship with your children? Do you really believe that having their parents retroactively charge them interest for a loan will somehow teach them something about the "real world" that your already adult children don't know? One of the main reasons they came to you and didn't go to a bank is precisely that they expected the loan to be interest free. So, sure, tell them that you won't lend any more until they repay what they owe. Even better, sit them down and have an honest, adult conversation, explaining that the absence of the money they owe is making itself felt in your household and work out a way they can repay you. What, in my opinion, you most certainly shouldn't do is treat your relationship with your children as a regular business transaction. It isn't and I am sure you don't want it to be. |
Relation between inflation rates and interest rates | Is it true that due the to the increase in interest rates that inflation is likely to increase as well? It is typically the reverse where inflation causes interest rates to rise. Interest rates fundamentally reflect the desire for people to purchase future goods over present day goods. If I loan money to someone for 5 years I lose the ability to use that money. In order to entice me to loan the money the borrower would have to offer me an incentive, that is, they would have to give me additional money at the end of that 5 years. This additional money is the interest rate and it reflects the desire of people to spend money in the future versus the present day. If offered the same amount of money today versus 5 years from now almost everyone would chose to take the money now. Money in the present is more valuable than the same amount of money in the future. Interest rates would still exist even with a currency that could not be printed. I would still prefer to have the currency today than in the future. If the currency is continually devalued (i.e. the issuer is printing more of the currency) than borrowers may charge additional interest to compensate for the loss in purchasing power when they make a loan. Also, it is hard to compare interest rates and inflation. Inflation is very difficult to calculate. New products and services, as well as ever changing consumer desires, continually change the mixture of goods in the market so it is nearly impossible to compare a basket of goods today to a basket of goods 5, 10, 20, or 30 years ago. |
I cosigned for a friend who is not paying the payment | If the bank is calling your employer, the federal Fair Debt Collection Practices Act (FDCPA) limits where and when debt collectors can contact consumer debtors. In many cases, debt collectors that contact debtors at work are violating the FDCPA. http://www.nolo.com/legal-encyclopedia/a-debt-collector-calling-me-work-is-allowed.html |
Does a growing economy mean the economy is becoming less efficient? | A growing economy should become more efficient because of increased opportunity for division of labor: specialization. External regulation or monetary policy external to the free market can cause parts of the economy to grow in response to said regulations. This creates inefficiencies that are wrung out of the economy after the policies reverse. A couple of examples: Tinkering with the economy causes the inefficiencies. |
What are the benefits of opening an IRA in an unstable/uncertain economy? | As I stated in my comment on @JCotton's answer, the only way you benefit by putting your money in an IRA or other tax-deferred vehicle is if you expect to have a lower tax rate when you withdraw than when you put the money in. If you look at @JCotton's numbers and remember to pay taxes when you withdraw the money in 30 years, you will see that both situations - paying taxes now or 30 years from now - give you the exact same dollar amount if the tax rates are the same at both points in time. So if you put money in an IRA, you're betting on the fact that the government will not substantially raise interest rates by then, and/or that you will be in a lower tax bracket. To me, the only valid reasons to invest in an IRA or 401K are the following: However, you should also consider the major downside that the money is locked away and, at best, inconvenient to access when you need it. At worst, you have to pay taxes and penalties if you ever withdraw that money. If you are a financially responsible person, I think you're generally better off keeping your money outside of an IRA or 401K, with the exception of making sure to get all of your employer's matching contributions. |
