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Are limit orders safe? | I assume you're talking about a sell order, not a buy order. When you place a limit sell order, your order is guaranteed to be placed at that price or higher. If the market is currently trading much higher than the price of your sell order, then your mistakenly low limit order will be essentially a market order, and will be filled at the current bid price. So the only way this is a problem is if you want to place a limit sell that is much higher than the current market, but mistakenly place a limit lower than the current market. |
Can an IRA be taxed? | The Motley Fool article is correct that if you earn UBTI over $1000, you will need to pay the tax, even if held in an IRA. C-corps won't generate UBTI, so you're fine with those. For non-C-corps, the most common are REITs, MLPs, and BDCs. REITs These typically invest in either real estate property or mortgages. The ones that invest in mortgages are sometimes notated: mREITs, and can occasionally generate UBTI. Tip: Don't let this stop you from investing in REITs in your IRA. REITs can be a great source of income and are best held in an IRA since the income will be tax free vs. your ordinary income tax bracket if held in a taxable account. Some examples of mREITs would be NLY, CIM, AGNC. Some property REITs would be: O, SNR, OHI, EQR. https://seekingalpha.com/article/1257351-tax-bomb-mortgage-reits-triggering-ubit MLPs Master Limited Partnerships are also pass-through entities, like REITs, but have the additional complication that most issue K-1 forms at tax time. K-1s can be very complex when the MLP owns assets across state boundaries, which is why I actually PREFER to hold MLPs in my IRA (against the advice of M. Fool) since I won't have to deal with the tax complications of filing the K-1, just as long as my MLPs don't generate over $1000 of UBTI. https://seekingalpha.com/article/4057891-mlps-kminus-1s-ubti-oh BDCs Business Development Companies like REITs and MLPs are also pass-through entities in that the income they give you will be taxed at your ordinary income bracket if held in a taxable account. Examples of BDCs include: MAIN, MCC, ARCC. You'd need to consult their 10-K to determine if there is a risk of UBTI. Tip: MLPs, BDCs, and especially REITs can all be very valuable sources of income and from my experience, UBTI is rare so don't let that scare you away if you otherwise like the investment. |
What can I replace Microsoft Money with, now that MS has abandoned it? | Check the Financial section in this list of Open Source Software |
Receive money from US Client to Myself in India by selling services | Depending on how tech savvy your client is you could potentially use bitcoin. There is some take of indian regulators stopping bitcoin exchanges, meaning it might be hard to get your money out in your local country but the lack of fees to transfer and not getting killed on the exchange rate every time has a huge impact, especially if your individual transaction sizes are not huge. |
How should we prioritize retirement savings, paying down debt, and saving for a house? | The advice to pay off near-7% debt is tough to argue against. That said, I'd project out a few years to understand the home purchase. Will you plan for the 20% down John recommends? The Crazy Truth about PMI can't be ignored. The way the math works, if you put 15% down, the PMI costs you so much, it's nearly like paying 20% interest on that missing 5%. If your answer is that you intend to save for the full downpayment, 20%, and can still knock off the student loan, by all means, go for it. I have to question the validity of "we will definitely be in a higher tax bracket when we retire." By definition, pretax deposits save tax at the marginal rate. i.e. If you are in the 25% bracket, a $1000 deposit saves you $250 in tax that year. But, withdrawals come at your average rate, i.e. your tax bill divided by gross income. There's the deductions for itemized deductions or the standard. Then 2 exemptions if you are married. Then the 10% bracket, etc. Today, a couple grossing $100K may be in the 25% bracket, but their average rate is 12%. I read this Q&A again and would add one more observation - Student Loans and Your First Mortgage is an article I wrote in response to a friend's similar question. With the OP having plan to buy a house, paying off the loan may be more costly in the long run. It may keep him from qualifying for the size mortgage he needs, or from having enough money to put 20% down, as I noted earlier. With finance, there are very few issues that are simply black and white. It's important to understand all aspects of one's finances to make any decision. Even if thee faster payoff is the right thing, it's not a slam-dunk, the other points should be considered. |
How does order matching happen in stock exchanges? | But how does the quantity matching happen? For example, if I want to buy 1000 shares at $100, but there is only one seller to sell 10 shares at $100, what happens then? This depends on the type of order you've placed. If you placed a fill-or-kill order, your order to buy or sell a certain number of shares is routed to the trading floor for immediate execution. If the order cannot be immediately filled, it is cancelled (killed) automatically. Note that the order must be filled in its entirety. Partial fills are not allowed. In your example, your buy order wouldn't be filled because it couldn't be matched to a sell order of the same volume. This is similar to an all-or-none order, which is an order that contains A condition instructing the broker to fill the order completely or not at all. If there is insufficient supply to meet the quantity requested by the order then it is canceled at the close of the market. In this case, if your order wasn't matched to an order of the same volume by the time the market closes, it's cancelled. If you simply placed a market/limit order, and (in the case of the limit order), part of your order was matched to another order with the right price, that part of your order will be filled, while the rest will remained unfilled. |
I paid a contractor to make roof repairs to a house in my LLC. How can I deduct this cost? | This new roof should go on the 2016 LLC business return, but you probably won't be able to expense the entire roof as a repair. A new roof is most likely a capital improvement, which means that it would need to be depreciated over many years instead of expensed all in 2016. The depreciation period for a residential rental property is 27.5 years. Please consider seeking a CPA or Enrolled Agent for the preparation of your LLC business return. See also: IRS Tangible Property Regulations FAQ list When you made the loan to the LLC (by paying the contractor and making a contract with the LLC), did you state an interest rate? If not, you and your brother should correct the contract so that an interest rate is stated, then follow it. The LLC needs to pay you interest until the loan is paid off. You need to report the interest income on your personal return, and the LLC needs to report the interest expense in its business return. |
What effect would sovereign default of a European country have on personal debt or a mortgage? | If the default happens through mass monetary inflation rather than openly ("We're not paying interest on our bonds") then make sure you pay off your house. There may not be a very long window to do so. If the currency becomes worthless, then it depends on what you have of value that would be accepted by the lender as payment. If you don't have anything, the lender will take it back, as they're probably entitled to on the notes. |
Is it a good idea to teach children that work is linearly related to income? | My family instilled in me early on that hard work was important, and the output of that work was its reward. My grandparents really made in impression with me about telling the truth and being fair (probably after I was busted for lying and cheating about something) -- I remember my grandfather talking about the solem trust associated with shaking hands over something. I remember opening a savings account at school on bank day and being really excited about the interest accruing... but my folks never really allowed us to spend it on toys or other stuff. I didn't really think about money at all until I was probably about 10 or 11, when I started watching "Wall Street Week" on PBS with my dad on Friday night and bombarding him with dozens of questions. Then games like Sim City really got me going... my grandmother was always amazed that I was talking about bonding construction projects. I think that before 10 or so, kids needn't concern themselves with money, but should understand responsibility, the rewards that come from working hard, and the consequences for not doing so. |
Buy US ETF as foreigner — a bad idea? | Here're some findings upon researches: Two main things to watch out for: Estate tax and the 30% tax withholding. These 2 could be get around by investing in Luxembourg or Ireland domiciled ETF. For instance there's no tax withholding on Ireland domiciled ETF dividend, and the estate tax is not as high. (source: BogleHead forums) Some Vanguard ETF offered in UK stock market: https://www.vanguard.co.uk/uk/mvc/investments/etf#docstab. Do note that the returns of S&P 500 ETF (VUSA) are adjusted after the 30% tax withholding! Due to VUSA's higher TER (0.09%), VOO should remain a superior choice. The FTSE Emerging Markets and All-World ETFs though, are better than their US-counterparts, for non-US residents. Non-US residents are able to claim back partials of the withhold tax, by filing the US tax form 1040NR. In 2013, non-US resident can claim back at least $3,900. Kindly correct me if anything is inaccurate. |
To rebalance or not to rebalance | In theory, investing is not gambling because the expected outcome is not random; people are expecting positive returns, on average, with some relationship to risk undertaken and economic reality. (More risk = more returns.) Historically this is true on average, that assets have positive returns, and riskier assets have higher returns. Also it's true that stock market gains roughly track economic growth. Valuation (current price level relative to "fundamentals") matters - reversion to the mean does exist over a long enough time. Given a 7-10 year horizon, a lot of the variance in ending price level can be explained by valuation at the start of the period. On average over time, business profits have to vary around a curve that's related to the overall economy, and equity prices should reflect business profits. The shorter the horizon, the more random noise. Even 1 year is pretty short in this respect. Bubbles do exist, as do irrational panics, and milder forms of each. Investing is not like a coin flip because the current total number of heads and tails (current valuation) does affect the probability of future outcomes. That said, it's pretty hard to predict the timing, or the specific stocks that will do well, etc. Rebalancing gives you an objective, automated, unemotional way to take advantage of all the noise around the long-term trend. Rather than trying to use judgment to identify when to get in and out, with rebalancing (and dollar cost averaging) you guarantee getting in a bit more when things are lower, and getting out a bit more when things are higher. You can make money from prices bouncing around even if they end up going nowhere and even if you can't predict the bouncing. Here are a couple old posts from my blog that talk about this a little more: |
Do I need a new EIN since I am hiring employees for my LLC? | I called the IRS (click here for IRS contact info) and they said I do not need to get a new EIN. I could have just filed the appropriate employer federal tax return (940/941) and then the filing requirements would have been updated. But while I was on the phone, they just updated the filing requirements for my LLC so I am all good now (I still need to file the correct form and make the correct payments, etc. but I can use this same EIN going forward). Disclaimer: Don't trust me (or this answer) for tax advice (your situation may be different). The IRS person on the phone was very helpful so I recommend calling them if you are in a similar situation. FYI, I have found calling the IRS to always be very helpful. |
How to minimize damage from sale of savings account | Bank of America has been selling off their local branches to smaller banks in recent years. Here are a few news stories related to this: Along with the branch buildings, the local customers' savings and checking accounts are sold to the new bank. It is interesting that you were told that your savings account is being sold, but that your checking account will remain with BofA. I guess it depends on the terms of the particular sale. Here are your options, as I see it: Let the savings account move to the new bank, and see what the new terms are like. You might actually like the new bank. If you don't, you can shop around and close your account at the new bank after it has been created. Close your account now, before the move. If you have a different bank you'd like to move to, there is no need to wait. Since your checking account is apparently staying with BofA, you could move all your money from your savings account to your checking account, closing your savings account. Then after "mid August" when the local branch switches to the new bank and everyone else's savings account has moved, you can call up BofA and tell them you want to move some of the money from your checking account into a new savings account. If you really have your heart set on staying with BofA, option 3 looks like a good, easy choice. To address your other concerns: Bank of America is a big credit card company, so I doubt that your credit card is being sold off. Your credit card account should stay as-is. Even if your savings account and checking account are at a different bank, there is no need to switch credit cards. Your savings and checking accounts have nothing to do with your credit report or score, so there is no concern there. If you end up wanting to switch to a new credit card with a different bank, there are minor hits to your credit score involved with applying for a new card and closing your current card, but if I were you I would not worry about your credit score in this. Switch credit cards if you want a change, and keep your credit card if you don't. |
