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Would it make sense to buy a rental property as an LLC and not in my own name? | Don't worry about the spam mail. If you get a loan, it will be based on your personal credit. I don't know if you can get a real estate loan for your LLC, even if it owns many properties. Typically you get the loan in your own name, then transfer title to the LLC. The LLC does offer good liability protection. The downside is that it can be expensive (at least in California) and requires some work. You may have to pay an annual tax, and file (multiple) tax returns. It may not be worth it for one property. But it definitely a good idea if it is not too expensive. |
ESPP strategy - Sell right away or hold? | A general rule of thumb is to avoid having more than 5% of your investments in any single stock, to avoid excessive risk; it's usually even more risky if you're talking company stock because an adverse event could result in an inferior stock price and you getting laid off. Under other circumstances, the ideal amount of company stock is probably 0%. But there are tax benefits to waiting, as you've noted, and if you're reasonably confident that the stock isn't likely to jerk around too much, and you have a high risk tolerance (i.e. lots of extra savings besides this), and you're comfortable shouldering the risk of losing some money, it might make sense to hold onto the stock for a year - but never any longer. The real risk to holding a lot of company stock doesn't depend on how often you buy it and sell it per se, but having period purchases every month should make it easier for you to ladder the funds, and regularly sell your old shares as you purchase new shares. You might also consider a stop-loss order on the stock at or near the price you purchased it at. If the stock is at $100, then you buy at $85, and then the stock drops to $85, there are no more outstanding tax benefits and it makes no sense to have it as part of your portfolio instead of any other speculative instrument - you probably get better diversification benefits with any other speculative instrument, so your risk-adjusted returns would be higher. |
Are solar cell panels and wind mills worth the money? | Solar water heaters are definitely questionable in the Northeast -- the season when you most need them is also the season when they are least effective. Solar electric isn't a huge moneymaker, but with rebates on installation and carbon-reduction credits (SRECs) -- and a group purchase discount if you can get one, either at a town level or through organizations like One Block Off The Grid -- it can definitely turn a profit. Early estimate was that my setup would pay its initial costs back in 4 years, and the panels are generally considered to be good for a decade before the cells have degraded enough that the panels should be replaced. I haven't had a negative electric bill yet, but I've gotten close, and my setup is a relatively small one (eight panels facing SSE on a 45-degree roof). Admittedly I've also been working to reduce electricity use; I don't think I have an incandescent bulb left in the house. |
Capital Gains and Tax Brackets | It will definitely be added to your AGI, but not necessarily bump your ordinary income tax bracket. You will have to use the Capital Gains Computation worksheet (that uses the general Tax Computation Worksheet) to figure out your tax liability. You might also be subject to the AMT. See the instructions to form 1040, line 44 (page 38) and line 45. |
Canceling credit cards - insurance rate increase? | You don't need to have a bunch of credit cards lying around; just a couple is fine. Get a "rewards" card (without annual fee) that pays you back for use, and use it regularly to buy groceries, for example. Pay it off promptly each month, using the rewards, if you like, to reduce the amount you have to send in. Or you can use the rewards for other purchases; some merchants offer $25 worth of merchandise for $20 in rewards. It used to be the case that you could negotiate a discount for paying cash rather than use a credit card, but that is a lot harder to do now, in many cases because credit-card company contracts with merchants prohibit this practice. Also, merchants often prefer credit cards rather than cash because money-handling is an issue (pay for an armored car to come pick up the day's receipts, or risk getting mugged on the way to the bank, possible burglaries if you leave the money overnight in the store, daily balancing of cash-register trays, etc.) So, not being in debt and being rich enough to not need to be in debt are laudable goals, and you have my best wishes that you will reach them soon, but getting rid of all your credit cards as a part of not being in debt may be more trouble than it is worth. Keep a couple, pay them off promptly, and if you are concerned about being in debt, you can time your charges so that you are in debt at most 2 or 3 days each month. |
Has anyone created a documentary about folks who fail to save enough for retirement? | To answer your question, Retirement Revolution may fit the bill to some extent. I'd also like to address some of the indirect assumptions that were made in your bullet points. I'm convinced that the best way to overcome this is not simply to hold down a good job with COLAs every year, max out your IRA accounts and 401(k)s, invest another 10-20% on top, and live off of the savings and whatever Social Security decides to pay you. Instead, the trick is to not retire -- to make a transition into an income-producing activity that can be done in the typical retirement years, hopefully one that is closer to one's calling (i.e., more fulfilling). This takes time, not money. If people just shut off the TV and spent the time building up a side business that has a high passive component, they'd stand a much better chance of not outliving their money. |
Are PINs always needed for paying with card? | As far as I'm aware, PINs are only used for in-person transactions, not 'remote' (over the Internet or phone). |
Will an ETF increase in price if an underlying stock increases in price | The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.) |
Will I be paid dividends if I own shares? | gnasher729, was able to see my problem here. It was a silly oversight. It's not 50p a share, its 0.5p a share. @Bezzzo: The dividend is not 50p per share, it is 0.50p per share - half a penny per share. Thanks! |
Why does financial investor bother to buy derivatives and then hedge the position? | Sometimes hedging is used if you have a position and you feel the market is going against your position, so one would hedge that position in order to protect their capital and possible profits instead of closing the position and incurring capital gains tax. Personally if the market was going against a position I had open I would get out of that position and protect my capital/profits instead of using more capital to hedge against my position. I would rather take a profit and pay some capital gains tax than watch my profits turn into a loss or use up more capital to try and protect a bad position. Hedging can be useful in certain circumstances but I think if you feel the market is going against your position/s for the medium to long term you should just get out of your positions instead of hedging against them. |
How does one value Facebook stock as a potential investment? | To know if a stock is undervalued is not something that can be easily assessed (else, everybody would know which stock is undervalued and everybody will buy it until it reaches its "true" value). But there are methods to assess the value of a company, I think that the 3 most known methods are: If the assets of the company were to be sold right now and that all its debts were to be paid back right now, how much will be left? This remaining amount would be the fundamental value of your company. That method could work well on real estate company whose value is more or less the buildings that they own minus of much they borrowed to acquire them. It's not really usefull in the case of Facebook, as most of its business is immaterial. I know the value of several companies of the same sector, so if I want to assess the value of another company of this sector I just have to compare it to the others. For example, you find out that simiral internet companies are being traded at a price that is 15 times their projected dividends (its called a Price Earning Ratio). Then, if you see that Facebook, all else being equal, is trading at 10 times its projected dividends, you could say that buying it would be at a discount. A company is worth as much as the cash flow that it will give me in the future If you think that facebook will give some dividends for a certain period of time, then you compute their present value (this means finding how much you should put in a bank account today to have the same amount in the future, this can be done by dividing the amount by some interest rates). So, if you think that holding a share of a Facebook for a long period of time would give you (at present value) 100 and that the share of the Facebook is being traded at 70, then buy it. There is another well known method, a more quantitative one, this is the Capital Asset Pricing Model. I won't go into the details of this one, but its about looking at how a company should be priced relatively to a benchmark of other companies. Also there are a lot's of factor that could affect the price of a company and make it strays away from its fundamental value: crisis, interest rates, regulation, price of oil, bad management, ..... And even by applying the previous methods, the fundemantal value itself will remain speculative and you can never be sure of it. And saying that you are buying at a discount will remain an opinion. After that, to price companies, you are likely to understand financial analysis, corporate finance and a bit of macroeconomy. |
Given a certain yearly savings, how much can I spend on a capital improvement? NPV of future cash flow | This investment does not have a payback period as the net present value of your investment is negative. Your investment requires an initial cash outlay of $40,000 followed by annual savings of $2060 for the next 20 years. Your discount rate is 5% at which the NPV is $-14327.85 as calculated below by using this JavaScript financial functions library tadJS that is based on a popular tadXL add-in for Excel 2007, 2010 and 2013. |
What can I replace Microsoft Money with, now that MS has abandoned it? | If you would like to use linux I suggest you to use KMyMoney http://kmymoney2.sourceforge.net/ It is based on gnucash but it is easier to use IMO |
How are RSU's factored into Income during loan qualification? | RSUs are not "essentially cash". "R" in the RSU stands for restricted. These awards have strings attached, and as long as the strings are attached - you don't really own the money. As such, most banks do not include RSUs in the income considerations. Some do, especially if they have a specific agreement with your employer (check your HR/benefits coordinator). Specifically for mortgage loan, where the underwriting is very strict, I'm not aware of banks that include RSUs as income without a specific agreement with the employer as a perk. For credit cards/car loans, where you just need to write a number, they would probably care less. Some banks (but not all) consider past performance, and would include bonuses (and maybe RSUs) if you can show several consecutive years of comparable bonuses. |
Cash out 401k for house downpayment | Does it ever make sense? Yes, but almost never. If you're in a situation where you're invested in something with low rates (think government securities) or cash equivalents, then you do need to think about rate spread as you mention. Does the savings over the life over the mortgage beat out the 35% hit now, plus all the interest you would earn over those 20 years? Have you factored in other considerations such as mortgage interest deduction on taxes? Don't forget you need to think about how rates will change down the line (they can't go much lower, so potentially you'll get better rates in the 401(k) down the line). Don't forget there's also the impact of inflation; again the rates on your savings may go up, but your mortgage is a fixed payment, so with even a low rate of inflation, your payments effectively become "less" over time. If your investments are in something like stocks and bonds, then I would say undoubtedly you would want to keep the money in the 401(k). Time in market and compounding are your best friends over a long time horizon. Also, as mentioned by @JohnFX, the hit of your 35% now is something you will absolutely feel now. Hopefully not, but your life situation could change where you have an emergency and need to drain your savings or you may not see the end of that 20 years. |
