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What are the gains from more liquidity in ETF for small investors? | ETFs are both liquid (benefits active traders) and a simple way for people to invest in funds even if they don't have the minimum balance needed to invest in a mutual fund (EDIT: in which purchases are resolved at the end of the trading day). One big difference between ETFs and mutual funds is that you must buy ETFs in... |
Starting a side business slowly | This is a great question! I've been an entrepreneur and small business owner for 20+ years and have started small businesses in 3 states that grew into nice income streams for me. I've lived off these businesses for 20+ years, so I know it can be done! First let me start by saying that the rules, regulations, requireme... |
How can I improve my credit score if I am not paying bills or rent? | For those who are looking to improve credit for the sake of being able to obtain future credit on better terms, I think a rewards credit card is the best way to do that. I recommend that you only use as many cards as you need to gain the best rewards. I have one card that gives 6% back on grocery purchases, and I have ... |
“In-the-Money” vs “Out-of-the-Money” Call Options | First, welcome to Money.SE. The selected page is awful. I don't know the value in listing different expirations at the same strike. Usually, all the strikes are grouped by month, so I'd be looking at Jan '15 across all strikes. "In the money" means the price of a stock is trading above the strike price, if a call, or... |
Return of value to shareholders in an ISA | You will receive a combination of Verizon shares and cash whether you chose option B or C. Option B means that your "Return of Value" will be treated as capital - ie: as a capital gain. Option C means that your "Return of Value" will be treated as income - ie: as a dividend. As your ISA has favourable tax status, you d... |
Covered calls: How to handle this trade? | I would expect that your position will be liquidated when the option expires, but not before. There's probably still some time value so it doesn't make sense for the buyer to exercise the option early and take your stock. Instead they could sell the option to someone else and collect the remaining time value. Occasiona... |
Price graphs: why not percent change? | Actually, total return is the most important which isn't necessarily just price change as this doesn't account for dividends that may be re-invested. Thus, the price change isn't necessarily that useful in terms of knowing what you end up with as an ending balance for an investment. Secondly, the price change itself m... |
Do stock prices drop due to dividends? | I would say that the answer is yes. Investors may move on purchasing a stock as a result of news that a stock is set to pay out their dividend. It would be interesting to analyze the trend based on a company's dividend payouts over 10 or so years to see what/how this impacts the market value of a given company. |
Should I move my money market funds into bonds? | There is a thing called the Sharpe Ratio. This Ratio takes return/risk with risk being defined as the standard deviation of prices over time. According to Financial theory the investment with the highest (best) Sharpe Ratio is a market portfolio. Technically accepting the lower risk of a treasury is accepting an amplif... |
If I have a home loan preapproval letter for x, can the seller know this without me explicitely telling them? | The seller has a legitimate desire to know of your preapproval. I have two current anecdotes on this issue. As a realtor helping a client buy a home, I worked closely with buyer's bank, and got a pre-approval for the amount we were offering. When there was a counteroffer, and we were going to raise the price, the bank ... |
How to calculate how far a shorted stock's price can rise before broker issues a margin call? | Most brokers have a margin maintenance requirement of 30%. In your example, it would depend on how much money you're borrowing from your broker on margin. Consider this: You have $250, and short AAPL at $500 on margin. This would be a common scenario (federal law requires investors to have at least 50% of their margin... |
I have $10,000 sitting in an account making around $1 per month interest, what are some better options? | Put the whole lot into a couple of low-cost broad index funds with dividends reinvested (also known as accumulation funds) and then don't look at them. Invest through a low-cost broker. There are a number to choose from and once you start googling around the theme of "index fund investing" you'll find them. The S&P 500... |
How do you calculate the rate of return (ROR) when buying and selling put options? | What Jaydles said. I think of each strategy in terms of Capital at Risk (CaR). It's a good thing to know when considering any position. And then conveniently, the return is always profit / CaR. With covered calls it's pretty easy. Pay $1000 for stock, receive $80 in premium, net CaR is $920. If you own the stock and w... |
Estimated Tax on Unplanned Capital Gains | In general, you are expected to pay all the money you owe in taxes by the end of the tax year, or you may have to pay a penalty. But you don't have to pay a penalty if: The amount you owe (i.e. total tax due minus what you paid in withholding and estimated taxes) is less than $1000. You paid at least 90% of your total ... |