Is it normal to think of money in different “contexts”? | The psychology around money is the subject of a lifetime of study. Your observations are not uncommon. The market daily fluctuation is out of our control. Hopefully, by the time the 1% volatility impacts you by say $1,000, you'll have grown accustomed to it, so when the 1% is then $10,000, you won't lose sleep. The difference between the $1000 up/down and the $3 sandwich is simple - one is in your control, the other isn't. When you're out, you need to try to cut down on the math, it will only bring you unhappiness. You're paying for the socializing and can't let the individual items on the check bother you. I'm at the point in my life when I prefer a more expensive restaurant meal that I can't make at home to a moderate one that I'd make myself. For me, that logic works, and it's not keeping us home. Funny how my own sense of value for the dollar pushes me to a more expensive experience, but one that I'll enjoy. By the way - eBay has done an amazing thing, it's created a market for you to sell your stuff, but it's also pulled everyone's collection of junk out for sale. Books I thought might be worth selling go for $1-$2 plus shipping. It's not worth my time or effort, and I need to just break the emotional ties to 'stuff.' I box them up and bring them to the library for their sale. If that picture frame isn't antique, throw it out or have a yard sale. This may be right on track to your question or a complete tangent.... |
Loan to son - how to get it back | I think you've made a perfectly valid suggestion, and, if your son is struggling somewhat financially now, one that may be very welcome. If you agree to forgive the debt at this time in lieu of a similar amount forgone in future inheritance, it will eliminate the never ending interest-only payments, free up $200+ a month for you son on a tight budget, and improve your own credit score once you pay off the credit line. It's also, in my opinion, a good idea to be open about this in advance with your other children heirs so that everyone will understand what is expected during the eventual probate. My paternal grandfather was the recipient of a great deal of financial largess from his wealthy mother during her life, and it was fully understood by him, her, and his siblings, that in exchange he would not share in her estate when she passed. He didn't, there were no problems, and he and his siblings stayed close for the rest of their lives. |
Dividend vs Growth Stocks for young investors | In financial theory, there is no reason for a difference in investor return to exist between dividend paying and non-dividend paying stocks, except for tax consequences. This is because in theory, a company can either pay dividends to investors [who can reinvest the funds themselves], or reinvest its capital and earn the same return on that reinvestment [and the shareholder still has the choice to sell a fraction of their holdings, if they prefer to have cash]. That theory may not match reality, because often companies pay or don't pay dividends based on their stage of life. For example, early-stage mining companies often have no free cashflow to pay dividends [they are capital intensive until the mines are operational]. On the other side, longstanding companies may have no projects left that would be a good fit for further investment, and so they pay out dividends instead, effectively allowing the shareholder to decide where to reinvest the money. Therefore, saying "dividend paying"/"growth stock" can be a proxy for talking about the stage of life + risk and return of a company. Saying dividend paying implies "long-standing blue chip company with relatively low capital requirements and a stable business". Likewise "growth stocks" [/ non-dividend paying] implies "new startup company that still needs capital and thus is somewhat unproven, with a chance for good return to match the higher risk". So in theory, dividend payment policy makes no difference. In practice, it makes a difference for two reasons: (1) You will most likely be taxed differently on selling stock vs receiving dividends [Which one is better for you is a specific question relying on your jurisdiction, your current income, and things like what type of stock / how long you hold it]. For example in Canada, if you earn ~ < $40k, your dividends are very likely to have a preferential tax treatment to selling shares for capital gains [but your province and specific other numbers would influence this]. In the United States, I believe capital gains are usually preferential as long as you hold the shares for a long time [but I am not 100% on this without looking it up]. (2) Dividend policy implies differences in the stage of life / risk level of a stock. This implication is not guaranteed, so be sure you are using other considerations to determine whether this is the case. Therefore which dividend policy suits you better depends on your tax position and your risk tolerance. |
Is candlestick charting an effective trading tool in timing the markets? | Candlesticks and TA are a relic of pre-computer trading, period. Market makers use sophisticated algorithms not for trading, but manipulations. |
splitting a joint mortgage - one owner in home | Definitely get a lawyer to write up all the details of the partnership in a formal agreement. If your ex does not want to do this, that is a bad sign. You both need to be clear about expectations and responsibilities in this partnership, and define an exit strategy in the case one of you wants out. This is the most fair to both parties. Generally, what is common is that property is split cleanly when the relationship ends. I would strongly recommend you both work towards a clean split with no joint property ownership. How this looks depends on your unique situation. To address your questions 2 and 3: You have two roles here - tenant and owner. As a 50% owner, you are running a business with a partner. That business will have assets (home), income, expenses, and profit. You basically need to run this partnership as a simple business. All the rent income (your rent and the other tenant's) should go into a separate account. The mortgage and all other housing expenses are then paid from only this account. Any excess is then profit that may be split 50/50. All expenses should be agreed upon by both of you, either by contract or by direct communication. You should see a financial professional to make sure accounting and taxes are set up properly. Under this system, your ex could do work on the house and be paid from the business income. However, they are responsible to you to provide an estimate and scope of work, just like any other contractor. If you as a joint owner agree to his price, he then could be paid out of the business income. This reduces the business cash flow for the year accordingly. You can probably see how this can get very complicated very fast. There is really no right or wrong answer on what both of you decide is fair and best. For the sake of simplicity and the least chance of a disaster, the usual and recommended action is to cleanly split all property. Good Luck! |
Easiest way to diversify savings | Having savings only in your home currency is relatively 'low risk' compared with other types of 'low diversification'. This is because, in a simple case, your future cash outflows will be in your home currency, so if the GBP fluctuates in value, it will (theoretically) still buy you the same goods at home. In this way, keeping your savings in the same currency as your future expenditures creates a natural hedge against currency fluctuation. This gets complicated for goods imported from other countries, where base price fluctuates based on a foreign currency, or for situations where you expect to incur significant foreign currency expenditures (retirement elsewhere, etc.). In such cases, you no longer have certainty that your future expenditures will be based on the GBP, and saving money in other currencies may make more sense. In many circumstances, 'diversification' of the currency of your savings may actually increase your risk, not decrease it. Be sure you are doing this for a specific reason, with a specific strategy, and not just to generally 'spread your money around'. Even in case of a Brexit, consider: what would you do with a bank account full of USD? If the answer is "Convert it back to GBP when needed (in 6 months, 5 years, 30, etc.), to buy British goods", then I wouldn't call this a way to reduce your risk. Instead, I would call it a type of investment, with its own set of risks associated. |
Can I claim a tax deduction for working from home as an employee? I work there 90% of the time | 90% sounds like "principal place of business" but check these IRS resources to make sure. |
Any experience with maxing out 401(k)? | You want to take the hit now. There are tons of calculators out there, but the rule of 70 should be enough to help convince you: Assume you can put an extra $10k in a 401k now, or keep it. If you pay ~30% in taxes, you can have either: A) $7k now, or: B) What $10K will grow to in your 40 years till retirement less taxes at the end. The rule of 70 is a quick, dirty way to calculate compounded returns. It says that if you divide 70 by your assumed return, you get the approximate number of years it will take to double your money. So let's say you assume a 5% rate of return (you can replace that with whatever you want): 1) 70/5 is 14, so you'll double your $10k every 14 years. 2) In 40 years, you'll double your money almost 3 times (2.86) 3) That means you'll end up with almost $80k before taxes 4) Even if we assume the same tax rate at retirement of 30% (odds are decent it's lower, since you'll have less income, presumably), you still have $56k. Whatever you think inflation will be, $56k later is a LOT better than $7k now. |
What are the economic benefits of owning a home in the United States? | It is almost a sure thing that the housing market will crash again hugely.For this reason I prefer to own several houses that way when it does no one can ask for their money back and leave me homeless. Current economics suggest a fall of between 40-60% from 2011 prices meaning that if you have bought a house in the last 12 years you can wave bye bye to any and all equity, and this will happen very soon. I recommend saving your money and buying a house outright (like I did 3 times) from someone who has spent 12 years or so paying a mortgage. |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | You should only loan money to friends or relatives if you are fully accepting the possibility of never ever getting that money back. And in this situation it can happen that you will be forced to give him a very large loan if something bad ever happens to him. (Paying the monthly rates instead of him and expecting he will someday pay it back to you is technically the same as loaning him money). Something might happen in the future which will result in him not paying his monthly payments. Maybe not now, but in 5 years. Or 10. The economy might change, he might be out of a job, his personal values might change. A house mortgage is long term, and during that time a lot can happen. |
What does a contract's worth mean? | $400M is the gross "check" the company will receive as payment for the project. The contract will specify payment schedule. And it can range from a payment per milestone achieved to a pay in full on completion. The profit will hopefully be positive, but it's not impossible for a bid to underestimate the full cost, resulting in no profit at all. In theory, if you knew the expected profit from the deal, you should be able to estimate the value it adds to the company's value. |
Do developed country equities have a higher return than emerging market equities, when measured in the latter currency? | First of all, the answer to your question depends on your starting dates and ending dates. So developed markets returns are higher over one period, and emerging markets returns over other periods. So far, there does not appear to be a systematic tilt in favor of one or the other. The reasons are as you said. Emerging markets tend to have higher returns in nominal terms, but developed markets currency movements (sometimes) cancel this out. So watch out for periods of strong and weak developed markets (e.g. U.S) currencies. In "strong" currency periods (such as those of the past five years or so), you want U.S. market exposure, and in "weak" currency periods, the larger nominal local returns will be fully reflected in dollar terms as well. |
How does a lender compute equity requirement for PMI? | Do you have any legal options? Not really. Citi is under no obligation to refinance your loan on your terms. But that goes both ways, and you are under no obligation to refinance with Citi! Get more quotes from another lender. It'll feel really good when you find a lender that wants your business. You might get a better deal. And think how good it will feel to cut ties with Citi! |
When I pay off my mortgage loan, what would really happen? | The underlying investment is usually somewhat independent of your mortgage, since it encompasses a bundle of mortgages, and not only yours. It works similarly to a fund. When, you pay off the old mortgage while re-financing, the fund receives the outstanding debt in from of cash, which can be used to buy new mortgages. |
Is this mortgage advice good, or is it hooey? | Sounds fishy - taking out more debt to pay the main mortgage down faster? There are a couple of issues I can see: I would think that a much more sensible strategy with a lot less risk is to save up extra cash and send your lender a check every quarter or six months. |
Can I sell a stock immediately? | If you place a market order, you are guaranteed to sell your stock unless the stock is in a trading halt. A market order does not guarantee the price you sell the stock at. If you place a market order, even if the stock is very illiquid a market maker will guarantee a market, but will not guarantee a price. |
What are non-qualified stock options? | Non-qualified stock options are like regular incentive stock options but without the preferential treatments that ISOs get: Companies like to give NQSOs because they can claim a tax deduction (i.e. a loss) for that difference between exercise price and market price (that you have to report as income). |
Diversify my retirement investments with a Roth IRA | Yep, most 401k options suck. You'll have access to a couple dozen funds that have been blessed by the organization that manages your account. I recently rolled my 401k over into a self-directed IRA at Fidelity, and I have access to the entire mutual fund market, and can trade stocks/bonds if I wish. As for a practical solution for your situation: the options you've given us are worryingly vague -- hopefully you're able to do research on what positions these funds hold and make your own determination. Quick overview: Energy / Utilities: Doing good right now because they are low-risk, generally high dividends. These will underperform in the short-term as the market recovers. Health Care: riskier, and many firms are facing a sizable patent cliff. I am avoiding this sector. Emerging Markets: I'm also avoiding this due to the volatility and accounting issues, but it's up to you. Most large US companies have "emerging markets" exposure, so not necessary for to invest in a dedicated fund in my unprofessional opinion. Bonds: Avoid. Bonds are at their highest levels in decades. Short-term they might be ok; but medium-term, the only place to go is down. All of this depends on your age, and your own particular investment objectives. Don't listen to me or anyone else without doing your own research. |