I spend too much money. How can I get on the path to a frugal lifestyle? | There are a lot of great suggestions here on how to get and keep your finances in shape. But I have to say, I disagree with some on the starting point. The first step to living frugal is to convince yourself that it is worth it. That it is the way to go and the way you want to manage your finances. As @DrFredEdison and @fennec stated, the reason we frugal people don't spend wildly is because of what we believe. So I would suggest buying a book or video/audio series from someone like Dave Ramsey who will encourage and motivate you to spend wisely and show you practical ways to get started. With that said I do agree with a lot of the practical suggestions that have been given here. |
Student loan payments and opportunity costs | I'll use similar logic to Dave Ramsey to answer this question because this is a popular question when we're talking about paying off any debt early. Also, consider this tweet and what it means for student loans - to you, they're debt, to the government, they're assets. If you had no debt at all and enough financial assets to cover the cost, would you borrow money at [interest rate] to obtain a degree? Put it in the housing way, if you paid off your home, would you pull out an equity loan/line for a purchase when you have enough money in savings? I can't answer the question for you or anyone else, as you can probably find many people who will see benefits to either. I can tell you two observations I've made about this question (it comes a lot with housing) over time. First, it tends to come up a lot when stocks are in a bubble to the point where people begin to consider borrowing from 0% interest rate credit cards to buy stocks (or float bills for a while). How quickly people forget what it feels (and looks like) when you see your financial assets drop 50-60%! It's not Wall Street that's greedy, it's most average investors. Second, people asking this question generally overlook the behavior behind the action; as Carnegie said, "Concentration is the key to wealth" and concentrating your financial energy on something, instead of throwing it all over the place, can simplify your life. This is one reason why lottery winners don't keep their winnings: their financial behavior was rotten before winning, and simply getting a lot of money seldom changes behavior. Even if you get paid a lot or little, that's irrelevant to success because success requires behavior and when you master the behavior everything else (like money, happiness, peace of mind, etc) follows. |
Abundance of Cash - What should I do? | Since your 401k/IRA are maxed out and you don't need a 529 for kids, the next step is a plain ol' "Taxable account." The easiest and most hassle-free would be automatic contributions into a Mutual Fund. Building on poolie's answer, I think mutual funds are much more automatic/hassle-free than ETFs, so in your case (and with your savings rate), just invest in the Investor (or Admiral) shares of VEU and VTI. Other hassle-free options include I-Bonds ($5k/year), and 5-year CDs. |
Taking out a loan to pay down a mortgage | You have the 2 properties, and even though the value of property B is less than the amount you owe on it hopefully you have some equity in propery A. So if you do have enough equity in property A, why don't you just go to the one lender and get both property A and B refinanced under the same mortgage. This way hopefully the combined equity in both properties would be enough to cover the full amount of the loan, and you have the opportunity to refinance at favourable rate and terms. Sounds like you are in the USA with an interest rate of 3.25%, I am in Australia and my mortgage rates are currently between 6.3% to 6.6%. |
Hypothetical: can taxes ever cause a net loss on otherwise-profitable stocks? | The original post's $16 has two errors: Here is the first scenario: . Tax Liability($) on Net . Cash # of Price Paper Realized Value Time: ($) Shares ($/sh) Profits Profits ($) 1. Start with: 100 - n/a - - 100 2. After buy 10@10$/sh: - 10 10 - - 100 3. Before selling: - 10 12 (5) - 115 4. After sell 10@12$/sh: 120 - n/a - (5) 115 5. After buy 12@10$/sh: - 12 10 - (5) 115 6. Before selling: - 12 12 (6) (5) 133 7. After sell 12@12$/sh: 144 - n/a - (11) 133 8. After buy 14@10$/sh: 4 14 10 - (11) 133 9. Before selling: 4 14 12 (7) (11) 154 10.After sell 14@12$/sh: 172 - n/a - (18) 154 At this point, assuming that all of the transactions occurred in the same fiscal year, and the realized profits were subject to a 25% short-term capital gains tax, you would owe $18 in taxes. Yes, this is 25% of $172 - $100. |
What is the difference between fund and portfolio? | Oddly enough, in the USA, there are enough cost and tax savings between buy-and-hold of a static portfolio and buying into a fund that a few brokerages have sprung up around the concept, such as FolioFN, to make it easier for small investors to manage numerous small holdings via fractional shares and no commission window trades. A static buy-and-hold portfolio of stocks can be had for a few dollars per trade. Buying into a fund involves various annual and one time fees that are quoted as percentages of the investment. Even 1-2% can be a lot, especially if it is every year. Typically, a US mutual fund must send out a 1099 tax form to each investor, stating that investors share of the dividends and capital gains for each year. The true impact of this is not obvious until you get a tax bill for gains that you did not enjoy, which can happen when you buy into a fund late in the year that has realized capital gains. What fund investors sometimes fail to appreciate is that they are taxed both on their own holding period of fund shares and the fund's capital gains distributions determined by the fund's holding period of its investments. For example, if ABC tech fund bought Google stock several years ago for $100/share, and sold it for $500/share in the same year you bought into the ABC fund, then you will receive a "capital gains distribution" on your 1099 that will include some dollar amount, which is considered your share of that long-term profit for tax purposes. The amount is not customized for your holding period, capital gains are distributed pro-rata among all current fund shareholders as of the ex-distribution date. Morningstar tracks this as Potential Capital Gains Exposure and so there is a way to check this possibility before investing. Funds who have unsold losers in their portfolio are also affected by these same rules, have been called "free rides" because those funds, if they find some winners, will have losers that they can sell simultaneously with the winners to remain tax neutral. See "On the Lookout for Tax Traps and Free Riders", Morningstar, pdf In contrast, buying-and-holding a portfolio does not attract any capital gains taxes until the stocks in the portfolio are sold at a profit. A fund often is actively managed. That is, experts will alter the portfolio from time to time or advise the fund to buy or sell particular investments. Note however, that even the experts are required to tell you that "past performance is no guarantee of future results." |
What happens when they run out of letters? | NYSE started allowing four letter tickers around 2009. NASDAQ allows 4-5 letter tickers. I guess they'll keep increasing when / if needed. Companies are allowed to change tickers, although there are costs. Tickers in the US are assigned through a single entity. Companies that are new need to take something that's open. http://www.wsj.com/articles/SB124296050986346159 I see that you're in Australia, but, since there aren't really that many options to deal with the problem that you mentioned, I'd guess that you'll ultimately do the same. Not sure about how tickers are assigned there though. |
Can future rental income be applied to present debt-to-income ratio when applying for second mortgage? | Generally speaking, no they won't. In this case, though I haven't done it myself, I was recommended to put the mortgage on the real estate after it's been leased out and has a contract on it. Then, yes, they will use it for that. But, ex-ante don't expect any bank to count on income from it because, at that point, there's zero guarantee you'll get it leased, and even if you do, at what rate. |
How to pay with cash when car shopping? | You could write a personal check after the final price has been set and you're ready to purchase. Another option would be to get the final price - then walk over to your bank and get a cashier's check. |
What is a “Junk Bond”? | A junk bond is, broadly, a bond with a non-negligible risk of default. ("Bond" ought to be defined elsewhere, but broadly it's a financial instrument you buy from a company or government, where they promise to pay you back the principal and some interest over time, on a particular schedule.) The name "junk" is a bit exaggerated: many of them are issued by respectable and reasonably stable businesses. junk bonds were required to do large leveraged buyouts. This means: the company issued fairly risky, fairly high-yield debt, to buy out equity holders. They have to pay a high rate on the debt because the company's now fairly highly geared (ie has a lot of debt relative to its value) and it may have to pay out a large fraction of its earnings as interest. What is a junk bond and how does it differ from a regular bond? It's only a matter of degree and nomenclature. A bond that has a credit rating below a particular level (eg S&P BBB-) is called junk, or more politely "non-investment grade" or "speculative". It's possible for an existing bond to be reclassified from one side to another, or for a single issuer to have different series some of which are more risky than others. The higher the perceived risk, the more interest the bond must pay offer in order to attract lenders. Why is there higher risk/chance of default? Well, why would a company be considered at higher risk of failing to repay its debt? Basically it comes down to doubt about the company's future earnings being sufficient to repay its debt, which could be for example: |
What's the difference between TaxAct and TurboTax? | Like most software it's about what you put in to them. We use ProSeries software which is like TurboTax but $4500 with no questions. I would do your taxes on online and then have a professional do them. You then can ask any questions you may have to better understanding of what's going on. Only take copies of your documents because some unprofessional places will try to keep them. Do this each time something big changes in your life, you have a baby, buy a house or start a business. May cost more but could save you thousands in the long run. I have been doing taxes professionally for 7 years. |
How to properly collect money from corporate sponsors? | http://www.legalzoom.com/business-management/starting-your-business/turn-your-calling Answering this, but I expect an expert to give an answer with some insight too There are many more steps, but not having done them personally I suggest you read the legalzoom.com site. |
How to prevent myself from buying things I don't want | Nathan's answer was a +1 from me. The answer is not always simple. Having the money available is surely the first step. Using Pete's process aligns with this. Another thought is depending where you are in your finances, delay by a day for every $100 in cost. e.g. For a $1000 purchase, sleep on it for 10 days. Adjust the number for your circumstance. |