Why diversify stocks/investments? | Basically, diversifying narrows the spread of possible results, raising the center of the returns bell-curve by reducing the likelihood of extreme results at either the high or low end. It's largely a matter of basic statistics. Bet double-or-nothing on a single coin flip, and those are the only possible results, and your odds of a disaster (losing most or all of the money) are 50%. Bet half of it on each of two coin flips, and your odds of losing are reduced to 25% at the cost of reducing your odds of winning to 25%, with 50% odds that you retain your money and can try the game again. Three coins divides the space further; the extremes are reduced to 12.5% each, with the middle being most likely. If that was all there was, this would be a zero-sum game and pure gambling. But the stock market is actually positive-sum, since companies are delivering part of their profits to their stockholder owners. This moves the center of the bell curve up a bit from break-even, historically to about +8%. This is why index funds produce a profit with very little active decision; they treat the variation as mostly random (which seems to work statistically) and just try to capture average results of a (hopefully) slightly above-average bucket of stocks and/or bonds. This approach is boring. It will never double your money overnight. On the other hand, it will never wipe you out overnight. If you have patience and are willing to let compound interest work for you, and trust that most market swings regress to the mean in the long run, it quietly builds your savings while not driving you crazy worrying about it. If all you are looking for is better return than the banks, and you have a reasonable amount of time before you need to pull the funds out, it's one of the more reliably predictable risk/reward trade-off points. You may want to refine this by biasing the mix of what you're holding. The simplest adjustment is how much you keep in each of several major investment categories. Large cap stocks, small cap stocks, bonds, and real estate (in the form of REITs) each have different baseline risk/return curves, and move in different ways in response to news, so maintaining a selected ratio between these buckets and adding the resulting curves together is one simple way to make fairly predictable adjustments to the width (and centerline) of the total bell curve. If you think you can do better than this, go for it. But index funds have been outperforming professionally managed funds (after the management fees are accounted for), and unless you are interested in spending a lot of time researching and playing with your money the odds of your doing much better aren't great unless you're willing to risk doing much worse. For me, boring is good. I want my savings to work for me rather than the other way around, and I don't consider the market at all interesting as a game. Others will feel differently. |
What does this diagram from Robert Kiyosaki about corporations mean? | These types of diagrams appear all throughout Kiyosaki's Rich Dad, Poor Dad book. The arrows in the diagrams represent cash flow. For example, the first two diagrams of this type in the book are: The idea being presented here is that an asset generates income, and a liability generates expenses. According to the book, rich people spend their money buying assets, while middle class people buy liabilities. The diagram you posted above does not appear in the edition of the book I have (Warner Books Edition, printed in 2000). However, the following similar diagram appears in the chapter titled "The History of Taxes and the Power of Corporations": The idea behind this diagram is to demonstrate what the author considers the tax advantages of a personal corporation: using a corporation to pay for certain expenses with pre-tax dollars. Here is a quote from this chapter: Employees earn and get taxed and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It's one of the biggest legal tax loopholes that the rich use. They're easy to set up and are not expensive if you own investments that are producing good cash flow. For example; by owning your own corporation - vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses. And on and on - but do it legally with pre-tax dollars. This piece of advice, like so much of the book, may contain a small amount of truth, but is oversimplified and potentially dangerous if taken a face value. There are many examples, as JoeTaxpayer mentioned, of people who tried to deduct too many expenses and failed to make a business case for them that would satisfy the IRS. |
Value of a call option spread | On expiry, with the underlying share price at $46, we have : You ask : How come they substract 600-100. Why ? Because you have sold the $45 call to open you position, you must now buy it back to close your position. This will cost you $100, so you are debited for $100 and this debit is being represented as a negative (subtracted); i.e., -$100 Because you have purchased the $40 call to open your position, you must now sell it to close your position. Upon selling this option you will receive $600, so you are credited with $600 and this credit is represented as a positive (added) ; i.e., +$600. Therefore, upon settlement, closing your position will get you $600-$100 = $500. This is the first point you are questioning. (However, you should also note that this is the value of the spread at settlement and it does not include the costs of opening the spread position, which are given as $200, so you net profit is $500-$200 = $300.) You then comment : I know I am selling 45 Call that means : As a writer: I want stock price to go down or stay at strike. As a buyer: I want stock price to go up. Here, note that for every penny that the underlying share price rises above $45, the money you will pay to buy back your short $45 call option will be offset by the money you will receive by selling the long $40 call option. Your $40 call option is covering the losses on your short $45 call option. No matter how high the underlying price settles above $45, you will receive the same $500 net credit on settlement. For example, if the underlying price settles at $50, then you will receive a credit of $1000 for selling your $40 call, but you will incur a debit of $500 against for buying back your short $45 call. The net being $500 = $1000-$500. This point is made in response to your comments posted under Dr. Jones answer. |