F-1 Visa expired - Unable to repay private student loan. What to do? | As an international student, the tuition is sky high. Typically, most students take loans for Education and start paying it back once they get a job. If you have exhausted your OPT period and have not got H1B, your options are either to go for further education(Hint: Phd), you can hope to cover living expense by part-time on campus job. This will give you additional time to look for a job and try for H1B again! |
Condo Purchase - Tax Strategies [US] | You will need to see a tax expert. Your edited question includes the line For the short term, we will be "renting" it to my wife's grandmother at a deep discount. According to the instructions for schedule E If you rented out a dwelling unit that you also used for personal purposes during the year, you may not be able to deduct all the expenses for the rental part. “Dwelling unit” (unit) means a house, apartment, condominium, or similar property. For each property listed on line 1a, report the number of days in the year each property was rented at fair rental value and the number of days of personal use. A day of personal use is any day, or part of a day, that the unit was used by: I have no idea how this will work for Schedule C. |
How much time would I have to spend trading to turn a profit? | Making a profit in trading is not a function of time, it's a function of information, speed, and consistency. Regardless of how much time you spend learning about trading, there is no guarantee that you will ever become profitable because you will always be competing against a counter-party who is either better- or more poorly-informed than you are. Since trading is a zero-sum game, someone is always a winner and someone else is always a loser. So you need to be either better informed than your counter-party, or you need to be as well informed as them but beat them to the punch. You also need to be able to be consistent, or else eventually you will get wiped out when the unexpected happens or you make a mistake. This is why resources such as full-time professional analysts, high-speed trading terminals/platforms, and sophisticated algorithms can provide significant advantages. Personally, I think that people with talent and those kinds of resources would take all my lunch money, so I don't trade and stick to passive investing. One funny story, I once knew a trader who was in the money on a particular trade and went out to have a drink to celebrate. The next day, she remembered that she had forgotten to exercise the options. Luckily, they had expired while in the money, and by rule had been exercised automatically as a result. |
What options do I have at 26 years old, with 1.2 million USD? | Former financial analyst here, happy to help you. First off, you are right to not be entirely trusting of advisors and attorneys. They are usually trustworthy, but not always. And when you are new to this, the untrustworthy ones have a habit of reaching you first - you're their target market. I'll give you a little breakdown of how to plan, and a starting investment. First, figure out your future expenses. A LOT of that money may go to medical bills or associated care - don't forget the costs of modifications and customizations to items so you can have a better quality of life. Cars can be retrofit to assist you with a wheelchair, you can build a chair lift into a staircase, things like that which will be important for mobility - all depending on the lingering medical conditions. Mobility and independence will be critically important for you. Your past expenses are the best predictor of future expenses, so filter out the one-time legal and medical costs and use those to predict. Second, for investing there is a simple route to get into the stock market, and hopefully you will hear it a lot: Exchange Traded Funds (ETFs). You'll hear "The S&P 500 increased by 80 points today..." on the news; the S&P is a combination of 500 different stocks and is used to gauge the market overall. You can buy an exchange traded fund as a stock, and it's an investment in all those components. There's an ETF for almost anything, but the most popular ones are for those big indexes. I would suggest putting a few hundred thousand into an S&P 500 indexed ETF (do it at maybe $10,000 per month, so you spread the money out and ensure you don't buy at a market peak), and then let it sit there for many years. You can buy stocks through online brokerages like Scottrade or ETrade, and they make it fairly easy - they even have local offices that you can visit for help. Stocks are the easiest way to invest. Once you've done this, you can also open a IRA (a type of retirement account with special tax benefits) and contribute several thousand dollars to it per year. I'll be happy to give more advice if/when you need it, but there are a number of good books for beginning investors that can explain it better than I. I would suggest that you avoid real estate, especially if you expect to move overseas, as it is significantly more complicated and has maintenance costs and taxes. |
When are investments taxed? | An investment is sold when you sell that particular stock or fund. It doesn't wait until you withdraw cash from the brokerage account. Whether an investment is subject to long term or short term taxes depends on how long you held that particular stock. Sorry, you can't get around the higher short term tax by leaving the money in a brokerage account or re-investing in something else. If you are invested in a mutual fund, whether it's long or short term depends on when you buy and sell the fund. The fact that the fund managers are buying and selling behind your back doesn't affect this. (I don't know what taxes they have to pay, maybe you really are paying for it in the form of management fees or lower returns, but you don't explicitly pay the tax on these "inner" transactions.) Your broker should send you a tax statement every year giving the numbers that you need to fill in to the various boxes of your income tax form. You don't have to figure it out. Of course it helps to know the rules. If you've held a stock for 11 1/2 months and are planning to sell, you might want to consider waiting a couple of weeks so it becomes a long term capital gain rather than short term and thus subject to lower tax. |
How can I remove the movement of the stock market as a whole from the movement in price of an individual share? | As others have pointed out, the value of Apple's stock and the NASDAQ are most likely highly correlated for a number of reasons, not least among them the fact that Apple is part of the NASDAQ. However, because numerous factors affect the entire market, or at least a significant subset of it, it makes sense to develop a strategy to remove all of these factors without resorting to use of an index. Using an index to remove the effect of these factors might be a good idea, but you run the risk of potentially introducing other factors that affect the index, but not Apple. I don't know what those would be, but it's a valid theoretical concern. In your question, you said you wanted to subtract them from each other, and only see an Apple curve moving around a horizontal line. The basic strategy I plan to use is similar but even simpler. Instead of graphing Apple's stock price, we can plot the difference between its stock price on business day t and business day t-1, which gives us this graph, which is essentially what you're looking for: While this is only the preliminaries, it should give you a basic idea of one procedure that's used extensively to do just what you're asking. I don't know of a website that will automatically give you such a metric, but you could download the price data and use Excel, Stata, etc. to analyze this. The reasoning behind this methodology builds heavily on time series econometrics, which for the sake of simplicity I won't go into in great detail, but I'll provide a brief explanation to satisfy the curious. In simple econometrics, most time series are approximated by a mathematical process comprised of several components: In the simplest case, the equations for a time series containing one or more of the above components are of the form that taking the first difference (the procedure I used above) will leave only the random component. However, if you want to pursue this rigorously, you would first perform a set of tests to determine if these components exist and if differencing is the best procedure to remove those that are present. Once you've reduced the series to its random component, you can use that component to examine how the process underlying the stock price has changed over the years. In my example, I highlighted Steve Jobs' death on the chart because it's one factor that may have led to the increased standard deviation/volatility of Apple's stock price. Although charts are somewhat subjective, it appears that the volatility was already increasing before his death, which could reflect other factors or the increasing expectation that he wouldn't be running the company in the near future, for whatever reason. My discussion of time series decomposition and the definitions of various components relies heavily on Walter Ender's text Applied Econometric Time Series. If you're interested, simple mathematical representations and a few relevant graphs are found on pages 1-3. Another related procedure would be to take the logarithm of the quotient of the current day's price and the previous day's price. In Apple's case, doing so yields this graph: This reduces the overall magnitude of the values and allows you to see potential outliers more clearly. This produces a similar effect to the difference taken above because the log of a quotient is the same as the difference of the logs The significant drop depicted during the year 2000 occurred between September 28th and September 29th, where the stock price dropped from 26.36 to 12.69. Apart from the general environment of the dot-com bubble bursting, I'm not sure why this occurred. Another excellent resource for time series econometrics is James Hamilton's book, Time Series Analysis. It's considered a classic in the field of econometrics, although similar to Enders' book, it's fairly advanced for most investors. I used Stata to generate the graphs above with data from Yahoo! Finance: There are a couple of nuances in this code related to how I defined the time series and the presence of weekends, but they don't affect the overall concept. For a robust analysis, I would make a few quick tweaks that would make the graphs less appealing without more work, but would allow for more accurate econometrics. |
Are ACH transfers between individuals possible? | Yes, many banks offer such a service. Often such payments can be made through their "bill pay" interface. You log in to your account on the bank's website, enter the recipient's routing and account numbers, and off you go. You could ask your bank whether they offer this. If not, you could change banks to one that does. |
Why can Robin Hood offer trading without commissions? | They mostly make money off of the spread between your order and the spread of the buy and sell currently in the market. As others have previously explained, their buy/sell spreads are a little lacklustre. |
what is the best way of investment which gives returns forever? | What is the best way that I can invest money so that I can always get returns? If you want something that doesn't require any work on your end, consider having a fee-only financial planner make a plan so that your investments can be automated to generate a cash flow for you or get an annuity as the other classic choices here as most other choices will require some time commitment in one form or other. Note that for stock investments there could be rare instances like what happened for a week in September in 2001 where the markets were closed for 5 days straight that can be the hiccup in having stocks. Bonds can carry a risk of default where there have been municipalities that defaulted on debt as well as federal governments like Russia in the 1990s. Real estate may be subject to natural disasters or other market forces that may prevent there always being a monthly payment coming as if you own a rental property then what happens if there aren't tenants because there was an evacuation of the area? There may be some insurance products to cover some of these cases though what if there are exceptionally high claims all at once that may have an insurance company go under? Would it be to set up an FD in a bank, to buy land, to buy a rental house, to buy a field, or maybe to purchase gold? What investment of your own time do you plan on making here? Both in terms of understanding what your long-term strategy is and then the maintenance of the plan. If you put the money in the bank, are you expecting that the interest rate will always be high enough to give you sufficient cash to live as well as having no financial crisis with the bank or currency you are using? Are there any better investments? You may want to reconsider what assumptions you want to make and what risks you want to accept as there isn't likely to be a single solution here that would be perfect. |
Why I cannot find a “Pure Cash” option in 401k investments? | Holding pure cash is a problem for 401K companies because they would then have follow banking rules because they would be holding your cash on their balance sheets. They don't want to be in that business. Instead, they should offer at least one option as a cash equivalent - a money market fund. This way the money is held by the fund, not by 401K administrator. Money Market funds invest in ultra-short term paper, such as overnight loans between banks and other debt instruments that mature in a matter of days. So it is all extremely liquid, as close to "Money" as you can get without actually being money. It is extremely rare for a money market fund to lose value, or "break the buck." During the crisis of 2008, only one or two funds broke the buck, and it didn't last long. They had gotten greedy and their short term investments were a little more aggressive as they were trying to get extra returns. In short, your money is safe in a money market fund, and your 401K plan should offer one as the "cash" option, or at least it should offer a short-term bond fund. If you feel strongly that your money should be in actual cash, you can always stop contributing to the 401K and put the money in the bank. This is not a good idea though. Unless you're close to retirement, you'll be much better off investing in a well diversified portfolio, even through the ups and downs of the market. |
Simple and safe way to manage a lot of cash | Overall I think your idea is sound. The key here is to choose that 401k provider wisely and have a specific asset allocation plan (like Joe mentioned) Summary of this approach: Pluses: Minuses: I'd consider Vanguard for simple, no frills investing. If you're looking to get into choosing stocks, check out the Motley Fool. |