Comparing keeping old car vs. a new car lease | Regarding the opportunity cost comparison, consider the following two scenarios assuming a three-year lease: Option A: Keep your current car for three years In this scenario, you start with a car that's worth $10,000 and end with a car that's worth $7,000 after three years. Option B: Sell your current car, invest proceeds, lease new car Here, you'll start out with $10,000 and invest it. You'll start with $10,000 in cash from the sale of your old car, and end with $10,000 plus investment gains. You'll have to estimate the return of your investment based on your investing style. Option C: Use the $10k from proceeds as down payment for new car In this scenario you'll get a reduction in finance charges on your lease, but you'll be out $10,000 at the end. Overall Cost Comparison To compare the total cost to own your current car versus replacing it with a new leased car, first look up the cost of ownership for your current car for the same term as the lease you're considering. Edmunds offers this research and calls it True Cost to Own. Specifically, you'll want to include depreciation, fuel, insurance, maintenance and repairs. If you still owe money you should also factor the remaining payments. So the formula is: Cost to keep car = Depreciation + Fuel + Insurance + Maintenance + Repairs On the lease side consider taxes and fees, all lease payments, fuel, and maintenance. Assume repairs will be covered under warranty. Assume you will put down no money on the lease and you will finance fees, taxes, title, and license when calculating lease payments. You also need to consider the cost to pay off your current car's loan if applicable. Then you should subtract the gains you expect from investing for three years the proceeds from the sale of your car. Assume that repairs will be covered under warranty. The formula to lease looks like: Lease Cost = Fuel + Insurance + Maintenance + Lease payments - (gains from investing $10k) For option C, where you use the $10k from proceeds as down payment for new lease, it will be: Lease Cost = Fuel + Insurance + Maintenance + Lease payments + $10,000 A somewhat intangible factor to consider is that you'll have to pay for body damage to a leased car at the end of the lease, whereas you are obviously free to leave damage unrepaired on your own vehicle. |
What's the best use for this money? Its only a small amount but can make a big difference to me | Its very silly of you to have house savings while you have these debts. Your total (listed) debt is 1657, with a savings of 2000, and a tax refund of 985. I'd be done with the Apple loan and CC tomorrow. Does that accomplish the goal of making a significant difference in your debt? Yes it does. This will leave you with 1328. I'd keep 500 or so in an emergency fund, and put the rest to the car. Although 828 will not help much with the car it would probably knock a month off. Next work like crazy to pay off the car. Get a second job or work overtime. Then save a emergency fund of 3 to 6 months of expenses as if you already owned the house. I would tend to go on the high side as I suspect you are single. Only then does it makes sense to save for a down payment. Although it is an American institution, the book The Millionaire Next Door might be helpful for you. Your most powerful wealth building tool is your income. When one handicaps that tool with payments and exorbitant lifestyle choices you greatly reduce your ability to become wealthy. These amounts are so small, you should just knock them out. |
Why can't house prices be out of tune with salaries | I'd suggest changing the subject when your friends talk about real estate to save your sanity and friendship. There's a difference between "belief" and "knowledge". Arguing with a believer isn't a very productive course of action, and will ultimately poison the friendship. Reality is a harsh mistress. |
Do Americans still need extra health care / medical insurance after reform to health care? [U.S.] | I think it is too early to tell. They changed so many variables in an incredibly complex system, and a lot of it will depend on how the requirements in the legislation look once the bureaucrats and insurance companies get a chance to interpret them and implement them as policy. My gut feeling is that for most people, you should plan on some pretty price increases for insurance in the next few years as insurance companies try cover the costs of removing lifetime caps and insuring people with pre-existing conditions. That said, the personal finance issue that you really should be planning for is your portfolio not your insurance costs. The bill includes almost a 4% increase in capital gains taxes. |
Are car buying services worth it? | The buying service your credit union uses is similar to the one my credit union uses. I have used their service several times. There is no direct cost to use the service, though the credit union as a whole might have a fee to join the service. I have used it 4 times over the decades. If you know what make and model you want to purchase, or at least have it narrowed down to just a few choices, you can get an exact price for that make, model, and options. You do this before negotiating a price. You are then issued a certificate. You have to go to a specific salesman at a specific dealership, but near a large city there will be several dealers to pick from. There is no negotiating at the dealership. You still have to deal with a trade in, and the financing option: dealer, credit union, or cash. But it is nice to not have to negotiate on the price. Of course there is nobody to stop you from using the price from the buying service as a goal when visiting a more conveniently located dealership, that is what I did last time. The first couple of times I used the standard credit union financing, and the last time I didn't need a loan. Even if you don't use the buying service, one way to pay for the car is to get the loan from the credit union, but get the rebate from the dealer. Many times if you get the low dealer financing you can't get the rebate. Doing it this way actually saves money. Speaking of rebates see how the buying service addresses them. The big national rebates were still honored during at least one of my purchases. So it turned out to be the buying service price minus $1,000. If your service worked like my experience, the cost to you was a little time to get the price, and a little time in a different dealer to verify that the price was good. |
How does the process of “assignment” work for in-the-money Options? | I often sell covered calls, and if they are in the money, let the stock go. I am charged the same fee as if I sold online ($9, I use Schwab) which is better than buying back the option if I'm ok to sell the stock. In my case, If the option is slightly in the money, and I see the options are priced well, i.e. I'd do another covered call anyway, I sometimes buy the option and sell the one a year out. I prefer to do this in my IRA account as the trading creates no tax issue. |
Can you explain “time value of money” and “compound interest” and provide examples of each? | Here are some really excellent video tutorials on these topics: Introduction to Compound Interest Introduction to Present Value |
What is a decent rate of return for investing in the markets? | If someone is guaranteeing X%, then clearly you can borrow money for less than X% (otherwise his claim wouldn't be remotely impressive). So why not do that if his 4% is guaranteed? :) Anyway, my answer would be that beating the market as a whole is a "decent" rate of return. I've always used the S&P 500 as a benchmark but you can use other indices or funds. |
Is buying a home a good idea? | Once you paid it off, you don't pay rent anymore. That is the major advantage. Also, you can do any change you want to it. Many people consider it an investment - if you ever sell it, it could be worth more than what you paid (although this is not for sure) |
Canada discount stock brokers: Interactive Brokers vs. Questrade? | I have had accounts at both IB and Questrade. Whatever you've heard about Questrade, sadly much of it is true pertaining to 2007-2009. I have not had any issues with their service, and making the few trades I do with the QuestraderWEB service has been flawless. In the time that I've had the account, their service has constantly been improving (statements are easier to read, customer service is more responsive). You should read what FrugalTrader and Canadian Capitalist have to say along with the combined 1000+ comments before deciding. Interactive Brokers is a whole different world. Those guys are the definition of real-time. You can get daily and weekly statements, along with the typical monthly statements. Buying power, margin, etc, is all updated in real-time and viewable in their TWS software. Trading fees are definitely lower than Questrade unless you're routinely trading 800-1000+ shares. Most of my trades cost $1. Options have a lower limit before Questrade makes more sense. And nothing beats IB for forex. Ultimately it really depends on what you will be doing. Note that IB charges a minimum monthly fee of $10 ($3 if you're young and foolish). If you don't hit that with commissions, the balance is taken from your account. Also, all other fees are passed on to you (e.g. data, order cancellation). IB also doesn't have any registered accounts such as TFSA or RRSP, and doesn't plan to. If you'll be doing a bunch of hefty trading, IB offers a trading platform free of charge, but charges for everything else. Questrade instead has a monthly fee for its QuestraderPRO and QuestraderELITE services, but that includes data and flat rate commissions. If you're just looking for a place to invest cheaply without extra fees and plan on making a few trades a year, Questrade might be the right choice. |
Tax implications of exercising ISOs and using proceeds to exercise more ISOs | This may be a good or a bad deal, depending on the fair market value (FMV) of the stock at the time of exercise. Let's assume the FMV is $6, which is the break even point. In general this would probably be treated as two transactions. So overall you would be cash neutral, but your regular tax income would be increased by $30,000 and your AMT income by $60,000. |
Calculate time to reach investment goals given starting balance? | Here's a formula; I had to go over to SEMath, use their MathJax to compose the answer and then paste this screen shot. As a result, I can't fix a typo: "ST" is the same as "St" |
How should I be investing in bonds as part of a diversified portfolio? | For most people, you don't want individual bonds. Unless you are investing very significant amounts of money, you are best off with bond funds (or ETFs). Here in Canada, I chose TDB909, a mutual fund which seeks to roughly track the DEX Universe Bond index. See the Canadian Couch Potato's recommended funds. Now, you live in the U.S. so would most likely want to look at a similar bond fund tracking U.S. bonds. You won't care much about Canadian bonds. In fact, you probably don't want to consider foreign bonds at all, due to currency risk. Most recommendations say you want to stick to your home country for your bond investments. Some people suggest investing in junk bonds, as these are likely to pay a higher rate of return, though with an increased risk of default. You could also do fancy stuff with bond maturities, too. But in general, if you are just looking at an 80/20 split, if you are just looking for fairly simple investments, you really shouldn't. Go for a bond fund that just mirrors a big, low-risk bond index in your home country. I mean, that's the implication when someone recommends a 60/40 split or an 80/20 split. Should you go with a bond mutual fund or with a bond ETF? That's a separate question, and the answer will likely be the same as for stock mutual funds vs stock ETFs, so I'll mostly ignore the question and just say stick with mutual funds unless you are investing at least $50,000 in bonds. |
What is the purpose of property tax? | Property taxes are levied by the local authorities to pay for their services. Since the services are continuous - so are the charges. You need someone to pave a road to your house, to build infrastructure, to maintain the police force, fire department, local schools etc. That's what your property taxes are going to. However, at times the property taxes become more than what the owners have actually paid for the house. Think of a house bought in the midst of a recession at a bargain price of $20K, but at the top of the market bubble costs $2M. The poor guy who bought it for $20K should pay as if he had ever had $2M? It can certainly be the case that the property taxes change drastically over the years and sometimes people have to give up their property because they cannot afford the taxes. That is exactly the thought that had led Californians to amend the Constitution in Prop 13. |