Can dividends be exploited? | In addition to the other answers it's also noteworthy that the stock exchanges themselves adjust the price quotes via their ex-div mechanism. All limit orders present in the book when the stock goes ex-div will be adjusted by the dividend. Which means you can't even get "accidentally" filled in the very unlikely case that everyone forgot to adjust their quotes. |
Are 'per trade' fees charged on every order or just once per stock? | The answer, like many answers, is "it depends". Specifically, it depends on the broker, and the type of account you have with the broker. Most brokers will charge you once per transaction, so a commission on the buy, and a commission (and SEC fee in the US) on the sale. However, if you place a Good-til-Canceled (GTC) order, and it's partially filled one day, then partially filled another day, you'll be charged two commissions. There are other brokers (FolioFN comes to mind) that either have trading "windows", where you can make any number of trades within that window, or that have a fixed monthly fee, giving you any (probably with some upper limit) number of trades per month. There are other brokers (Interactive Brokers for example), that charge you the standard commission on buy and another commission and fee on sell, but can refund you some of that commission for making a market in the security, and pay you to borrow the securities. So the usual answer is "two commissions", but that's not universal. However, while commissions are important, with discount brokers, you'll find the percent you're paying for commissions is minimal, which losses due to slippage and poor execution can swamp. |
Can an immigrant get a mortgage in the us? | There are two Questions: Financial institutions do not care about your nationality, only your ability to pay over time. For long term debt the lender will want assurances that the borrower has the ability and means to pay the debt over time. A legal resident in the US should have no more difficulty obtaining financing than a citizen under similar life circumstances. The Lender is also under legal obligation to confirm that the borrower is who they say they are, will have the ability to pay over time AND have no malicious intent in the purchase. Persons who do not have legal status in the US, AND who do not have the means to pay for property outright will have difficulty obtaining financing as they will have trouble establishing the requirements of the Lender. This is simple math, a lender will be reluctant to lend to any person who is more likely to have difficulty paying the obligation than another. In your case Your father would be an unlikely candidate for a mortgage because he cannot establish his legal status nor can he guarantee that he will have the legal right to earn a means to pay the loan back. This puts the lender at risk both of losing the money lent AND losing the right to repossess the property if the borrower doesn't pay. Despite all of the obstacles I have indicated above, it is still possible for your father to purchase property legally, but the risk and the cost go way up for him as a borrower. There may be sellers willing to finance property over time, but your father's status puts him at a disadvantage if the seller is not honest. There may be community coalitions which can help you work through the challenges of property ownership. Please see these related articles |
Is Cost of Living overstated? | You mention: High rent places are usually also high property value places. Given the tax incentives, it seems like a good long term idea to grab a house, so if we assume you have the option of working and buying a house in a high CoL or a low CoL city, I think you'd prefer the high cost. Because essentially, after 30 years, you'd have a million dollar house vs a quarter million dollar house. You've captured three quarters of a million dollars in rent, given my napkin math hypothetical. I think you're forgetting about some of the associated costs with "owning" a home, including: |
What variety of hedges are there against index funds of U.S. based stocks? | Even though "when the U.S. sneezes Canada catches a cold", I would suggest considering a look at Canadian government bonds as both a currency hedge, and for the safety of principal — of course, in terms of CAD, not USD. We like to boast that Canada fared relatively better (PDF) during the economic crisis than many other advanced economies, and our government debt is often rated higher than U.S. government debt. That being said, as a Canadian, I am biased. For what it's worth, here's the more general strategy: Recognize that you will be accepting some currency risk (in addition to the sovereign risks) in such an approach. Consistent with your ETF approach, there do exist a class of "international treasury bond" ETFs, holding short-term foreign government bonds, but their holdings won't necessarily match the criteria I laid out – although they'll have wider diversification than if you invested in specific countries separately. |