What are the scenarios if mining company around 4c decides to halt stock trading due to capital raising? | It appears that the company in question is raising money to invest in expanding its operations (specifically lithium production but that is off topic for here). The stock price was rising on the back of (perceived) increases in demand for the company's products but in order to fulfil demand they need to either invest in higher production or increase prices. They chose to increase production by investing. To invest they needed to raise capital and so are going through the motions to do that. The key question as to what will happen with their stock price after this is broken down into two parts: short term and long term: In the short term the price is driven by the expectation of future profits (see below) and the behavioural expectations from an increase in interest in the stock caused by the fact that it is in the news. People who had never heard of the stock or thought of investing in the company have suddenly discovered it and been told that it is doing well and so "want a piece of it". This will exacerbate the effect of the news (broadly positive or negative) and will drive the price in the short run. The effect of extra leverage (assuming that they raise capital by writing bonds) also immediately increases the total value of the company so will increase the price somewhat. The short term price changes usually pare back after a few months as the shine goes off and people take profits. For investing in the long run you need to consider how the increase in capital will be used and how demand and supply will change. Since the company is using the money to invest in factors of production (i.e. making more product) it is the return on capital (or investment) employed (ROCE) that will inform the fundamentals underlying the stock price. The higher the ROCE, the more valuable the capital raised is in the future and the more profits and the company as a whole will grow. A questing to ask yourself is whether they can employ the extra capital at the same ROCE as they currently produce. It is possible that by investing in new, more productive equipment they can raise their ROCE but also possible that, because the lithium mines (or whatever) can only get so big and can only get so much access to the seams extra capital will not be as productive as existing capital so ROCE will fall for the new capital. |
How can it be possible that only ~10% of options expire worthless, and only ~10% are exercised? | You gave your own answer - the 80% is positions, not contracts. Most actors on the option market have no interest in the underlying asset. They want "just" exposure to its price movement. It makes more sense to close your position than to be handed over bushels of wheat or whatever. |
Do US mutual funds and ETFs pay taxes on dividends? | Mutual funds don't pay taxes themselves, they distribute any dividends or capital gains to the shareholders. Thus, if you hold a mutual fund in a tax-advantaged account like a 401k or IRA then the distribution isn't a taxable event while in a regular taxable account you would have to pay taxes on the distributions. From Forbes: There can be foreign companies on US stock exchanges that would still work the same way. Unilever for example is an Anglo-Dutch multinational listed on the NYSE as "UN." |
Is it possible to make money by getting a mortgage? | I think this is possible under very special conditions. The important part of the description here is probably retired and rich. The answers so far apply to people with "normal" incomes - both in the sense of "not rich" and in the sense of "earned income." If you sit at the top tax bracket and get most of your income through things like dividends, then you might be able to win multiple ways with the strategy described. First you get the tax deduction on the mortgage interest, which everyone has properly noted is not by itself a winning game - You spend more than you save. BUT... There are other factors, especially for the rich and those whose income is mostly passive: I'm not motivated enough on the hypothetical situation to come up with a detailed example, but I think it's possible that this could work out. In any case, the current answers using "normal sized" incomes and middle tax brackets don't necessarily give the insight that you might hope if the tax payer really is unusually wealthy and retired. |
How long can I convert 401(k) to Roth 401(k)? | the deadline for roth conversions is december 31st. more precisely, roth conversions are considered to have happened in the tax year the distribution was taken. this creates a kind of loop hole for people who do an ira rollover (not a trustee-to-trustee transfer). technically, you can take money out of your traditional ira on december 31st and hold it for 60 days before deciding to roll it over into either another traditional ira or a roth ira. if you decide to put it in another traditional account, it is not a taxable event. but if you decide to put it in a roth account, the "conversion" is considered to have happened in december. unfortunately non-trustee rollovers are tricky. for one, the source trustee will probably take withholding that you will have to make up with non-ira funds. and rollovers are limitted to a certain number per year. also, if you miss the 60-day deadline, you will have to pay an early-withdrawal penalty (with some exceptions). if you really want to push the envelope, you could try to do this with a 60-day-rule extension, but i wouldn't try it. source: https://www.irs.gov/publications/p590a/ch01.html oddly, recharacterizations (basically reverse roth conversions) have a deadline of october 15th of the year after the original roth conversion it is reversing. so, you could do the conversion in december, then you have up to 10 months to change your mind and "undo" the conversion with a "recharacterization". again, this is tricky business. at the very least, you should be aware that the tax calculations for recharacterization are different if you convert the funds into a new empty roth account vs an existing roth account with a previous balance. honestly, if you want to get into the recharacterization business, you can probably save more on taxes by converting in january before 20-month stock market climb rather than simply converting in the year your tax brackets are low. that is the typical recharacterization strategy. source: https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs-Recharacterization-of-Roth-Rollovers-and-Conversions |
Is there any reason to choose my bank's index fund over Vanguard? | Extortionate expense ratio aside, comparing the fund to the vanguard balanced fund (with an expense ratio of 0.19%) shows that your bank's fund has underperformed in literally every shown time period. Mind you, the vanguard fund is all US stocks and bonds which have done very well whereas the CIBC fund is mostly Canadian. Looking at the CIBC top 10 holdings does seem to suggest that it's (poorly) actively managed instead of being an index tracker for what that's worth. Maybe your bank offers cheaper transaction costs when buying their own funds but even then the discount would have to be pretty big to make up for the underperformance. Basically, go Vanguard here. |
Is the Yale/Swenson Asset Allocation Too Conservative for a 20 Something? | I don't think the advice to take lots more risk when young makes so much sense. The additional returns from loading up on stocks are overblown; and the rocky road from owning 75-100% stocks will almost certainly mess you up and make you lose money. Everyone thinks they're different, but none of us are. One big advantage of stocks over bonds is tax efficiency only if you buy index funds and don't ever sell them. But this does not matter in a retirement account, and outside a retirement account you can use tax-exempt bonds. Stocks have higher returns in theory but to have a reasonable guarantee of higher returns from them, you need around a 30-year horizon. That is a long, long time. Psychologically, a 60/40 stocks/bonds portfolio, or something with similar risk mixing in a few more alternative assets like Swenson's, is SO MUCH better. With 100% stocks you can spend 10 or 15 years saving money and your investment returns may get you nowhere. Think what that does to your motivation to save. (And how much you save is way more important than what you invest in.) The same doesn't happen with a balanced portfolio. With a balanced portfolio you get reasonably steady progress. You can still have a down year, but you're a lot less likely to have a down decade or even a down few years. You save steadily and your balance goes up fairly steadily. The way humans really work, this is so important. For the same kind of reason, I think it's great to buy one fund that has both stocks and bonds in there. This forces you to view the thing as a whole instead of wrongly looking at the individual asset class "buckets." And it also means rebalancing will happen automatically, without having to remember to do it, which you won't. Or if you remember you won't do it when you should, because stocks are doing so well, or some other rationalization. Speaking of rebalancing, that's where a lot of the steady, predictable returns come from if you have a nice balanced portfolio. You can make money over time even if both asset classes end up going nowhere, as long as they bounce around somewhat independently, so you'll buy low and sell high when you rebalance. To me the ideal is an all-in-one fund that aims for about 60/40 stocks/bonds level of risk, somewhat more diversified than stocks/bonds is great (international stock, commodities, high yield, REIT, etc.). You can just buy that at age 20 and keep it until you retire. In beautiful ideal-world economic theory, buy 90% stocks when young. Real world with human brain involved: I love balanced funds. The steady gains are such a mental win. The "target retirement" funds are not a bad option, but if you buy the matching year for your age, I personally wish they had less in stocks. If you want to read more on the "equity premium" (how much more you make from owning stocks) here are a couple of posts on it from a blog I like: Update: I wrote this up more comprehensively on my blog, |
Lump sum annuity distribution — do I owe estate tax? | If you are the beneficiary of an annuity, you might receive a single-sum distribution when the annuity owner dies. The amount of this death benefit might be the current cash value of the annuity or some other amount based upon contract riders that the owner purchased. The tax on death benefits depends on a number of factors. Death benefits are taxed as normal income. Unlike other investments, the named beneficiary of a non-qualified annuity does not get a step-up in tax basis to the date of death. However, that doesn't mean the beneficiary will have to pay taxes on the full amount. Because the purchaser of the annuity made the investment with after-tax dollars, only the amount attributable to investment income is taxed, but it will be taxed as ordinary income and not enjoy any special capital gains treatment. When there is a death benefit that exceeds the value of the account, that additional amount is also taxed as ordinary income. Taxes on annuities depend on several circumstances: For more information on distribution of inherited annuities and taxes - go to Annuities HQ-- http://www.annuitieshq.com/articles/distribution-options-inherited-annuity/ they go into details that could help you even more. One thing that Annuities HQ points out is if you take the lump sum payout, you may be pushed into a higher tax bracket. Along with doing research I would also contact a financial advisor! |
Financing with two mortgages: a thing of the past? | You can't get a HELOC, to the best of my knowledge, without actually "owning" the house. If you get an 80% mortgage (of the purchase price - not the appraised value, btw), you still need 20% as a down payment. Once you own the home, you can apply for a HELOC ... presuming you have enough equity (eg, the purchase price is $40k less than the appraised value). We haven't looked at the norm, at least where I live, of 5% down for a traditional mortgage and 3.5% for an FHA (which your question touches on). If you can do 5% down, on a $1,000,000 mortgage you need $50,000 on the day of closing. If the home is worth (ie appraises for) $1,250,000, you're getting 20% of the house "for free". Presuming the bank(s) will go for it, you could likely then open a HELOC for as much as $250,000 (again, depending on individual lender rules). tl;dr: If you don't have the money ready on the day of signing (via seasoning, if it is a loan/gift, or because you have been saving), you cannot afford the house. To clarify from comments with the OP, I am in no way speaking to the buyer's ability to afford the monthly payments - this is only about affording the initial costs associated with the home buying process (down payment, closing, whatever else the bank(s) require, etc). |
Transfering money from NRE to saving account is taxable or not | Meagrely transferring money within your own accounts doesn't result in any tax, however legally once you are an NRI you cannot operate a savings account at all as per Reserve Bank Guidelines found here One option is for you to transfer to a joint account held by a close relative of yours with you and this would be tax free in India. |
Is there a register that shows the companies with notifiable interest in a stock? | There are multiple places where you can see this. Company house website On any financial news website, if you have access e.g. TESCO on FT On any 3rd party website which supply information on companies e.g. TESCO on Companycheck An observation though, FT lists down more shareholders for me than Companycheck as I pay for FT. |
What is the best way to get cash from my retirement accounts for a home down payment? | You can withdraw the contributions you made to Roth IRA tax free. Any withdrawals from Roth IRA count first towards the contributions, then conversions, and only then towards the gains which are taxable. You can also withdraw up to $10000 of the taxable portion penalty free (from either the Traditional IRA or the Roth IRA, or the combination of both) if it is applied towards the purchase of your first primary residence (i.e.: you don't own a place yet, and you're buying your first home, which will become your primary residence). That said, however, I cannot see how you can buy a $250K house. You didn't say anything about your income, but just the cash needed for the down-payment will essentially leave you naked and broke. Consider what happens if you have an emergency, out of a job for a couple of months, or something else of that kind. It is generally advised to have enough cash liquid savings to keep you afloat for at least half a year (including mortgage payments, necessities and whatever expenses you need to spend to get back on track - job searching, medical, moving, etc). It doesn't look like you're anywhere near that. Remember, many bankruptcies are happening because of the cash-flow problem, not the actual ability to repay debts on the long run. |