What is the difference between fund and portfolio? | A fund is a portfolio, in that it is a collection, so the term is interchangeable for the most part. Funds are made up of a combination of equities positions (i.e., stocks, bonds, etc.) plus some amount of un-invested cash. Most of the time, when people are talking about a "fund", they are describing what is really an investment strategy. In other words, an example would be a "Far East Agressive" fund (just a made up name for illustration here), which focuses on investment opportunities in the Far East that have a higher level of risk than most other investments, thus they provide better returns for the investors. The "portfolio" part of that is what the stocks are that the fund has purchased and is holding on behalf of its investors. Other funds focus on municipal bonds or government bonds, and the list goes on. I hope this helps. Good luck! |
Shares - Query about RSI (Relative Strength Index) | Well that will depend on the time frame you are looking at it. You can't compare the RSI on a five minute chart to the RSI on a daily chart. The minute chart would represent the momentum of very small trends whilst the daily chart would represent the momentum of much larger trends. On the daily chart the shares might be experiencing a strong uptrend with a rising RSI. During each day the price might move up at the open then come down some, then back up a bit more and repeat this several times during the day before closing higher. During the day the RSI might have moved slightly higher. But during a single day on the 5 minute chart the price may have gone through several up and down trends, with the RSI going into oversold and overbought several times. What you should be looking at to strengthen the signal from the RSI is to watch for when the RSI is in the overbought at the same time the price is reaching a peak, or when the RSI is in the oversold at the same time the price is reaching a trout. These could represent potential turning points in price. The time frame to use would depend on the type of trading you are attempting to undertake. If you prefer day trading (being in and out of a trade in minutes to hours) you might look at time frames of minutes to hours. If you prefer longer term position, trend or swing trading you would probably stick to daily charts. If you prefer longer term active investing you might stick to a combination of daily, weekly and monthly charts. |
Am I considered in debt if I pay a mortgage? | Yes, a mortgage is debt. It's unique in that you have a house which should be worth far more than the mortgage. After the mortgage crisis, many found their homes under water i.e. worth less than the mortgage. The word debt is a simple noun for money owed, it carries no judgement or negative connotation except when it's used to buy short lived items with money one doesn't have. Aside from my mortgage, I get a monthly credit card bill which I pay in full. That's debt too, only it carried no interest and rewards me with 2% cash back. Many people would avoid this as it's still debt. |
Can't the account information on my checks be easily used for fraud? | I was a victim of this. I'm not sure who got my routing and account number off my check, but someone subscribed to Playboy.com using my bank account information. Luckily it was only for about $30 and the bank refunded my money. However, it was a mess in that I had to open a new checking account and keep the other one open until all checks cleared. The bank was extremely helpful and monitored the account to make sure only the checks I told them about were processed. I then had to close the old account. This is why I believe checks are much less secure than credit cards or debit cards. A paper check can lay on someone's desk for anyone to pick up or write the information down off of it. I avoid checks if at all possible. For things like Craig's list, I would try to use PayPal or some other intermediate processing service. |
Harmony Gold Mining Company is listed on the NYSE and JSE at different prices? | On NYSE it isn't the equity which is listed but is an ADR(American Depositary Receipt). Source A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction. Else people would make a killing on the arbitrage opportunity. Frankly speaking arbitrage opportunities are more or less non existent. They occur for maybe seconds or milliseconds and the HFT firms and banks trade on it to remove the arbitrage. |
Why can it be a bad idea to buy stocks after hours? | There are several reasons it is not recommended to trade stocks pre- or post-market, meaning outside of RTH (regular trading hours). Since your question is not very detailed I have to assume you trade with a time horizon of at least more than a day, meaning you do not trade intra-day. If this is true, all of the above points are a non-issue for you and a different set of points becomes important. As a general rule, using (3) is the safest regardless of what and how you trade because you get price guarantee in trade for execution guarantee. In the case of mid to longer term trading (1 week+) any of those points is viable, depending on how you want to do things, what your style is and what is the most comfortable for you. A few remarks though: (2) are market orders, so if the open is quite the ride and you are in the back of the execution queue, you can get significant slippage. (1) may require (live) data of the post-market session, which is often not easy to come by for the entire US stock universe. Depending on your physical execution method (phone, fax, online), you may lack accurate information of the post-market. If you want to execute orders based on RTH and only want to do that after hours because of personal schedule constraints, this is not really important. Personally I would always recommend (3), independent of the use case because it allows you more control over your orders and their fills. TL;DR: If you are trading long-term it does not really matter. If you go down to the intra-day level of holding time, it becomes relevant. |
How long does a bank's “Know Your Customer” (KYC) process typically take? | The idea is to positively identify you with properly issued government ID. If you show up with your passport, visa, and another form of government-issued identification which the banker can recognize and use (for example - international driver's license, a US-State driver's license, EU internal ID, etc) - it will be quick and painless. Usually, at least two distinct forms of identification are required from foreigners: passport and something else, and not the visa stamped in a passport, that just shoes to show your status upon your W9/W8 requirements may be based. You'll probably be asked for a TIN before any payments are made to you by the bank. If you don't have anything credible to show as your identification it will be equally quick and painless, except that you'd be leaving without a bank account. If your identity cannot be established properly there and then - they will not serve you. |
When should I start an LLC for my side work? | It really depends on the type of business you are running. If there is any chance of liability, you should protect yourself with an LLC. Then it is much more difficult for them to sue and take personal assets. For example, if you are a wedding photographer, you would want to be an LLC in case you lose someones pictures. |
High dividend stocks | Like almost all investing question: it depends! Boring companies generally appreciate slowly and as you note, pay dividends. More speculative investing can get you some capital gains, but also are more likely to tank and have you lose your original investment. The longer your time horizon, and the more risk you are willing to take, then it is reasonable to tilt towards, but not exclusively invest in, more speculative stocks. A shorter horizon, or if you have trouble sleeping at night if you lose money, or are looking for an income stream, would then tend towards the boring side. Good Luck |
Possibility of donations in an educational site | You can have a way for people to pay, i.e. some kind of payment gateway. Run as Business: Best create a company and get the funds there. This would be treated as income of the website and would be taxed accordingly. One can deduct expenses for running the website, etc. Run as Charity: Register as one, however the cause should be considered as charitable one by the tax authorities. Only then the donations would be tax free. |
How can a school club collect money using credit cards? | You should check with the Office of Student Affairs (or equivalent) at your University to see if you can accept Credit Cards. Many will only allow you to accept student organization dues paid in cash, check, or money order. Many universities will also provide your organization with basic operating funds, if you request it. Your first point of contact should be your faculty adviser, though. Your best bet would be to just use cash. Learn where the nearest ATMs are. If you are set on using credit cards, set up a PayPal account and just use it to reimburse the person who fronts the money (cover the markup). Everyone will have to have a PayPal account set up, linked to their credit card. You can avoid fees by using a bank account. If you're so inclined, you can set up a Business account and have a PayPal Debit Card, but you'll want to check with your adviser / University by-laws to see if you're allowed. Don't expect any of these to work as website implementations. As you're a University group, you will undoubtedly be meeting in person such that an exchange of cash/check/money order would be trivial In short, you'll need to check into the rules of your University. Credit cards generally carry processing fees, charged to the merchant, which (on its own) carries some tax implications. |
Protecting savings from exceptional taxes | Don't worry. The Cyprus situation could only occur because those banks were paying interest rates well above EU market rates, and the government did not tax them at all. Even the one-time 6.75% tax discussed is comparable to e.g. Germany and the Netherlands, if you average over the last 5 years. The simple solution is to just spread your money over multiple banks, with assets at each bank staying below EUR 100.000. There are more than 100 banks large enough that they'll come under ECB supervision this year; you'd be able to squirrel away over 10 million there. (Each branch of the Dutch Rabobank is insured individually, so you could even save 14 million there alone, and they're collectively AAA-rated.) Additionally, those savings will then be backed by more than 10 governments, many of which are still AAA-rated. Once you have to worry about those limits, you should really talk to an independent advisor. Investing in AAA government bonds is also pretty safe. The examples given by littleadv all involve known risky bonds. E.g. Argentina was on a credit watch, and paying 16% interest rates. |
Trouble sticking to a budget when using credit cards for day to day transactions? | As long as you can be trusted with a Credit Card i find that if you have a setup that uses three accounts: 1. your Credit Card, 2. 2. a high interest internet account (most of these accounts don’t have fees), 3. a savings account. The Method that works for me is: 1st i calculate my fixed monthly bills i.e Rent and utilities and then transfer it into my high interest account. for the month whenever i make a purchase i transfer the money into the high interest account ( this way I can keep a running balance of what money I have left to spend in the month. Then when the Credit Card bill comes I transfer the money out of the high interest account across to pay off the Credit Card ( this way you generate interest on the money which you would have spent throughout the month and still maintain $0 of interest from the Credit Card) over a year you can generate at least enough money in interest to go out for dinner on one of free flights! |
Accounting for reimbursements that exceed actual expenses | I've been in a very similar situation to yours in the past. Since the company is reimbursing you at a flat rate (I assume you don't need to provide documentation/receipts in order to be paid the per diem), it's not directly connected to the $90 in expenses that you mention. Unless they were taking taxes out that would need to be reimbursed, the separate category for Assets:Reimbursable:Gotham City serves no real purpose, other than to categorize the expenses. Since there is no direct relationship between your expenses and the reimbursement, I would list them as completely separate transactions: Later, if you needed to locate all of the associated expenses with the Gotham trip, gnucash lets you search on memo text for "Gotham" and will display all of the related transactions. This is a lot cleaner than having to determine what piece of the per diem goes to which expenses, or having to create a new Asset account every time you go on a trip. |