Can a company stop paying dividends? | Yes. Companies increase, decrease, start paying and stop paying dividends when they think it appropriate. If a company has been going through some problems and makes a loss, or even a large decrease in profits, they can choose to stop paying dividends until things improve. Many companies did this during the Global Financial Crisis of 2007-08. |
How to invest in gold at market value, i.e. without paying a markup? | And you have hit the nail on the head of holding gold as an alternative to liquid currency. There is simply no way to reliably buy and sell physical gold at the spot price unless you have millions of dollars. Exhibit A) The stock symbol GLD is an ETF backed by gold. Its shares are redeemable for gold if you have more than 100,000 shares then you can be assisted by an "Authorized Participant". Read the fund's details. Less than 100,000 shares? no physical gold for you. With GLD's share price being $155.55 this would mean you need to have over 15 million dollars, and be financially solvent enough to be willing to exchange the liquidity of shares and dollars for illiquid gold, that you wouldn't be able to sell at a fair price in smaller denominations. The ETF trades at a different price than the gold spot market, so you technically are dealing with a spread here too. Exhibit B) The futures market. Accepting delivery of a gold futures contract also requires that you get 1000 units of the underlying asset. This means 1000 gold bars which are currently $1,610.70 each. This means you would need $1,610,700 that you would be comfortable with exchanging for gold bars, which: In contrast, securitized gold (gold in an ETF, for instance) can be hedged very easily, and one can sell covered calls to negate transaction fees, hedge, and collect dividends from the fund. quickly recuperating any "spread tax" that you encounter from opening the position. Also, leverage: no bank would grant you a loan to buy 4 to 20 times more gold than you can actually afford, but in the stock market 4 - 20 times your account value on margin is possible and in the futures market 20 times is pretty normal ("initial margin and maintenance margin"), effectively bringing your access to the spot market for physical gold more so within reach. caveat emptor. |
What exactly can a financial advisor do for me, and is it worth the money? | If you don't have the time or interest to manage investments, you need a financial advisor. Generally speaking, you're better served by an advisor who collects an annual fee based on a percentage of your account value. Advisors who are compensated based on transactions have a vested interest to churn your account, which is often not in your best interest. You also need to be wary of advisors who peddle expensive mutual funds with sales loads (aka kick-backs to the advisor) or annuities. Your advisor's compensation structure should be transparent as well. |
Put-Call parity - what is the difference between the two representations? | Well, the first one is based on the "Pert" formula for continuously-compounded present value, while the second one is the periodically-compounded variant. Typically, the continuously-compounded models represent the ideal; as the compounding period of time-valued money shrinks towards zero, and the discount rate (or interest rate if positive) stays constant over the time period examined, the periodic equation's results approach that of the continuously-compounded equation. Those two assumptions (a constant rate and continuous balance adjustment from interest) that allow simplification to the continuous form are usually incorrect in real-world finance; virtually all financial institutions accrue interest monthly, for a variety of reasons including simpler bookkeeping and less money paid or owed in interest. They also, unless prohibited by contract, accrue this interest based on a rate that can change daily or even more granularly based on what financial markets are doing. Most often, the calculation is periodic based on the "average daily balance" and an agreed rate that, if variable, is based on the "average daily rate" over the previous observed period. So, you should use the first form for fast calculation of a rough value based on estimated variables. You should use the second form when you have accurate periodic information on the variables involved. Stated alternately, use the first form to predict the future, use the second form in retrospect to the past. |
Definition of “secular” in the context of markets? | According to Wikipedia: In the finance industry, something done on a secular basis is done on a long-term basis, not a temporary or cyclical one, with a time frame of "10–50 years or more" Source |
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