Buying Fixed Deposit in India from Europe | About the inflation or low interest rates in both the countries is out of the equation especially since rupee is always a low currency compared to Euro. You cannot make profit in Euros using rupee or vice-versa. It all depends on where you want to use the money, in India or Europe? If you want use the money from fixed deposit in Europe, then buy fixed deposit in euros from Europe. If you want to use the money in India, then convert the euros and buy FD in India. |
Should I participate in a 401k if there is no company match? | With a match, the 401(k) becomes the priority, up to that match, often ahead of other high interest debt. Without the match, the analysis is more about the cost within the 401(k). The 401(k) is a tax deferred account (let's not go on a tangent to Roth 401(k)) so ideally, you'd be skimming off money at 25% and saving it till you retire, so some of it is taxed at 0, 10, 15%. If the fees in the 401(k) are say 1.5% between the underlying funds and management fee, it doesn't take long to wipe out the potential 10 or 15% you are trying to gain. Yes, there's a risk that cap gain rates go away, but with today's tax law, the long term rate is 15%. So that money put into a long term low cost ETF will have reinvested dividends taxed at 15% and upon sale, a 15% rate on the gains. There are great index ETFs with sub - .1% annual cost. My simple answer is - If the total cost in that 401(k) is .5% or higher, I'd pass. Save the money in an outside account, using IRAs as best you can. (The exact situation needs to be looked at very carefully. In personal finance, there's a lot of 'grey'. For example, a frequent job changer can view the 401(k) as a way of saving pretax, knowing the fee will only last 2 years, and will end with a transfer to the IRA) |
Should I trade in a car I own to lower my payments on a new lease? | You need to look at the numbers when you're ready to transact. What your crossover is worth now, what the truck will lease for then, what financing deals may or may not be available will all change. I'm not sure why you've already decided you will lease the truck, perhaps you're planning to take advantage of some kind of business write off. I would personally never put anything down on a lease, though I have argued with people on here about that particular decision. The reality is you need to look at the numbers. Some banks will adjust the interest you pay on your lease to account for your down payment, some don't. Consider a $9,000 lease, $250 per month for 36 months. Consider you pay $1,000 up front as a down payment. Example 1: $1,000 lowers the amount due on the lease to $8,000 lowering your monthly payment to $222.22 from $250, the downpayment has accomplished nothing. Over the 36 months you will have still paid the same $9,000. Example 2: $1,000 up front changes the amount owed and other fees generally applicable to a lease (gap insurance etc) and your payment drops to $215, your total over the lease is now $8,740 ($1,000 down and $7,740 in payments). You need to look at the numbers. In general if you know you will be purchasing the truck at the end of the lease it's more financially advantageous to just purchase it from the start. |
Loan holder wants a check from the insurance company that I already cashed and used to repair my car | What would happen if you was to cash a check, didn’t realize it was to you and your finance company, take it to a local business that has a money center, they cash the check without even having you sign let alone having the finance companies endorsement on it . The money cleared my account like a couple months ago and it was just brought up now .. ? The reason why the check was made out the owner and the lender is to make sure the repairs were done on the car. The lender wants to make sure that their investment is protected. For example: you get a six year loan on a new car. In the second year you get hit by another driver. The damage estimate is $1,000, and you decide it doesn't look that bad, so you decide to skip the repair and spend the money on paying off debts. What you don't know is that if they had done the repair they would have found hidden damage and the repair would have cost $3,000 and would have been covered by the other persons insurance. Jump ahead 2 years, the rust from the skipped repair causes other issues. Now it will cost $5,000 to fix. The insurance won't cover it, and now a car with an outstanding loan balance of $4,000 and a value of $10,000 if the damage didn't exist needs $5,000 to fix. The lender wants the repairs done. They would have not signed the check before seeing the proof the repairs were done to their satisfaction. But because the check was cashed without their involvement they will be looking for a detailed receipt showing that all the work was done. They may require that the repair be done at a certified repair shop with manufacturer parts. If you don't have a detailed bill ask the repair shop for a copy of the original one. |
Does a stock holder profit from a reverse-stock split? | These are not real gains. Wherever you're looking this up, the prices are not adjusted for corporate actions. In a reverse stock split the price of a single share multiplies by five, but as a shareholder you hold only one share after for every five that you did before. |
How should I invest my money as a young graduate in Europe? | Using a simple investment calculator to get a sense of scale here, to have 70k total, including the 500 a month invested, after ten years you just need returns of 2%. To earn 70k on top of the money invested you would need returns over 20%. To do that in five years you would need over 50% annual return. That is quite a big difference. Annualized returns of 20% would require high risk and a very large amount of time invested, skill and luck. 2% returns can be nearly guaranteed without much effort. I would encourage you to think about your money more holistically. If you get very unlucky with investments and don't make any money will you not go on the vacations even if your income allows? That doesn't make a lot of sense. As always, spend all your money with the current and future in mind. Investment return Euros are no different from any other Euros. At that point, the advice is the same for all investors try to get as much return as possible for the risk you are comfortable with. You seem to have a high tolerance for risk. Generally, for investors with a high risk tolerance a broadly diversified portfolio of stocks (with maybe a small amount of bonds, other investments) will give the most return over the long term for the risk taken. After that generally the next most useful way to boost your returns is to try to avoid taxes which is why we talk about 401(k)s so much around here. Each European country has different tax law, but please ask questions here about your own country as well as you mention money.se could use more ex-US questions. |
Where do I invest my Roth IRA besides stock market and mutual funds? | You're technically 'allowed' to do other investments with your Roth, but you get taken to the cleaners by the financial 'services' community who wants to take a slice. Non-securities investments from a Roth typically require a 'custodian' or other intermediary to handle your investment, e.g. buying silver coins and paying someone else to hold them. Buy these with cash and hold them yourself, assuming you trust yourself more than some stranger. |
Some stock's prices don't fluctuate widely - Is it an advantages? | I don't think you are reading the stock chart right. ORCL has a beta of 1.12 which means it has more volatility than the market as a whole. See image below for a fairly wild stock chart for a year. I would not truly consider ESPP participation investing, unless you intend to buy and hold the stock. If you intend to sell the stock soon after you are able, it is more speculation. ESPP's are okay based upon the terms. If the stock was a constant price, and you could sell right away, then an ESPP plan would be easy money. Often, employees are often given a 15% discount to purchase the stock. If you can sell it before any price drop, then you are guaranteed to make 15% on the money invested minus any commissions. Some employers make ESPP participants hold the stock for a year. This makes such a plan less of a value. The reasons are the stock can drop in price during that time, you could need the money, or (in the best case) your money is tied up longer making the ROI less. The reasons people invest in stock are varied and is far to much to discuss in a single post. Some of your colleagues are using the ESPP solely to earn the discount in their money. |
What argument(s) support the claim that long-term housing prices trend upward? | Several people have mentioned the obvious: inflation. But let's assume we are talking about real (inflation adjusted) prices. One argument is that populations keep rising while the land does not change. So the price of homes in desirable places gets pushed up and people move to second-best locations, pushing those prices up, etc. Similar Malthusian argument holds for raw materials (steel, granite, fine wood, etc.). Another argument is that the economy has a long-term upward trajectory (that's the assumption). So each generation, as a whole, has more disposable real income than the previous. As disposable income increases, people tend to put more and more money into their homes, pushing prices up. True for all goods, of course, but it may be more true for real estate than for other types of goods. |
Why is the stock market price for a share always higher than the earnings per share? | Earnings per share are not directly correlated to share price. NV Energy, the company you cited as an example, is an electric utility. The growth patterns and characteristics of utilities are well-defined, so generally speaking the value of the stock is driven by the quality of the company's cash flow. A utility with a good history of dividend increases, a dividend that is appropriate given the company's fiscal condition, (ie. A dividend that is not more than 80% of earnings) and a good outlook will be priced competitively. For other types of companies cash flow or even profits do not matter -- the prospects of future earnings matter. If a growth stock (say Netflix as an example) misses its growth projections for a quarter, the stock value will be punished. |
Why do grocery stores in the U.S. offer cash back so eagerly? | The reason is, stores want customers to use cash. By giving us cash, we are more likely to use cash next time. I feel a little guilty when using my bank card at the store because I know I'm giving about 2-3% of the sale to the bank. Unless I don't really like where I'm shopping (ie Walmart), I try to use cash if I have it. I doubt these large stores pay extra for supplying the cash portion. They just need to keep the cash onhand. In other countries, do they not mind paying banks a percentage of each transaction? That's a huge loss for retailers. (I also heard tipping isn't popular in some countries, maybe the lack of regard for vendors is related somehow??) Oh, plus, it's a value added service. A customer is more likely to return to a store if they provide this service. |
What are the advantages of a Swiss bank account? | Here are some reasons why it is advantageous to hold a portion of your savings in other countries: However, it should be noted that there are some drawbacks to holding funds in foreign banks: Don't worry; I haven't forgotten about the elephant in the room. What about tax evasion and money laundering? In general, simply transferring funds to a foreign jurisdiction will do nothing to help you evade taxes or hide evidence of a crime. Pretty much any method you can think of to transfer money is easily traceable, and any method that is difficult to trace is either illegal or heavily-regulated, with stiff penalties if you get caught. There are a few jurisdictions that have very strict banking privacy laws (the Philippines, for example). If you can somehow get the money into a bank account in one of these countries, you might be OK... at least, until that country's government decides (or is pressured) to change its banking privacy laws. But, what would you actually do with that money? Unless you want to go live in that country, you're going to have to transfer the funds out to spend them, and now you're right back on the radar — except now it's even worse, because the fact that the funds come from a suspicious jurisdiction will automatically cause your transfer to get flagged for investigation! This is where money laundering comes into play. There are lots of ways to go about this (exceptionally illegal) activity, many of which do not involve banks at all (at least, not directly). How money laundering works is outside the scope of this question, but in case you are curious, here are a couple of articles about the "dark side" of finance: In short, if you want to break the law, opening a foreign bank account isn't going to help much. In fact, the real crime is that offshore banking has such a criminal reputation in the first place! That said, it is possible to create legal distance between yourself and your money by using a corporate structure, and there are legitimate reasons why you might want to do this. Depending on which jurisdiction(s) you are a tax resident of, you can use this method to: Exactly how to do this is outside the scope of this question, but it's worth thinking about, especially if you have an interest in geopolitically diversifying your financial assets. If you're interested in learning more, I came across a pretty comprehensive article about Offshore Basics that covers how and why to set up offshore legal structures. (and yes, that makes now 4 links from the same site in one post! I promise it's just a coincidence; see disclaimer below) I am a US citizen with bank accounts in several countries (but not Switzerland; there are far better options out there right now). I have no affiliation with the website linked in this answer; while I was doing research for this answer, I found some really good supporting content, and it all just happened to be from the same source. |