Valuing a small business to invest in | There is nothing fair / unfair in such deals. It is an art than a science. what kind of things should be considered, to work out what would be a fair percentage stake A true fair value is; take the current valuation of the company [This can be difficult if it is small and does not maintain proper records]. Divide by number of shares, that is the value of share and you should 20K worth of such shares. But then there is risk premium. You are taking a risk that an small start-up may do exceedingly well ... or it may close off. This risk premium is what is negotiated. It depends on how desperate the owner of the small company is; who all are interested in this specific deal ... if you want 30% share; someone else is ready to offer 20K for 15% of share. Or there is no one willing to lend 20K as they don't believe it will make money ... and the owner is desperate, you may even get 50%. |
Buying my first car out of college | nan |
In a house with shared ownership, if one person moves out and the other assumes mortgage, how do we determine who owns what share in the end? | I second (or fifth?) the answers of the other users in that this should have been foreseen and discussed prior to entering the partnership. But to offer a potential solution: If the mortgage company allows you to assume the whole mortgage (big if) you could buy the other partner out. To determine what a fair buyout would be, take the current value of the house less the remaining mortgage to get the current equity. Half that is each partner's current gain (or potentially loss), and could be considered a fair buyout. At this point the partner realizes any gains made in the last 5 years, and from now on the whole house (and any future gains or losses) will be yours. Alternatively your partner could remain a full partner (if s/he so desires) until the house sells. You would see the house as a separate business, split the cost as you have, and you would pay fair market rent each month (half of which would come back to you). A third option would be to refinance the house, with you as a sole mortgage holder. To factor in how much your partner should receive out of the transaction, you can take his/her current equity and subtract half of the costs associated with the refi. I would also recommend both of you seek out the help of a real estate lawyer at this point to help you draft an agreement. It sounds like you're still on good terms, so you could see a lawyer together; this would be helpful because they should know all the things you should look out for in a situation like this. Good luck! |
Mitigate Effects Of Credit With Tangible Money | If you have no credit history but you have a job, buying an inexpensive used car should still be doable with only a marginally higher interest rate on the car. This can be offset with a cosigner, but it probably isn't that big of a deal if you purchase a car that you can pay off in under a year. The cost of insurance for a car is affected by your credit score in many locations, so regardless you should also consider selling your other car rather than maintaining and insuring it while it's not your primary mode of transportation. The main thing to consider is that the terms of the credit will not be advantageous, so you should pay the full balance on any credit cards each month to not incur high interest expenses. A credit card through a credit union is advantageous because you can often negotiate a lower rate after you've established the credit with them for a while (instead of closing the card and opening a new credit card account with a lower rate--this impacts your credit score negatively because the average age of open accounts is a significant part of the score. This advice is about the same except that it will take longer for negative marks like missed payments to be removed from your report, so expect 7 years to fully recover from the bad credit. Again, minimizing how long you have money borrowed for will be the biggest benefit. A note about cosigners: we discourage people from cosigning on other people's loans. It can turn out badly and hurt a relationship. If someone takes that risk and cosigns for you, make every payment on time and show them you appreciate what they have done for you. |
Are parking spaces and garage boxes a good investment? | 15 years ago I bought a beach condo in Miami for $400,000 and two extra parking spaces for $3000 each. Today the condo is worth 600,000 but the rent barely covers mortgage repairs and property taxes. Most of The old people in the building have since died and are now replaced with families with at least two cars and spots are in short supply. I turned down offers of 25,000 for each parking space. I have the spaces rented out for $200 per month no maintenance for an 80% annual return on my purchase price and the value went has gone up over $700%. And no realtors commissions if i decide to sell the spaces. |
Does the low CAD positively or negatively impact Canadian Investors? | When you want to invest in an asset denominated by a foreign currency, your investment is going to have some currency risk to it. You need to worry not just about what happens to your own currency, but also the foreign currency. Lets say you want to invest $10000 in US Stocks as a Canadian. Today that will cost you $13252, since USDCAD just hit 1.3252. You now have two ways you can make money. One is if USDCAD goes up, two is if the stocks go up. The former may not be obvious, but remember, you are holding US denominated assets currently, with the intention of one day converting those assets back into CAD. Essentially, you are long USDCAD (long USD short CAD). Since you are short CAD, if CAD goes up it hurts you It may seem odd to think about this as a currency trade, but it opens up a possibility. If you want a foreign investment to be currency neutral, you just make the opposite currency trade, in addition to your original investment. So in this case, you would buy $10,000 in US stocks, and then short USDCAD (ie long CAD, short USD $10,000). This is kind of savvy and may not be something you would do. But its worth mentioning. And there are also some currency hedged ETFs out there that do this for you http://www.ishares.com/us/strategies/hedge-currency-impact However most are hedged relative to USD, and are meant to hedge the target countries currency, not your own. |
Should I pay cash or prefer a 0% interest loan for home furnishings? | A friend recently bought an 800€ TV on 0% financing. Sounded like a sensible thing to do. Why pay 800 when you can pay 80pm for 10 months? It took 30mins to set up the 'loan'. She had to sign all kinds of documents, giving away much personal information (age, employment info, income, email address etc). She now has a financial relationship with an institution which has nothing to do with the item purchased. She is bombarded with all kinds of financial offerings. She regrets taking out the finance. She had the money. The hassle and the unwanted links to banks make the deal unattractive. Perhaps she should have tried to make a cash deal... |
Wash sales and year end tax implications | Yes, the net effect is zero. If you own zero shares by Nov 30, for example, and don't buy any more shares by 12/31, the year is done, and nothing left to account for. |
Ballpark salary equivalent today of “healthcare benefits” in the US? | As others have said, it depends entirely on what benefits are provided, and how much of the cost of those benefits is paid by the employer and how much is paid by the employee, and compare that to what it would cost to obtain the necessary/equivalent coverage without employer assistance. In my case, my employer pays more than $10,000 per year toward the cost of medical, dental, vision, disability, and life insurance for myself and my family. That's almost 20% of the average total household income in my state, so it is not an insignificant amount at all. |
Is a “total stock market” index fund diverse enough alone? | You're missing the concept of systemic risk, which is the risk of the entire market or an entire asset class. Diversification is about achieving a balance between risk and return that's appropriate for you. Your investment in Vanguard's fund, although diversified between many public companies, is still restricted to one asset class in one country. Yes, you lower your risk by investing in all of these companies, but you don't erase it entirely. Clearly, there is still risk, despite your diversification. You may decide that you want other investments or a different asset allocation that reduce the overall risk of your portfolio. Over the long run, you may earn a high level of return, but never forget that there is still risk involved. bonds seem pretty worthless, at least until I retire According to your profile, you're about my age. Our cohort will probably begin retiring sometime around 2050 or later, and no one knows what the bond market will look like over the next 40 years. We may have forecasts for the next few years, but not for almost four decades. Writing off an entire asset class for almost four decades doesn't seem like a good idea. Also, bonds are like equity, and all other asset classes, in that there are different levels of risk within the asset class too. When calculating the overall risk/return profile of my portfolio, I certainly don't consider Treasuries as the same risk level as corporate bonds or high-yield (or junk) bonds from abroad. Depending on your risk preferences, you may find that an asset allocation that includes US and/or international bonds/fixed-income, international equities, real-estate, and cash (to make rebalancing your asset allocation easier) reduces your risk to levels you're willing to tolerate, while still allowing you to achieve returns during periods where one asset class, e.g. equities, is losing value or performing below your expectations. |
Do I have to explain the source of *all* income on my taxes? | This is a case where you sit down with an advisor or two. There are legal, and tax issues. When you deposit the cash, or buy a car with it, the large cash transaction will trigger a notice to the US Government. So they will eventually find out. Before you get to that point you need to know what obligations and consequences you will be facing. Because you don't know if it was a gift, or found money, or if the owner will be back looking for you to return it; therefore you need expert advice. |
How can I get the most value from my employer's ESPP? | A 15% discount does not necessarily mean it is a good investment. The stock price can go down at any point. 15% discount might mean you are getting a little better deal than the average cat. |
Value of credit score if you never plan to borrow again? | what are the incentives to that person to actually pay off his/her debt as opposed to just walking away from it and relying on the cash (s)he has for the future spending needs as opposed to borrowing Well, you can't just "walk away" from debt - you still owe it. Eventually your creditors would end up suing you in court for the money, plus interest owed. I suppose you could try to continually duck the authorities, but you'd still owe the money legally. |
Do I only have to pay income tax on capital gains? | On the revenue only. This amount of 10$ will be considered as interest and fully taxable. It will not be a capital gain. But why would you decide to declare it as an income? 100$ is insignificant. If you lend small amount to friends it cannot be considered a lending business. |
Did basically all mutual funds have a significant crash in 2008? | In 2008, the S&P was down 37%. I love charts that show sector performance by year, as it helps show that 2008 wasn't like the crash of 2000-01 which was more tech-centric. Funds that were more geared towards bonds would have been up as the 10 year Treasury was up 20%. I understand you have a low risk tolerance. Over the long term, this will cost you. The CAGR for the S&P from 1928-2011 was 9.23%, for treasuries, 5.14%. This difference adds up dramatically over time. These rates double your stock investments every 8 years on average vs nearly 14 years for bonds. See the MoneyChimp site to tinker with start/finish years to understand long term returns. |