If I buy a share from myself at a higher price, will that drive the price up so I can sell all my shares the higher price? | This probably won't be a popular answer due to the many number of disadvantaged market participants out there but: Yes, it is possible to distort the markets for securities this way. But it is more useful to understand how this works for any market (since it is illegal in securities markets where company shares are inv... |
Will there always be somebody selling/buying in every stock? | Well Company is a small assets company for example it has 450,000,000 shares outstanding and is currently traded at .002. Almost never has a bid price. Compare it to PI a relative company with 350 million marker cap brokers will buy your shares. This is why blue chip stock is so much better than small company because... |
Making higher payments on primary residence mortgage or rental? | You're in the same situation I'm in (bought new house, didn't sell old house, now renting out old house). Assuming that everything is stable, right now I'd do something besides pay down your new mortgage. If you pay down the mortgage at your old house, that mortgage payment will go away faster than if you paid down the... |
Why are Rausch Coleman houses so cheap? Is it because they don't have gas? | Research the company that is all I can say this company has horrible reviews. They show on their Facebook page great reviews but if you really look through all reviews the high ratings are from past and current employees. All other reviews from actual home owners are bad. They make a lot of false promises and build ver... |
What do the terms par value, purchase price, call price, call date, and coupon rate mean in the context of bonds? | Unless stated otherwise, these terms apply to all bonds. The par value or face value of a bond refers to the value of the bond when it's redeemed at maturity. A bond with a par value of $10,000 simply means that if you purchase the bond and hold it until the maturity date specified in the contract, you receive $10,000.... |
What are some good ways to control costs for groceries? | This may not help with the overall grocery issue, but I find that there are items that I can do without the name brand version of. A handy rule-of-thumb is to start with the least-expensive brand and work your way up, until you find one that your family likes. For instance, I've learned I can do without French's must... |
Calculating Pre-Money Valuation for Startup | Since you have no sales, I'd likely question how well could you determine the value of the company's assets in a reasonable fashion. You may be better to estimate sales and discount that back to a current valuation. For example, insurance companies could determine that if you wanted to be paid $x/month for the rest of ... |
Why doesn't the emerging markets index reflect GDP growth? | GDP being a measurement for an economy's growth and with the stock market being driven (mostly) by company profits you would expect a tight correlation between GDP growth and stock market performance. After all, a growing economy should lead to a corresponding increase in profit right? But the stock market is heavily i... |
Is it better to buy this used car from Craigslist or from a dealership? | The 200K vehicle is likely the better deal. Get your own mechanic to check it out. If it doesn't have major issues, it will likely cost you less. Why? Because you've wisely included $6000 in expected maintenance. Yet it has the possibility of not needing more than $500 of maintenance during the 4 years you plan on ... |
Do Americans really use checks that often? | In my business (estate planning law practice), probably 60-70% of my income is in the form of checks, with the balance as credit/debit cards. I prefer to get paid by check so I don't have to pay the approx 2.5% merchant fee, but I don't push clients to choose one method over the other. I offer direct deposit to my empl... |
Do ETF dividends make up for fees? | It depends. Dividends and fees are usually unrelated. If the ETF holds a lot of stocks which pay significant dividends (e.g. an S&P500 index fund) these will probably cover the cost of the fees pretty readily. If the ETF holds a lot of stocks which do not pay significant dividends (e.g. growth stocks) there may not be... |
Buying from an aggressive salesperson | From your question and how you have framed it, I get you find Agressive Sales tactics disturb the buying process for you. ;) I understand because I also find the whole process of Research / Negotiating / Buying / Owning / Using is all on one continuum, so anything that ruins the process will likely lose the sale or enj... |
Does the IRS give some help or leniency to first-time taxpayers? | No, there is no special leniency given to first time tax payers. In general, this shouldn't be an issue. The IRS collects your taxes out of every one of your paychecks throughout the entire year in what is called a Withholding Tax. The amount that the IRS withholds is calculated on your W-4 Form that you file with your... |
New to investing — I have $20,000 cash saved, what should I do with it? | My advice to you is not to take any advice from anyone when it comes to investing, especially when you don't know much about what you are investing in. mbhunter is correct, take your time to learn about what you want to invest in. If your goal at the moment is short term don't invest in stocks unless you really know wh... |