As a total beginner, how do I begin to understand finance & stocks? | I think you've got basics, but you may have the order / emphasis a bit wrong. I've changed the order of the things you've learned in to what I think is the most important to understand: Owning a stock is like owning a tiny chunk of the business Owning stock is owning a tiny chunk of the business, it's not just "like" it. The "tiny chunks" are called shares, because that is literally what they are, a share of the business. Sometimes shares are also called stocks. The words stock and share are mostly interchangeable, but a single stock normally means your holding of many shares in a business, so if you have 100 shares in 1 company, that's a stock in that company, if you then buy 100 shares in another company, you now own 2 stocks. An investor seeks to buy stocks at a low price, and sell when the price is high. Not necessarily. An investor will buy shares in a company that they believe will make them a profit. In general, a company will make a profit and distribute some or all of it to shareholders in the form of dividends. They will also keep back a portion of the profit to invest in growing the company. If the company does grow, it will grow in value and your shares will get more valuable. Price (of a stock) is affected by supply/demand, volume, and possibly company profits The price of a share that you see on a stock ticker is the price that people on the market have exchanged the share for recently, not the price you or I can buy a share for, although usually if people on the market are buying and selling at that price, someone will buy or sell from you at a similar sort of price. In theory, the price will be the companies total value, if you were to own the whole thing (it's market capitalisation) divided by the total number of shares that exist in that company. The problem is that it's very difficult to work out the total value of a company. You can start by counting the different things that it owns (including things like intellectual property and the knowledge and experience of people who work there), subtract all the money it owes in loans etc., and then make an allowance for how much profit you expect the company to make in the future. The problem is that these numbers are all going to be estimates, and different peoples estimates will disagree. Some people don't bother to estimate at all. The market makers will just follow supply and demand. They will hold a few shares in each of many companies that they are interested in. They will advertise a lower price that they are willing to buy at and a higher price that they will sell at all the time. When they hold a lot of a share, they will price it lower so that people buy it from them. When they start to run out, they will price it higher. You will never need to spend more than the market makers price to buy a share, or get less than the market makers price when you come to sell it (unless you want to buy or sell more shares than they are willing to). This is why stock price depends on supply and demand. The other category of people who don't care about the companies they are trading are the high speed traders. They just look at information like the past price, the volume (total amount of shares being exchanged on the market) and many other statistics both from the market and elsewhere and look for patterns. You cannot compete with these people - they do things like physically locate their servers nearer to the stock exchanges buildings to get a few milliseconds time advantage over their competitors to buy shares quicker than them. |
What are the downsides that prevent more people from working in high-income countries, and then retiring in low-income (and cost of living) ones? | I know folks who considered retiring to another country. Their conclusion was that while base cost of living was lower, the cost of the things that they enjoy doing -- not to mention the cost of spending time with friends they didn't want to give up -- would be sufficiently higher to erase most of the advantages. Those of us who grew up in or close to cities feel much the same way about moving out to less-populated and less-expensive parts of our own country. Basically, when cost of living is high it tends to be because there are more people who want to live there and are competing for resources (and driving prices up). Low cost of living is generally tied to less-desired locations, for the same reasons. IF you can find a location that appeals to you, and if you can get the resources there which your preferred lifestyle requires, this may make sense. For a while there were a number of professional writers moving from the US to Ireland, in part because the Irish tax structure heavily favored writers and other creative artists. (Katherine Kurtz spent several years living in a renovated Irish castle.) I'm not sure how many have stayed there after the novelty wore off. |
Can I make my savings keep in check with or beat inflation over a long time period via index funds? | For your base question, yes. (Barring some major collapse-of-civilization event, but in that case you're screwed anyway :-)) On the individual points: 1) Depends on whether you choose to invest in index-type funds (where profit is mainly expected from price appreciation), or more value-based investing. But either or a mix of the two (my own choice) should show returns above inflation, over the long term. 2) Yes, in the US anyway. You can invest a few hundred dollars at a time, and (with good companies like Vanguard & T. Rowe Price) there are no transaction fees, either for investing or for redeeming. 3) Long-term, it's crash-proof IF you have the self-discipline not to panic-sell at market lows. In my case, my total fund valuation dropped around 40% in '08. I didn't sell anything (and in fact tried to cut spending and invest more), and now I have nearly double what I had before the crash. Bottom line is that it has worked for me. After ~30 years of investing this way without being fanatic about it, I have enough that I could live moderately without working for the rest of my life. Not - and this is where I part company with MMM and most of the FIRE community - that I'd ever want to actually retire. But my modest financial independence gives me the freedom to work at things I like, rather than because I'm worrying about paying bills. |
Someone asks you to co-sign a loan. How to reject & say “no” nicely or politely? | This is a real difficult situation and I think the correct way to proceed here is to be honest and straightforward. |
Is it legal to receive/send “gifts” of Non-Trivial Amounts to a “friend”? | Am I right to say that no tax needs to be given for the annual ~$130k USD, since they are considered as annual gift tax exclusion? Not only that you're wrong, but it also looks like a tax fraud, not just mere avoidance. You'll have hard time proving to any judge or jury that the gifts are "in good faith". By the way, $5 a month is below minimum wage. |
I've tracked my spending and have created a budget, now what do I do with it? | I think the answers you're going to receive are all going to be a bit subjective. Looking at it from a high-level point of view, having this budget nailed down lets you analyze: Now you've got your budget, stick to it! This is really the most important part. You've done your homework, now make sure you don't exceed it without a good reason. If you're under budget in any given month, have a plan on what to do with the excess funds. If you go over budget on a certain area, you can react accordingly. I, personally, recommend hiring a financial planner. Ours has been a huge help with looking further down the line than we had been originally. If you show up to your first meeting with an FP and have this budgetary breakdown ready to go, you'll probably get a high-five. Well done, you! |
For net worth, should I value physical property at my cost to replace it, or the amount I could get for selling it? | You are not asking for insurance purposes. So I'll go with this - I have two asset numbers I track. All investments, retirement accounts, etc, the kind that are valued at day's end by the market, etc. From that number I subtract the mortgage. This produces the number that I can say is my net worth with a paid in full house. The second number simply adds back the house's value, give or take. Unless I owned art that was valued in the six figures, it seems pointless to me to add it up, except for insurance. If my wife and I died tomorrow, the kid can certainly auction our stuff off, but knowing that number holds no interest for us. When most people talk 'net worth', I don't see them adding these things up. Cars, maybe, but not even that. |
15 year mortgage vs 30 year paid off in 15 | Why won't anyone just answer the original question? The question was not about opportunity cost or flexibility or family expenses. There are no right answers to any of those things and they all depend on individual circumstances. I believe the answer to the question of whether paying off a 30-year mortgage in 15 years would cost the same amount as a 15-year mortgage of the same interest rate is yes but ONLY if you pay it off on the exact same schedule as your supposed 15-year. In reality, the answer is NO for two reasons: the amortization schedule; and the fact that the 30-year will always have a higher interest rate than the 15-year. The way mortgages are amortized, the interest is paid first, essentially. For most people the majority of the monthly payment is interest for the first half of the loan's life. This is good for most people because, in reality, most mortgages only last a couple years after which people refinance or move and for those first couple years the majority of one's housing costs (interest) are tax deductible. It is arguable whether perpetuating this for one's entire life is wise... but that's the reality of most mortgages. So, unless you pay off your 30-year on the exact same amortization schedule of your theoretical 15-year, you will pay more in interest. A common strategy people pursue is paying an extra monthly payment (or more) each year. By the time you get around to chipping away at your principal in that way, you will already have paid a lot more interest than you would have on a 15-year. And, really, if you can afford to substantially pay down principal in the first year or two of your mortgage, you probably should've borrowed less money to begin with. In theory, IF the rates were the same (they're not) and IF you paid the 30 off every month in the EXACT same way as you would've paid a 15 (you won't) you will pay the same amount in the end. You have to decide if the flexibility is worth more to you than the cost savings. For example: a 300k mortgage at 3.5% will have a monthly payment of ~$2150 for a 15-year and ~$1350 for a 30-year, both will start with ~$875/month of that being in interest (gradually declining with time). What I think most people undervalue is the freedom and peace of mind that comes with a paid off or nearly paid off home... and 15 years is a lot more tangible than 30, plus a lot cheaper over all. If you can afford a 15-year mortgage without putting too much stress on your budget, it is definitely the better option for financial security. And be careful of the index fund opportunity cost advice. On average it may be a good idea when you look at the very long run, historically, but a lot of people get less than average returns depending on when they buy and what the market does in the short run. There is no certainty around what returns you will get from the stock market, but if you have a 30-year mortgage there is a lot of certainty around what you will owe every month for the next 30-years. Different mixes of investments make sense for different people, and most people would be wise to get some exposure to the stock market for its returns and liquidity. However, if someone's goal is borrowing more money for their house in order to invest more money in the stock market for their retirement, they would actually be better served in achieving security and independence 15 years sooner. |
Start a Holding Company? | If you are trying to invest in closely held / private companies (things that don't trade on the stock market), you will run into a variety of regulatory problems. For various reasons, most private companies only raise funds with accredited investors. To be an accredited investor you basically have to have $1,000,000 in net worth - NOT including your primary residence, OR you have to make over $200,000 a year for the last two years and expect to keep making that much. This is a class distinction the Federal government created, you will see different but similar wealth and investment classes worldwide. So your best most organized opportunities are left out, unless you do qualify as an accredited investor. There are tons of other companies, things you will find locally, that will let you invest in their smaller time operations. (Think like a local yoga studio looking for $20,000 and willing to split the profits with you). But the problem here is lack of accountability, where partners skip town or just stop answering your calls, and the legal remedies cost you more than your claim. That being said there are people that provide capital to smaller publicly traded companies on the bulletin boards and pink sheets. They have opportunities do much better than the actual stock market investors in these companies, because you can negotiate contracts that let you cash out in their inevitable financing death spirals with very little risk to you. You can do these things as an individual or as a holding company, but the holding company will limit your liability to the amount your holding company invested, instead of your personal assets, in case your financing starts to incur liability with the company. |
How risky are penny stocks? | Penny stocks are only appealing to the brokers who sell the penny stocks and the companies selling "penny stock signals!". Generally penny stocks provide abysmal returns to the average investor (you or me). In "The Missing Risk Premium", Falkenstein does a quick overview on average returns to penny stock investors citing the following paper "Do Investors Overpay for Stocks with Lottery-Like Payoffs? An Examination of the Returns on OTC Stocks". Over the 2000 to 2009 time period, average investors lost nearly half their investment. A comparable investment in the S&P over this period would have been flat see here. There is a good table in the book/paper showing that the average annual return for stocks priced at either a penny or ten cents range from -10 percent (for medium volume) to -30% to -40% for low or high volume. A different paper, "Too Good to Ignore? A Primer on Listed Penny Stocks" that cites the one above finds that listed, as opposed to OTC "Pink Sheet" penny stocks", have better returns, but provide no premium for the additional risk and low liquidity. The best advice here is that there is no "quick win" in penny stocks. These act more like lottery tickets and are not appropriate for the average investor. Stear clear! |