What is the P/E ratio for a company with negative earnings? | Usually their PE ratio will just be listed as 0 or blank. Though I've always wondered why they don't just list the negative PE as from a straight math standpoint it makes sense. PE while it can be a useful barometer for a company, but certainly does not tell you everything. A company could have negative earnings for a lot of reasons, some good and some bad. The company could just be a bad company and could be losing money hand over fist, or the company could have had a one time occurrence such as a big acquisition or some other event that just affected this years earnings, or they could be an awesome high growth company that is heavily investing for their future and forgoing locking in profits now for much bigger profits in the future. Generally IPO company's fall into that last category as they are going public usually because they want an influx of cash that they are going to use to grow the company much more rapidly. So they are likely already taking all incoming $$ and taking on debt to grow the company and have exceeded all of those options and that's when they turn to the stock market for the additional influx of cash, so it is very common for these companies not to have earnings. Now you just have to decide if that company is investing that money wisely and will in the future translate to actual earnings. |
How is not paying off mortgage better in normal circumstances? | One way of looking at it is that your equity in your house is an investment in a particular class of asset, and investing further in that asset class may drive you away from, rather than towards, your preferred asset mix. It's pretty common here in New Zealand for people's only investments to be their homes and rental properties. I wish those people luck when our current property boom ends. |
Stocks in India, what is the best way to get money to US | Convert the money into United States Dollars, put it in an NRE account in India and get 5% per annum for the USD. |
Exotic Car Flipping as a Strategic Investment? (US-CAN) | You can greatly reduce the risk if you can line up a buyer prior to purchasing the car. That kind of thing is common in business, one example is drop shipping. Also there are sales companies that specialize in these kinds of things bringing manufacturers of goods together with customers. The sales companies never take delivery of the product, just a commission on the sales. From this the manufacturers are served as they have gained a customer for their goods. The buying company is served as they can make a "better" end product. The two parties may have not been brought together had it not been for the sales company so on some level both are happy to pay for the service. Can you find market inequalities and profit from them? Sure. I missed a great opportunity recently. I purchased a name brand shirt from a discount store for $20. Those shirts typically sell on ebay for $80. I should have cleaned out that store's inventory, and I bet someone else did as by the time I went back they were gone. That kind of thing was almost risk-less because if the shirts did not sell, I could simply return them for the full purchase price. That and I can afford to buy a few hundred dollars worth of shirts. Can you afford to float 45K CDN? What if it takes a year to sell the car? What if the economy goes sour and you are left "holding the bag"? Why are not car dealers doing exactly what you propose? Here in the US this type of thing is called "horse trading" and is very common. I've both lost and made money on these kind of deals. I would never put a significant amount of my net worth at risk. |
How does refinancing work? | A re-financing, or re-fi, is when a debtor takes out a new loan for the express purpose of paying off an old one. This can be done for several reasons; usually the primary reason is that the terms of the new loan will result in a lower monthly payment. Debt consolidation (taking out one big loan at a relatively low interest rate to pay off the smaller, higher-interest loans that rack up, like credit card debt, medical bills, etc) is a form of refinancing, but you most commonly hear the term when referring to refinancing a home mortgage, as in your example. To answer your questions, most of the money comes from a new bank. That bank understands up front that this is a re-fi and not "new debt"; the homeowner isn't asking for any additional money, but instead the money they get will pay off outstanding debt. Therefore, the net amount of outstanding debt remains roughly equal. Even then, a re-fi can be difficult for a homeowner to get (at least on terms he'd be willing to take). First off, if the homeowner owes more than the home's worth, a re-fi may not cover the full principal of the existing loan. The bank may reject the homeowner outright as not creditworthy (a new house is a HUGE ding on your credit score, trust me), or the market and the homeowner's credit may prevent the bank offering loan terms that are worth it to the homeowner. The homeowner must often pony up cash up front for the closing costs of this new mortgage, which is money the homeowner hopes to recoup in reduced interest; however, the homeowner may not recover all the closing costs for many years, or ever. To answer the question of why a bank would do this, there are several reasons: The bank offering the re-fi is usually not the bank getting payments for the current mortgage. This new bank wants to take your business away from your current bank, and receive the substantial amount of interest involved over the remaining life of the loan. If you've ever seen a mortgage summary statement, the interest paid over the life of a 30-year loan can easily equal the principal, and often it's more like twice or three times the original amount borrowed. That's attractive to rival banks. It's in your current bank's best interest to try to keep your business if they know you are shopping for a re-fi, even if that means offering you better terms on your existing loan. Often, the bank is itself "on the hook" to its own investors for the money they lent you, and if you pay off early without any penalty, they no longer have your interest payments to cover their own, and they usually can't pay off early (bonds, which are shares of corporate debt, don't really work that way). The better option is to keep those scheduled payments coming to them, even if they lose a little off the top. Often if a homeowner is working with their current bank for a lower payment, no new loan is created, but the terms of the current loan are renegotiated; this is called a "loan modification" (especially when the Government is requiring the bank to sit down at the bargaining table), or in some cases a "streamlining" (if the bank and borrower are meeting in more amicable circumstances without the Government forcing either one to be there). Historically, the idea of giving a homeowner a break on their contractual obligations would be comical to the bank. In recent times, though, the threat of foreclosure (the bank's primary weapon) doesn't have the same teeth it used to; someone facing 30 years of budget-busting payments, on a house that will never again be worth what he paid for it, would look at foreclosure and even bankruptcy as the better option, as it's theoretically all over and done with in only 7-10 years. With the Government having a vested interest in keeping people in their homes, making whatever payments they can, to keep some measure of confidence in the entire financial system, loan modifications have become much more common, and the banks are usually amicable as they've found very quickly that they're not getting anywhere near the purchase price for these "toxic assets". Sometimes, a re-fi actually results in a higher APR, but it's still a better deal for the homeowner because the loan doesn't have other associated costs lumped in, such as mortgage insurance (money the guarantor wants in return for underwriting the loan, which is in turn required by the FDIC to protect the bank in case you default). The homeowner pays less, the bank gets more, everyone's happy (including the guarantor; they don't really want to be underwriting a loan that requires PMI in the first place as it's a significant risk). The U.S. Government is spending a lot of money and putting a lot of pressure on FDIC-insured institutions (including virtually all mortgage lenders) to cut the average Joe a break. Banks get tax breaks when they do loan modifications. The Fed's buying at-risk bond packages backed by distressed mortgages, and where the homeowner hasn't walked away completely they're negotiating mortgage mods directly. All of this can result in the homeowner facing a lienholder that is willing to work with them, if they've held up their end of the contract to date. |
What is a financial security? | First, realize that Wikipedia is written by individuals, just like this board has thousands of members. The two definition were written and edited by different people, most likely. Think Venn diagram. The definition for financial instruments claims that it's the larger set, and securities is contained in a subset. Comparing the two, it seems pretty consistent. Yes, Securities include derivatives. Transferable is close to tradable, although to me tradable implies a market as compared to private transfers. I don't believe there's an opposite, per se, but there's 'other stuff.' My house has value, but is not a security. My coffee cup has no value. Back to the concept of Venn. There aren't really opposites, just items falling outside the set we're discussing. I'd caution, this is a semantic exercise. If you know what you're buying, a stock, a bond, a gold bar, etc, whether it's a financial instrument or security doesn't matter to you. |
How are long-term/short-term capital gains tax calculated on restricted stock? | Is the Grant Date or the Vest Date used when determining the 12-month cutoff for long-term and short-term capital gains? You don't actually acquire the stock until it's vested, so that is the date and price used to determine your cost basis and short-term/long-term gain/loss. The grant date really has no tax bearing. If you held the stock (time between vesting and sale) for more than one year you will owe long-term CG tax, if less than one year you will owe short-term CG tax. |
Ongoing things to do and read to improve knowledge of finance? | For learning about finances my main two financial resources are this site, and the Motley Fool. My secondary sources are keeping up with columns by my favourite economic journalists - in the press in the US, Australia, England, and India. Regarding your comment about feeling green on the basics despite the reading - you're not alone. I've been interested in financials for better than 10 years, but there are a lot of questions on this site where I say to myself, "I've no idea of what the answer could be, what are our resident experts saying?" Having said that, there are some topics where I feel as though I can weigh in - and they tend to be where I have a little book knowledge and a lot of personal experience. |
Looking for suggestions for relatively safe instruments if another crash were to happen | Nobody has a "crash proof" portfolio -- you can make it "crash resistant". You protect against a crash by diversifying and not reacting out of fear when the markets are down. Be careful about focusing on the worst possible scenario (US default) vs. the more likely scenarios. Right now, many people think that inflation and interest rates are heading up -- so you should be making sure that your bond portfolio is mostly in short-duration bonds that are less sensitive to rate risk. Another risk is opportunity cost. Many people sold all of their equities in 2008/2009, and are sitting on lots of money in cash accounts. That money is "safe", but those investors lost the opportunity to recoup investments or grow -- to the tune of 25-40%. |
Is there an advantage to keeping a liquid emergency fund if one also has an untapped line of credit? | Let me offer what I did in a similar situation - Two points (a) we were banking $20K/yr or so to the cash fund, 2 good incomes, and the ability to go indefinitely on just one of the 2. (b) A HELOC that was prime-1.5%. The result was to mentally treat the HELOC as our emergency fund, but to enjoy the interest savings of over $16,500/yr for the $100K that had a sub-1% return. When I first referenced this story, I came under criticism. Fair enough, it's not for everyone. Let's jump ahead. We owe $228K @3.5%. We had tapped the equity line for brief periods, but never over $20,000. When we lost our jobs, both of us, we had hit our number and are semi-retired now. Our retirement budget included the current mortgage payment, so we are in line for that dropping out of the budget in 12 years, and starting social security after that, which I did not include as part of the budget. Note - when we lost our jobs, the severance was 6 month's pay, and we collected unemployment as well. The first 12 months were covered without tapping our retirement funds at all. So, to Nick's point (and excellent answer) our first line of defense against unemployment was this combination of severance and unemployment insurance. |