Do corporate stock splits negate share repurchase programs? | Companies do both quite often. They have opposite effects on the share price, but not on the total value to the shareholders. Doing both causes value to shareholders to rise (ie, any un-bought back shares now own a larger percentage of the company and are worth more) and drops the per-share price (so it is easier to ... |
T-mobile stock: difference between TMUSP vs TMUS | The difference between TMUSP and TMUS is that the "with P" ticker is for a TMobile Preferred Stock offering. The "without P" ticker is for TMobile common stock. The difference between the apparent percentage yields is due to Yahoo! Stock misreporting the dividend on the preferred stock for the common stock, which has... |
Option on an option possible? (Have a LEAP, put to me?) | I understand what you're asking for (you want to write options ON call options... essentially the second derivative of the underlying security), and I've never heard of it. That's not to say it doesn't exist (I'm sure some investment banker has cooked something like this up at some point), but if it does exist, you wou... |
How to share income after marriage and kids? | What equal percentage of both you and your girlfriend's income will cover the essential household expenses? Although we earned different amounts, both of us turned over half our income over to the household. Between us this percentage slice from each of our earnings neatly covered all the essentials. The amounts cont... |
Why is auto insurance ridiculously overpriced for those who drive few miles? | Not all miles carry the same amount of risk. A survey by Progressive indicated that accidents are most likely to occur within 5 miles of home, and 77% of accidents occur within 15 miles of home. Only 1% of accidents occurred 50 or more miles from home. That's from 2002, but it seems unlikely to have changed much. Since... |
What is a checking account and how does it work? | A checking account is one that permits the account holder to write demand drafts (checks), which can be given to other people as payment and processed by the banks to transfer those funds. (Think of a check as a non-electronic equivalent of a debit card transaction, if that makes more sense to you.) Outside of the abil... |
Annuities question - Equations of value | The solution is x = 8.92. This assumes that Chuck's six years of deposits start from today, so that the first deposit accumulates 10 years of gain, i.e. 20*(1 + 0.1)^10. The second deposit gains nine years' interest: 20*(1 + 0.1)^9 and so on ... If you want to do this calculation using the formula for an annuity du... |
Why do people buy stocks that pay no dividend? | There are many stocks that don't have dividends. Their revenue, growth, and reinvestment help these companies to grow, and my share of such companies represent say, one billionth of a growing company, and therefore worth more over time. Look up the details of Berkshire Hathaway. No dividend, but a value of over $100,0... |
Calculating Future Value: Initial deposit and recurring deposits of a fixed but different Value | Illustrating with a shorter example: Suppose I deposit 1,000 USD. Every year I deposit another 100 USD. I want to know how much money will be on that savings account in 4 years. The long-hand calculation is Expressed with a summation And using the formula derived from the summation (as shown by DJohnM) So for 20 yea... |
Why buy stock of a company instead of the holding company who has more than 99% of the stocks | Also VW has more brands, i.e. is more diversified This isn't necessarily a good thing for investing. It makes the company less likely to go down, but it limits your portfolio. For example, say you think that Hyundai is a good alternative to Volkswagen (VW) but really like Audi. If you buy VW, you get some Audi but a... |
How do I adjust to a new social class? | The prices reflect what the market will bear. People have more money, things will likely cost more. Think of it in terms of percentages and you can start to justify the higher housing costs. My father likes to tell me that his first mortgage cost him $75 a month, and he had no idea how he was going to pay it each mon... |
My investment account is increasingly and significantly underperforming vs. the S&P 500. What should I do? | Fire your fund manager. There are several passive funds that seek to duplicate the S&P 500 Index returns. They have lower management fees, which will make returns lower than S&P, and they have less risk by following a broadly diversified strategy (versus midcap growing stocks). There's also ETFs, but evidence is growin... |
How should I pay off my private student loans that have a lot of restrictions? | Excellent question and it is a debate that is often raised. Mathematically you are probably best off using option #1. Any money that is above and beyond minimum payments earns a pretty high interest rate, about 6.82% in the form of saved interest payments. The problem is you are likely to get discouraged. Personal f... |
How to tell if you can trust a loan company? | Look for people who have done business with them. If you don't know anyone who has used their services, look for a company that at least has a brick and mortar branch in your area. Being able to deal with them face to face is a must. Have you checked with your local bank? |