What to do with a 50K inheritance [duplicate] | The basic optimization rule on distributing windfalls toward debt is to pay off the highest interest rate debt first putting any extra money into that debt while making minimum payments to the other creditors. If the 5k in "other debt" is credit card debt it is virtually certain to be the highest interest rate debt. Pay it off immediately. Don't wait for the next statement. Once you are paying on credit cards there is no grace period and the sooner you pay it the less interest you will accrue. Second, keep 10k for emergencies but pretend you don't have it. Keep your spending as close as possible to what it is now. Check the interest rate on the auto loan v student loans. If the auto loan is materially higher pay it off, then pay the remaining 20k toward the student loans. Added this comment about credit with a view towards the OP's future: Something to consider for the longer term is getting your credit situation set up so that should you want to buy a new car or a home a few years down the road you will be paying the lowest possible interest. You can jump start your credit by taking out one or two secured credit cards from one of the banks that will, in a few years, unsecure your account, return your deposit, and leave no trace you ever opened a secured account. That's the route I took with Citi and Wells Fargo. While over spending on credit cards can be tempting, they are, with a solid payment history, the single most important positive attribute on a credit report and impact FICO scores more than other type of credit or debt. So make an absolute practice of only using them for things you would buy anyway and always, always, pay each monthly bill in full. This one thing will make it far easier to find a good rental, buy a car on the best terms, or get a mortgage at good rates. And remember: Credit is not equal to debt. Maximize the former and minimize the latter. |
Investing in real estate when the stock market is high, investing in stocks when it's low? | The price of real estate reacts to both demand for property and the rate of inflation and rate of income growth. Mortgage rates generally move as treasury rates move. See this paragraph: As we mentioned, intermediate term bonds and long-term mortgages (more properly, Mortgage-Backed Securities, or MBS) compete for the same fixed-income investor dollar. Treasury issues are 100% guaranteed to be repaid, but mortgages are not; therefore mortgages carry more risk of default or early repayment, which could potentially disturb the return on the investment. Therefore, mortgage rates must be priced higher to compensate for that risk. But how much higher are mortgages priced? In a normal market, the average "spread" or markup above the 100% secured Treasury is about 170 basis points, or 1.7%. That markup -- the spread relationship -- widens and contracts with a range of market conditions, investor appetites and supply of available product -- as well as the presence of competing investment opportunities, like corporate bonds or domestic (or foreign) equity markets Source: What Moves Mortgage Rates? And when the stock market crashes, investors tend to run to bonds and treasuries, which causes prices to go up and treasury yields to drop. Theoretically, this would also cause mortgage rates to drop, although most mortgage rates have a base price below which they cannot fall. How easy is it to profit from recent stock market drops and at what frequency? Incredibly difficult. The issue with your strategy is that you cannot predict the bottom of the market (at least us mortals can't). Just take the month of August for example. Stocks fell something like 15%? After the first 5-10% drop, people felt that the bottom was there, so they rushed in, only to have the market fall even more. How will you know when to invest? Even if the market falls by 50%, and there's a huge buying opportunity, and you increase the mortgage on your house, odds are your rates will increase because of the equity you take out. What if the market stays low for a very long time? Will you be able to maintain mortgage payments? Japan's stock bubble popped in the early 90's, and they've had two lost decade's now. Furthermore, there are issues of liquidity. What if you need more capital? Can you just sell a property or can you buy now property to draw equity against? What if the market is moving too fast for you to take advantage of. Don't ignore transaction costs and taxes either. Overall, there are a lot of ways that your idea can go wrong, and not many ways it can go right. |
How will the fall of the UK Pound impact purchasing my first property? | There are two impacts: First, if the pound is dropping, then buying houses becomes cheaper for foreign investors, so they will tend to buy more houses as investments, which will drive house prices up. Second, in theory you might be able to get a mortgage in a foreign country, let's say in Euro, and you might hope that over the next few years the pound would go up again, and the Euros that you owe the foreign bank become worth less. |
Looking to buy a house in 1-2 years. Does starting a Roth IRA now make sense? | With a Roth IRA, you can withdraw the contributions at any time without penalty as long as you don't withdraw the earnings/interest. There are some circumstances where you can withdraw the earnings such as disability (and maybe first home). Also, the Roth IRA doesn't need to go through your employer and I wouldn't do it through your employer. I have mine setup through Fidelity though I'm not sure if they have any guaranteed 3% return unless it was a CD. All of mine is in stocks. Your wife could also setup a Roth IRA so over 2 years, you could contribute $20,000. If I was you, I would just max out any 403-b matches (which you surely are at 25% of gross income) and then save my down payment money in a normal money market/savings account. You are doing good contributing almost 25% to the 403-b. There are also some income limitations on Roth IRAs. I believe for a married couple, it is $160k. |
Where can I find the nominal price of a stock prior a split into multiple companies? | Yahoo Finance provides the proper closing price. HP's historical data around the split date can be found here. The open, high and low of the day are wrong prior the split, but the closing price is right and for HP, it was $26.96 USD. The next day the closing price was $13.83 USD. |
Dividends - Why the push to reinvest? | Good question, here are some possible answers: Its a Good Idea There is probably some validity to the statictics and having money invested, generally speaking, has proven far more valuable than having it sit in a savings account. It tends to reinforce strength Suppose you own two stocks, one that is a great performer, and one that isn't. Generally speaking the high performer will pay out more, and if you reinvest more into that stock, you will be wealthier if you contributed equally to both stocks. You might forget People tend to forget to do things that are not in the forefront, and reinvestment is one of those things that slip people's mind. One of the wealth building tools that people universally recommend is automation. Reinvesting is a way to automate one aspect of one's financial life. You might spend it on something else If you put the dividends into your checking account, there is a non-zero chance that it might get put towards something else. Better to have it out of sight and mind and invested. They make money Generally speaking, the more money you have in a brokerage account, the more the brokerage makes. So it is good for them, as well as yourself. While there is some attraction to being able to see a balance that is the result of dividend investments, its just far better to have them be poured right back into whatever investment seem appropriate. |
Cheapest way to wire or withdraw money from US account while living in Europe | Atm machine and my Credit Union account. Low fees (often zero, if the machine is on any of the same networks) and decent exchange rate, and no need to carry cash or traveler's checks to be exchanged. Alternatively, pay by credit card, though there is a foreign transaction fee on that. |
How to transform dividends into capital gains? | In the US, dividends have special tax treatment similar to, but not the same as Capital Gains. No easy way to transform one to the other, the very fact that you invested your money in a company that has returned part of your capital as income means it is just that, income. Also in the US, you could invest in Master Limited Partnerships. These are companies that make distributions that are treated as a return of capital, instead of dividends. Throughout the life of the investment you receive tax forms that assign part of the operating expense/loss of the company to you as a tax payer. Then at the end of the investment life you are required to recapture those losses as Capital Gains on sale of the stock. In some ways, these investments do exactly what you are asking about. They transform periodic income into later capital gains, basically deferring tax on the income until the sale of the security. Here is an article I found about MLPs coming to the UK through an ETF: Master Limited Partnerships in the UK |
Are large companies more profitable than small ones? | This isn't as rigorous as it should be, but may offer some useful insight into how big and small companies differ operationally. Putting Apple aside, larger companies tend to sell larger volumes of products (even if they're MRI devices, or turbines) relative to what smaller companies can sell (obviously, in absolute terms as well). They are also able to negotiate volume discounts as well as payment terms. This allows them to finance sales through their supply chain. However, their large direct competitors are able to do the same thing as well. Competitive forces then drive prices down. Smaller businesses, without these advantages of scale, tend to have to charge higher margins since they have to pay directly (and, if their clients are large businesses, finance the sale). Small businesses still have higher proportional costs of operation. Sadly, my reference here is a study I performed for the South African Revenue Service about ten years ago, and not available online. However, the time taken by a small business to manage admin, tax, HR is a greater proportion of revenue than for larger companies. If the small business is a start-up with big investment from venture finance, then they could subsidise their selling price, run at a loss and try and gain scale. Funnily enough, there is a fantastic article on this by Joel Spolsky (Ben and Jerry's vs. Amazon) For the average highly-competitive smaller company, the best choice is to chase design/quality/premium markets in order to justify the higher margins they have to charge. And that's what makes Apple interesting as a case study. They were a small company in the presence of giants (Intel, Microsoft, IBM). They were "forced" to concentrate on design and premium markets in order to justify their need for higher margins. It almost didn't work but then they broke through. Now they're in the unique position of having gained scale but are still small enough relative to other electronics manufacturers to continue charging that premium (by volume their sales are still relatively small but their margins make them a giant). This type of variation from market to market makes developing some sort of generalised solution very unlikely but the general requirement holds: that smaller companies must charge higher margins in order to create equivalent profits to larger companies which must gain scale through volume. |
Will I have to pay taxes for Australia if I have an Australian bank account? | After reviewing the tax treaty between New Zealand and Australia, I think the issue is whether or not you have an interest in a "permanent establishment" in Australia where you do business. The bank is not relevant as it is merely the vehicle by which you collect payment and would only come into the picture if you had an income bearing account (which you have indicated you do not). Even if you work out of the offices of the Australian company, you do not have a financial interest in their offices and as such, would pay taxes on the income in New Zealand (see documentation below). https://www.ato.gov.au/business/international-tax-for-business/foreign-residents-doing-business-in-australia/tax-on-income-and-capital-gains/#permanentestablishment |
What's the point of a benchmark? | Yes an index is by definition any arbitrary selection. In general, to measure performance there are 2 ways: By absolute return - meaning you want a positive return at all times ie. 10% is good. -1% is bad. By relative return - this means beating the benchmark. For example, if the benchmark returns -20% and your portfolio returns -10%, then it has delivered +10% relative returns as compared to the benchmark. |
Options tax treatment | You would not owe any taxes in the 2015 year, unless you got exercised and called away in 2015. The premium would be short term capital gains barring some other exception I'm not aware of, and if you retain a gain on the underlying shares then that would still be long term capital gains. If it gets called in say April 2016, is the premium+profit+dividends all long term capital gains for the year 2016? The profits are long term capital gains and the premium serves to lower your cost basis, dividends have their own conditions so you'll have to do separate research on that, fortunately they'll likely be negligible compared to the potential capital gains and options premium. |
Can a company control its stock through contracts with stockholders? | Your first scenario, involving shareholders in a private corp being limited by a contractual agreement, is common in practice. Frequent clauses include methods of valuing the shares if someone wants to sell, first right of refusal [you have to attempt to sell to the other shareholders, before you can sell to a 3rd party], and many others. These clauses are governed by contract law [ie: some clauses may be illegal in contract law, and therefore couldn't be applied here]. A Universal Shareholders' Agreement is just the same as the above, but applied to more people. You would never get an already public company to convert to a universal shareholders' agreement - because even 1 share voting 'no' would block it [due to corporate law limiting the power of a corporation from abusing minority shareholder value]. In practice, these agreements universally exist at the start of incorporation, or at least at the first moment shares become available. An example is the Canadian mega-construction company PCL*, which is employee-owned. When the original owner transferred the corporation to his employees, there was a USA in place which still today governs how the corporation operates. In theory you could have a 'public company' where most shares are already owned by the founders, and 100% of remaining shares are owned by a specific group of individuals, in which case you may be able to get a USA signed. But it wouldn't really happen in practice. *[Note that while PCL is broadly owned by a large group of employees, it is not a 'public company' because any random schmuck can't simply buy a share on the Toronto Stock Exchange. I assume most exchanges would prevent corporations from being listed if they had ownership restrictions like this]. |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | I too was very confused when I tried to be tricky and paid down my balance BEFORE the bill date. I thought this would be a great thing because it would show my utilization near zero percent. The opposite happen, it dropped my credit score from 762 to 708. Here is the best example I can come up with when it comes to utilization. Lets pretend you are an insurance company and you trying to figure out who are the best risk drivers. The people that drive 10% of the day are a better risk than the people that drive 50% of the day. The people that drive 50% of the day are a better risk than the people that drive 90% of the day. Here is the rub when people drive 0%. When you look at the people at 0% they appear to be walking, busing or flying. What they are NOT doing is driving. Since they are not driving (using Credit) they are viewed as POOR drivers since they are not keeping up on their driving skills. (Paying bills, watching how they spend, and managing their debt). So, now before the billing date I pay down my balance to something between 5 to 10% of my utilization. After the bill is issued, I pay it off in FULL. ( I am not going to PAY these crazy interest rates). What shows up on my credit report is a person that is driving his credit between 5 and 10% utilization. It shows I know I how to manage my revolving accounts. I know it's dumb, you would think they reward people that have zero debt, I don't hate banks I hate the game. ( I do love me some reward points =)) |