What do I need to do to form an LLC? | You can file an LLC yourself in most states, although it might be helpful to use a service if you're not sure what to do to ensure it is correct. I filed my LLC here in Colorado online with the Secretary of State's office, which provided the fill-in-the-blank forms and made it easy. In the U.S., taxation of an LLC is "pass-through", meaning the LLC itself does not have any tax liability. Taxes are based on what you take out of the LLC as distributions to yourself, so you pay personal income tax on that. There are many good books on how to form and then operate an LLC, and I personally like NoLo (link to their web site) because they cater to novices. As for hiring people in India, I can't speak to that, so hopefully someone else can answer that specific topic. As for what you need to know about how to run it, I'll refer back to the NoLo books and web site. |
How to calculate car insurance quote | Question 1: Yes Question 2: There is no simple formula. Car insurance is mostly Statistics, because you have so many millions of cases that the variance is really low. This also means that, because the cost can be estimated so precisely, it is difficult to make an offer better than the competitors. For that reason every insurance company makes there own, arbitrary, segmentation of the data which leads them identify low risk groups they can offer a bonus to. Common ones are type of car or and driving experience, but it could be anything that is not forbidden by anti-discrimination-laws. Also additional perks like towing insurance etc. may give them an opportunity do differentiate themselves or to make easy profit. In fact it is a common tactic to offer prices that make close to no profit to fill up your book, then raise tariffs in then following years an make you profit with those who are to lazy to switch. |
Why do some companies offer 401k retirement plans? | IRA is not always an option. There are income limits for IRA, that leave many employees (those with the higher salaries, but not exactly the "riches") out of it. Same for Roth IRA, though the MAGI limits are much higher. Also, the contribution limits on IRA are more than three times less than those on 401K (5K vs 16.5K). Per IRS Publication 590 (page 12) the income limit (AGI) goes away if the employer doesn't provide a 401(k) or similar plan (not if you don't participate, but if the employer doesn't provide). But deduction limits don't change, it's up to $5K (or 100% of the compensation, the lesser) even if you're not covered by the employers' pension plan. Employers are allowed to match the employees' 401K contributions, and this comes on top of the limits (i.e.: with the employers' matching, the employees can save more for their retirement and still have the tax benefits). That's the law. The companies offer the option of 401K because it allows employee retention (I would not work for a company without 401K), and it is part of the overall benefit package - it's an expense for the employer (including the matching). Why would the employer offer matching instead of a raise? Not all employers do. My current employer, for example, pays above average salaries, but doesn't offer 401K match. Some companies have very tight control over the 401K accounts, and until not so long ago were allowed to force employees to invest their retirement savings in the company (see the Enron affair). It is no longer an option, but by now 401K is a standard in some industries, and employers cannot allow themselves not to offer it (see my position above). |
Why will the bank only loan us 80% of the value of our fully paid for home? | Imagine the bank loaning 100% of the sum of money you needed to buy a house, if the valuation of the house decreases to 90% of the original price after 3 months, would it be unfair for them to ask them for 10% of the original price from you immediately? I suppose the rationale for loaning 80% is so that you will fork our 20% first, and so your property is protected from fluctuations in the market, that they do not need to collect additional money from you as your housing valuation rarely drops below 80% of the original price. Banks do need to make money too, as they run as a business. |
How to start personal finances? | Personal finances are not intuitive for everyone, and it can be a challenge to know what to do when you haven't been taught. Congratulations on recognizing that you need to make a change. The first step that I would recommend is what you've already done: Assemble your bank statements so you can get an accurate picture of what money you currently have. Keep organized folders so you can find your bank statements when you need them. In addition to the bank statements for your checking and savings accounts, you also need to assess any debt that you have. Have you taken out any loans that need to be paid back? Do you have any credit card debt? Make a list of all your debts, and make sure that you have folders for these statements as well. Hopefully, you don't have any debts. But if you are like most people, you owe money to someone, and you may even owe more money than you currently have in your bank accounts. If you have debts, fixing this problem will be one of your goals. No matter what your debt is, you need to make sure that from now on, you don't spend more money than you take in as income. To do this, you need to make a budget. A budget is a plan for spending your money. To get started with a budget, make a list of all the income you will receive this month. Add it up, and write that amount at the top of a page. Next, you want to make a list of all the expenses you will have this month. Some of these expenses are more or less fixed: rent, utility bills, etc. Write those down first. Some of the expenses you have more control over, such as food and entertainment. Give yourself some money to spend on each of these. You may also have some larger expenses that will happen in the future, such as a tuition or insurance payment. Allocate some money to those, so that by the time that payment comes around, you will have saved enough to pay for those expenses. If you find that you don't have enough income to cover all of your expenses in a month, you need to either reduce your expenses somewhere or increase your income until your budget is at a point where you have money left over at the end of each month. After you've gotten to this point, the next step is figuring out what to do with that extra money left over. This is where your goals come into play. If you have debt, I recommend that one of your first goals is to eliminate that debt as fast as possible. If you have no money saved, you should make one of your goals saving some money as an emergency fund. See the question Oversimplify it for me: the correct order of investing for some ideas on what order you should place your goals. Doing the budget and tracking all of your spending on paper is possible, but many people find that using the right software to help you do this is much easier. I have written before on choosing budgeting software. All of the budgeting software packages I mentioned in that post are from the U.S., but many of them can successfully be used in Europe. YNAB, the program I use, even has an unofficial German users community that you might find useful. One of the things that budgeting software will help you with is the process of reconciling your bank statements. This is where you go through the bank statement each month and compare it to your own record of spending transactions in your budget. If there are any transactions that appear in the statement that you don't have recorded, you need to figure out why. Either it is an expense that you forgot to record, or it is a charge that you did not make. Record it if it is legitimate, or dispute the expense if it is fraudulent. For more information, look around at some of the questions tagged budget. I also recommend the book The Total Money Makeover by Dave Ramsey, which will provide more help in making a budget and getting out of debt. |
How to prevent myself from buying things I don't want | Since these are specific items that you don't really want to buy, it might help to figure out what you could spend that money on that you DO really want. It sounds like right now you are thinking "Wow, I can get this widget (that I don't really want) for so cheap with this discount code!" Try changing your thinking to something along the lines of "This widget is pretty cool, but I could buy this doodad that I really want instead" or "This widget is nice, but if I don't buy it, I could have a latte every other day this month." I've found this to be a very effective technique-- and I often don't end up buying the doodads or lattes either. It's just a good way to put the cost of your purchase in perspective. The other thing I do when I want something is to write it down and revisit it a week or so later. If I still want it and I still have the budget for it (and especially if I've skipped other purchases to save up for it), then I buy it. That advice doesn't sound like it will work for you though, since it sounds like you've wanted to buy these things for a long time. So... are you REALLY sure you don't want them, or do you just not want to want them? |
Should I pay half a large balance this month before I get my CC statement? | From what I have heard on Clark Howard if you pay your balance off before the statement's closing date it will help your utilization score. He has had callers confirm this but I don't have first hand knowledge for this to be true. Also this will take two months to make the difference. So it will be boarder line if you will get the benefit in time. Sign up for credit karma if you like. You can get suggestions on how to help your score. |
What is a good way to keep track of your credit card transactions, to reduce likelihood of fraud? | Read your bill, question things that don't look familiar. People who steal credit card numbers don't bother to conceal themselves well. So if you live in Florida, and all of the sudden charges appear in Idaho, you should investigate. Keeping charge slips seems counter-productive to me. I already know that I bought gasoline from the station down the street, a slip of paper whose date may or may not align with the credit card bill is not very useful. The half-life for a stolen card is hours. So you tend to see a bunch of charges appearing quickly. If someone is stealing $20 a week from you over an extended period of time, the theif is probably someone you live or work with, and paper slips won't help you there either. |
Can a dividend reinvestment plan (DRIP) and share purchase plan (SPP) be used with a TFSA? | You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not be a TFSA but you can perform what's called an "in-kind" transfer to move them into a TFSA that you open with either the same brokerage firm, or a different one. There will be a fee for the transfer - check with the brokerage that currently holds the stock to find out how costly that will be. Assuming the stock gained in value while you held it outside the TFSA, this transfer will result in capital gains tax that you'll have to pay when you file your taxes for the year in which the transfer occurs. The tax would be calculated by taking the value at time of transfer, minus the purchase price (or the market value at time of purchase, if your plan allowed you to buy it at a discounted price; the discounted amount will be automatically taxed by your employer). 50% of the capital gain is added to your annual income when calculating taxes owed. Normally when you sell a stock that has lost value, you can actually get a "capital loss" deduction that is used to offset gains that you made in other stocks, or redeemed against capital gains tax paid in previous years, or carried forward to apply against gains in future years. However, if the stock decreased in value and you transfer it, you are not eligible to claim a capital loss. I'm not sure why you said "TFSA for a family member", as you cannot directly contribute to someone else's TFSA account. You can give them a gift of money or stocks, which they can deposit in their TFSA account, but that involves that extra step of gifting, and the money/stocks become their property to do with as they please. Now that I've (hopefully) answered all your questions, let me offer you some advice, as someone who also participates in an employee stock purchase plan. Holding stock in the company that you work for is a bad idea. The reason is simple: if something terrible happens to the company, their stock will plummet and at the same time they may be forced to lay off many employees. So just at the time when you lose your job and might want to sell your stock, suddenly the value of your stocks has gone way down! So you really should sell your company shares at least once a year, and then use that money to invest in your TFSA account. You also don't want to put all your eggs in one basket - you should be spreading your investment among many companies, or better yet, buy index mutual funds or ETFs which hold all the companies in a certain index. There's lots of good info about index investing available at Canadian Couch Potato. The types of investments recommended there are all possible to purchase inside a TFSA account, to shelter the growth from being taxed. EDIT: Here is an article from MoneySense that talks about transferring stocks into a TFSA. It also mentions the importance of having a diversified portfolio! |
Free Historical Commodity Prices in txt? | Goldprice.org has different currencies and historical data. I think silverprice.org also has historical data. |
Ballpark salary equivalent today of “healthcare benefits” in the US? | There is some magic involved in that calculation, because what health insurance is worth to you is not necessarily the same it is worth for the employer. Two examples that illustrate the extreme ends of the spectrum: let's say you or a family member have a chronic or a serious illness, especially if it is a preexisting condition - for instance, cancer. In that case, health insurance can be worth literally millions of dollars to you. Even if you are a diabetic, the value of health insurance can be substantial. Sometimes, it could even make financial sense in that case to accept a very low-paying job. On the other extreme of the scale, if you are very young and healthy, many people decide to forego insurance. In that case, the value of health insurance can be as little as the penalty (usually, 2% of your taxable income, I believe). |
Should market based health insurance premiums be factored into 6 months emergency fund savings? | Yes, it should be. As, where one has insurance, its an expense one would expect one to continue to incur in a normal budgetary emergency, even drop in the extreme. |
How common are stock/scrip dividends (as opposed to cash dividends) in US equity markets? | There's not usually a point to issuing new stock as a dividend, because if you issue new stock, it dilutes the existing shareholders by the exact same amount as the dividend: so now they have a few more shares, great, but they're worth the exact same amount. (This assumes that all stockholders are equal. If there are multiple share classes, or people whose rights to a stock are tied to the stock price in some manner - options, warrants, or something - then a properly structured stock dividend could serve to enrich one set of shareholders and other rights-holders at the expense of another. But this is usually illegal.) If this sort of dividends are popular in China, I suspect it is due to some freaky regulatory or tax-related circumstances which are not present in the United States markets. China is kind of notorious for having unusual capital controls, limitations on the exchange of currency, and markets which are not very transparent. |
What is the best asset allocation for a retirement portfolio, and why? | It's all about risk. These guidelines were all developed based on the risk characteristics of the various asset categories. Bonds are ultra-low-risk, large caps are low-risk (you don't see most big stocks like Coca-Cola going anywhere soon), foreign stocks are medium-risk (subject to additional political risk and currency risk, especially so in developing markets) and small-caps are higher risk (more to gain, but more likely to go out of business). Moreover, the risks of different asset classes tend to balance each other out some. When stocks fall, bonds typically rise (the recent credit crunch being a notable but temporary exception) as people flock to safety or as the Fed adjusts interest rates. When stocks soar, bonds don't look as attractive, and interest rates may rise (a bummer when you already own the bonds). Is the US economy stumbling with the dollar in the dumps, while the rest of the world passes us by? Your foreign holdings will be worth more in dollar terms. If you'd like to work alternative asset classes (real estate, gold and other commodities, etc) into your mix, consider their risk characteristics, and what will make them go up and down. A good asset allocation should limit the amount of 'down' that can happen all at once; the more conservative the allocation needs to be, the less 'down' is possible (at the expense of the 'up'). .... As for what risks you are willing to take, that will depend on your position in life, and what risks you are presently are exposed to (including: your job, how stable your company is and whether it could fold or do layoffs in a recession like this one, whether you're married, whether you have kids, where you live). For instance, if you're a realtor by trade, you should probably avoid investing too much in real estate or it'll be a double-whammy if the market crashes. A good financial advisor can discuss these matters with you in detail. |
Is a “total stock market” index fund diverse enough alone? | Brendan, The short answer is no, there is no need to get into any other funds. For all intents and purposes the S&P 500 is "The Stock Market". The news media may quote the Dow when the market reaches new highs or crashes but all of the Dow 30 stocks are included in the S&P 500. The S&P is also marketcap weighted, which means that it owns in higher proportion the big "Blue Chip" stocks more than the smaller less known companies. To explain, the top 10 holdings in the S&P represent 18% of the total index, while the bottom 10 only represent 0.17% (less than 1 percent). They do have an equal weighted S&P in which all 500 companies represent only 1/500th of the index and that is technically even more diversified but in actuality it makes it more volatile because it has a higher concentration of those smaller less known companies. So it will tend to perform better during up markets and worse during down markets. As far as diversification into different asset classes or other countries, that's non-sense. The S&P 500 has companies in it that give you that exposure. For example, it includes companies that directly benefit from rising oil prices, rising gold prices, etc known as the Energy and Materials sector. It also includes companies that own malls, apartment complexes, etc. known as the Real Estate sector. And as far as other countries, most of the companies in the S&P are multi-national companies, meaning that they do business over seas in many parts of the world. Apple and FaceBook for example sell their products in many different countries. So you don't need to invest any of your money into an Emerging Market fund or an Asia Fund because most of our companies are already doing business in those parts of the world. Likewise, you don't need to specifically invest into a real estate or gold fund. As far as bonds go, if you're in your twenties you have no need for them either. Why, because the S&P 500 also pays you dividends and these dividends grow over time. So for example, if Microsoft increases its dividend payment by 100% over a ten year period , all of the shares you buy today at a 2.5% yield will, in 10 years, have a higher 5% yield. A bond on the other hand will never increase its yield over time. If it pays out 4%, that's all it will ever pay. You want to invest because you want to grow your money and if you want to invest passively the fastest way to do that is through index ETFs like the $SPY, $IVV, and $RSP. Also look into the $XIV, it's an inverse VIX ETF, it moves 5x faster than the S&P in the same direction. If you want to actively trade your money, you can grow it even faster by getting into things like options, highly volatile penny stocks, shorting stocks, and futures. Don't get involved in FX or currency trading, unless it through futures. |
Should I open a credit card when I turn 18 just to start a credit score? | Assuming I only use it to buy things I can afford (which I trust myself to do), essentially treating it as a debit card, is this a good idea? This is definitely a good idea. From my own experience, before I got my first credit card through my local bank (age 18), I tired to apply for a card that has cash back rewards and was rejected because I didn't have any credit history. After I had the card from my bank for 6 months, I applied for this Capital One card that I've had ever since. |
How does giving to charity work? | A simpler view is that tax deductions allow you to give to charities from your gross salary, not your net salary. |
What are the advantages/disadvantages of a self-directed IRA? | Our company does a lot of research on the self-directed IRA industry. We also provide financial advice in this area. In short, we have seen a lot in this industry. You mentioned custodian fees. This can be a sore spot for many investors. However, not all custodians are expensive, you should do your research before choosing the best one. Here is a list of custodians to help with your research Here are some of the more common pros and cons that we see. Pros: 1) You can invest in virtually anything that is considered an investment. This is great if your expertise is in an area that cannot be easily invested in with traditional securities, such as horses, private company stock, tax liens and more. 2) Control- you have greater control over your investments. If you invest in GE, it is likely that you will not have much say in the running of their business. However, if you invest in a rental property, you will have a lot of control over how the investment should operate. 3) Invest in what you know. Peter lynch was fond of saying this phrase. Not everyone wants to invest in the stock market. Many people won't touch it because they are not familiar with it. Self-directed IRAs allow you to invest in assets like real estate that you know well. Cons: 1) many alternative investments are illiquid. This can present a problem if you need to access your capital for withdrawals. 2) Prohibited transactions- This is a new area for many investors who are unfamiliar with how self-directed IRAs work 3) Higher fees- in many cases, the fees associated with self-directed IRA custodians and administrators can be higher. 4) questionable investment sponsors tend to target self-directed IRA owners for fraudulent investments. The SEC put out a good PDF about the risks of fraud with self-directed IRAs. Self Directed IRAs are not the right solution for everyone, but they can help certain investors focus on the areas they know well. |
As a sole proprietor can I charge a fee for being paid by check or card | You can charge a fee to accept checks, although I think the better solution might be to offer a small discount for early payment of your invoices. As some people here have suggested, why not add a small bit to your fees to begin with to cover your inconvenience in the case they choose to pay by check? I often will give clients a small discount of 1.5% for paying my invoices within 10 days, which does motivate some to pay sooner, depending on the client and the amount of the invoice. If you've already added a small amount to your fees in the first place then providing the discount is good public relations that doesn't actually cost you anything. You can always add a "convenience fee" for accepting checks, but this is a more negative approach, as though you're penalizing the client for paying by check rather than electronically. Some people do see it this way, despite any efforts you make to explain otherwise. As to your question about adding fees for accepting credit cards, be very careful! There are sometimes state or local laws on this, and you could find yourself in trouble very quickly if you run afoul of one. Here's a good article to read on the subject: Adding fees for accepting credit cards from CreditCards.com Site I hope this is helpful. Good luck! |
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