Why might it be advisable to keep student debt vs. paying it off quickly? | I see two advantages to not paying student loan debt off more quickly: For #1, however, there are plenty of other ways to build credit and I don't see this as being worth the downsides of not paying off the debt more quickly. In fact, in the United States student loan debt cannot be written off if you go bankrupt. This is important to know and understand. I would generally advise you to pay down your student loans as quickly as you can reasonably do so. |
What options do I have at 26 years old, with 1.2 million USD? | This may be a great idea, or a very bad one, or it may simply not be applicable to you, depending on your personal circumstances and interests. The general idea is to avoid passive investments such as stocks and bonds, because they tend to grow by "only" a few percent per year. Instead, invest in things where you will be actively involved in some form. With those, much higher investment returns are common (but also the risk is higher, and you may be tied down and have to limit the traveling you want to do). So here are a few different ways to do that: Get a college degree, but only if you are interested in the field, and it ends up paying you well. If you aren't interested in the field, you won't land the $100k+ jobs later. And if you study early-childhood education, you may love the job, but it won't pay enough to make it a good investment. Of course, it also has to fit with your life plans, but that might be easier than it seems. You want to travel. Have you thought about anthropology, marine biology or archeology? Pick a reputable, hard-to-get-into, academic school rather than a vocation-oriented oe, and make sure that they have at least some research program. That's one way to distinguish between the for-profit schools (who tend to be very expensive and land you in low-paying jobs), and schools that actually lead to a well-paying future. Or if your interest runs more in a different direction: start a business. Your best bet might be to buy a franchise. Many of the fast-food chains, such as McDonalds, will let you buy as long as you have around $300k net worth. Most franchises also require that you are qualified. It may often make sense to buy not just one franchised store, but several in an area. You can increase your income (and your risk) by getting a loan - you can probably buy at least $5 million worth of franchises with your "seed money". BTW, I'm only using McDonalds as an example. Well-known fast food franchises used to be money-making machines, but their popularity may well have peaked. There are franchises in all kinds of industries, though. Some tend to be very short-term (there is a franchise based on selling customer's stuff on ebay), while others can be very long-lived (many real-estate brokerages are actually franchises). Do be careful which ones you buy. Some can be a "license to print money" while others may fail, and there are some fraudsters in the franchising market, out to separate you from your money. Advantage over investing in stocks and bonds: if you choose well, your return on investment can be much higher. That's generally true for any business that you get personally involved in. If you do well, you may well end up retiring a multimillionaire. Drawback: you will be exposed to considerable risk. The investment will be a major chunk of your net worth, and you may have to put all your eggs in none basket. If your business fails, you may lose everything. A third option (but only if you have a real interest in it!): get a commercial driver's license and buy an 18-wheeler truck. I hear that owner-operators can easily make well over $100k, and that's with having to pay off a bank loan. But if you don't love trucker culture, it is likely not worth doing. Overall, you probably get the idea: the principle is to use your funds as seed money to launch something profitable and secure, as well as enjoyable for you. |
What exactly happens during a settlement period? | Securities clearing and settlement is a complex topic - you can start by browsing relevant Wikipedia articles, and (given sufficient quantities of masochism and strong coffee) progress to entire technical books. You're correct - modern trade settlement systems are electronic and heavily streamlined. However, you're never going to see people hand over assets until they're sure that payment has cleared - given current payment systems, that means the fastest settlement time is going to be the next business day (so-called T+1 settlement), which is what's seen for heavily standardized instruments like standard options and government debt securities. Stocks present bigger obstacles. First, the seller has to locate the asset being sold & make sure they have clear title to it... which is tougher than it might seem, given the layers of abstraction/virtualization involved in the chain of ownership & custody, complicated in particular by "rehypothecation" involved in stock borrowing/lending for short sales... especially since stock borrow/lending record-keeping tends to be somewhat slipshod (cf. periodic uproar about "naked shorting" and "failure to deliver"). Second, the seller has to determine what exactly it is that they have sold... which, again, can be tougher than it might seem. You see, stocks are subject to all kinds of corporate actions (e.g. cash distributions, spin-offs, splits, liquidations, delistings...) A particular topic of keen interest is who exactly is entitled to large cash distributions - the buyer or the seller? Depending on the cutoff date (the "ex-dividend date"), the seller may need to deliver to the buyer just the shares of stock, or the shares plus a big chunk of cash - a significant difference in settlement. Determining the precise ex-dividend date (and so what exactly are the assets to be settled) can sometimes be very difficult... it's usually T-2, except in the case of large distributions, which are usually T+1, unless the regulatory authority has neglected to declare an ex-dividend date, in which case it defaults to standard DTC payment policy (i.e. T-2)... I've been involved in a few situations where the brokers involved were clueless, and full settlement of "due bills" for cash distributions to the buyer took several months of hard arguing. So yeah, the brokers want a little time to get their records in order and settle the trade correctly. |
No transaction fee ETF trades - what's the catch? | AFAIK, It's also possible that the ETF company is paying Ameritrade for every trade you make. Even if your brokerage doesn't make you pay a fee to trade ETFs, the company that created and runs the ETF is still making money when you purchase and use their ETFs. See "What motivates each player?" at Yahoo Finance. |
Is there any downside snapping a picture (or scanning a copy) of every check one writes vs. using a duplicate check? | When banks would return the actual physical cheque, at least you had some printing / writing from the other bank on it, as some type of not-easily-Photoshopped proof. Now many (most?) banks don't return the actual cheques anyway, just an image of it - sometimes a low quality shrunken B&W photocopy-like image too. You'd have to check with a lawyer or court in your area, but I suspect any photocopy or image, as well as a written or carbon-copy duplicate, would not be good enough proof for a law court, since they could all be easily re-written or Photoshopped. So I don't think there's a real upside anyway. Only an official bank statement saying that the name/people written actually cashed the cheque might be "good evidence" (I'm having doubts that the bank's own low quality "image" would even qualify, unless it's verified as coming directly from the bank somehow). I'd agree with Nate (+1) that a big downside could be identity theft, either online or alongside phone loss/theft. |
Why is the breakdown of a loan repayment into principal and interest of any importance? | The reason it's broken out is very specific: this is showing you how much interest accrued during the month. It is the only place that's shown, typically. Each month's (minimum) payment is the sum of [the interest accrued during that month] and [some principal], say M=I+P, and B is your total loan balance. That I is fixed at the amount of interest that accrued that month - you always must pay off the accrued interest. It changes each month as some of the principal is reduced; if you have a 3% daily interest rate, you owe (0.03*B*31) approximately (plus a bit as the interest on the interest accrues) each month (or *30 or *28). Since B is going down constantly as principal is paid off, I is also going down. The P is most commonly calculated based on an amortization table, such that you have a fixed payment amount each month and pay the loan off after a certain period of time. That's why P changes each month - because it's easier for people to have a constant monthly payment M, than to have a fixed P and variable I for a variable M. As such, it's important to show you the I amount, both so you can verify that the loan is being correctly charged/paid, and for your tax purposes. |
What is the lifespan of a series of currency? | US currency doesn't expire, it is always legal tender. I can see some trouble if you tried to spend a $10,000 bill (you'd be foolish to do so, since they are worth considerably more). Maybe some stores raise eyebrows at old-style $100's (many stores don't take $100 bills at all), but you could swap them for new style at a bank if having trouble with a particular store. Old-series currency can be an issue when trying to exchange US bills in other countries, just because it doesn't expire here, doesn't mean you can't run into issues elsewhere. Other countries have different policies, for example, over the last year the UK phased in a new five pound note, and as of last month (5/5/2017) the old fiver is no longer considered legal tender (can still swap out old fivers at the bank for now at least). Edit: I mistook which currency you took where, and focused on US currency instead of Canadian, but it looks like it's the same story there. |
Ideal investments for a recent college grad with very high risk tolerance? | Theoretically there is limited demand for risky investments, so higher-risk asset classes should outperform lower-risk asset classes over sufficiently long time periods. In practice, I believe this is true, but it could be several decades before a risky portfolio starts to outperform a more conservative one. Stocks are considered more risky than most assets. Small-cap stocks and emerging market stocks are particularly high-risk. I would consider low-fee ETFs in these areas, like VB or VWO. If you want to seek out the absolute riskiest investments, you could pick individual stocks of companies in dire financial situations, as Bank of America was a couple years ago. Most importantly, if you don't expect to need the money soon, I would maximize your contribution to tax-advantaged accounts since they will grow exponentially faster than taxable accounts. Over 50 years, a 401(k) or IRA will generally grow at least 50% more than a taxable account, maybe more depending on the tax-efficiency of your investments. Try to contribute the maximum ($17,500 for most people in 2014) if you can. If you can save more than that, I'd suggest contributing a Roth 401k rather than a traditional 401(k) - since Roth contributions are post-tax, the effective contribution limit is higher. Also contribute to a Roth IRA (up to $5,500 in 2014), using a backdoor Roth if necessary. |
company market capitalization to total (annual) stock market capitalization | This depends. Quite a few stock exchanges / country report total capitalisation in terms of free float. I.E total shares that can be traded, ignoring the promoters shares. The market cap reported by company takes all shares. |
What should I be doing to protect myself from identity theft? | Here are a handful of measures I take myself: I check my credit reports once in a while and look for anything out of the ordinary. If somebody calls me on the telephone claiming to be from my bank or credit card company, utility, etc. I ask for their number, check it, and call them back. I don't give personal information to people merely claiming to be from a place I do business with. I never fill out ballots for free contests. Most of the time these are scams. When I get a call telling me "you won a free cruise" for a ballot I supposedly filled out at the mall, I say they're lying through their teeth. For excitement, I'll sometimes buy a lotto ticket instead. I'm careful when I surf the web. I don't give my personal information to web sites I can't trust. If they look the least bit shady, I'm out. Also, I use different passwords at different web sites. I avoid using a password from a public terminal, but when I must, I change my password soon after. I'm careful when I download software. I don't install anything I didn't get from a trusted source. I pay for software when necessary, so finding a trusted source is not hard. But, I've heard of people who – to save a buck – would download a pirated application from a shady warez site only to be "gifted" a trojan horse key logging or other spyware along with it. When I no longer need a bill, receipt, statement, etc. or any document containing personal information, I shred it, and I use a shredder that does a micro-cut, not just a strip- or cross-cut. The micro-cut remains go in the green bin with wet and yucky organic waste. When I no longer need a hard drive, I use a secure wiping tool like Darik's Boot & Nuke before reusing. If the drive isn't worth reusing, I'll wipe first then take apart with my Torx screwdriver. Once I have the drive platter, I scratch the heck out of it. Remains go to the community recycling depot. That's all I can think of right now; I probably missed a few :-) So, what do others do? I'm curious, too. |
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