Understanding differences between S&P500 index-tracking ETFs | Back in the olden days, if you wanted to buy the S&P, you had to have a lot of money so you can buy the shares. Then somebody had the bright idea of making a fund that just buys the S&P, and then sells small pieces of it to investor without huge mountains of capital. Enter the ETFs. The guy running the ETF, of course, ... |
Accepting high volatility for high long-term returns | Modern portfolio theory has a strong theoretical background and its conclusions on the risk/return trade-off have a lot of good supporting evidence. However, the conclusions it draws need to be used very carefully when thinking about retirement investing. If you were really just trying to just pick the one investment... |
How can I remove the movement of the stock market as a whole from the movement in price of an individual share? | As others have pointed out, the value of Apple's stock and the NASDAQ are most likely highly correlated for a number of reasons, not least among them the fact that Apple is part of the NASDAQ. However, because numerous factors affect the entire market, or at least a significant subset of it, it makes sense to develop a... |
Why is it possible to just take out a ton of credit cards, max them out and default in 7 years? | Well, primarily because that's fraud and fraud prevents a debtor from receiving a discharge in bankruptcy court. Fraud would be pretty easy to prove if you didn't have an income change and you have several lines of credit opened on and around the same day with almost no payments made toward them. Additionally, thanks... |
Why is a stock trade flat on large volume? | Large volume just means a lot of market participants believe they know where the stock price will be (after some amount of time). The fact that the price is not moving just means that about 50% of those really confident traders think the stock will be moving up, and about 50% of those really confident traders think th... |
Avoiding timing traps with long term index investing | 1) The risks are that you investing in financial markets and therefore should be prepared for volatility in the value of your holdings. 2) You should only ever invest in financial markets with capital that you can reasonably afford to put aside and not touch for 5-10 years (as an investor not a trader). Even then you s... |
Price/Time priority order matching - limit order starvation | Market orders do not get priority over limit orders. Time is the only factor that matters in price/time order matching when the order price is the same. For example, suppose the current best available offer for AAPL is $100.01 and the best available bid is $100.00. Now a limit buy for $100.01 and a market buy arrive ... |
Taking partial capital loss purely for tax purposes | When a question is phrased this way, i.e. "for tax purposes" I'm compelled to advise - Don't let the tax tail wag the investing dog. In theory, one can create a loss, up to the $3K, and take it against ordinary income. When sold, the gains may be long term and be at a lower rate. In reality, if you are out of the stoc... |
For very high-net worth individuals, does it make sense to not have insurance? | Everyone is usually better off without insurance. A very few people are much better off with insurance. Insurance is a gamble and when you lose, you win. Very few people lose badly enough to win. Most people just pay money into insurance and never get as much back as they pay in. For most people, in most lives, in... |
Is inflation a good or bad thing? Why do governments want some inflation? | Basically, in any financial system that features fractional reserve banking, the monetary supply expands during times of prosperity. Stable, low inflation of 2-4% keeps capital available while keeping the value of money stable. It also discourages hoarding of wealth. Banks aren't vaults. They take deposits and make an ... |
Expecting to move in five years; how to lock mortgage rates? | First consider the basic case of what you are asking: you expect to have a future obligation to pay interest, and you are concerned that the rate when you pay it, will be higher than the rate today. In the simplest case, you could theoretically hedge that risk by buying an asset which pays the market interest rate. As ... |
Why do people buy insurance even if they have the means to overcome the loss? | For a car, you're typically compelled to carry insurance, and picking up "comprehensive" coverage (fire, theft, act of god) is normally cheap. If the car was purchased with a loan, the lender will stipulate that you carry comprehensive and collision insurance. People buy insurance because it limits their liability. In... |
Scam or Real: A woman from Facebook apparently needs my bank account to send money | Yes, it is a scam. Think about it: Why would a stranger offer to give you money? Why would she need you to pay her own employees? She wouldn't. It is a scam. You have more to lose than just the $25 that is in the account. Just as has happened to your dad before, you will be receiving money that is not real, but payin... |
Why do people buy stocks that pay no dividend? | Shares in a company represent a portion of a company. If that company takes in money and doesn't pay it out as a dividend (e.g. Apple), the company is still more valuable because it has cold hard cash as an asset. Theoretically, it's all the same whether your share of the money is inside the company or outside the comp... |
What software do you recommend for Creating a To-The-Penny, To-The-Day Budget? | I've tried Mint, and I've tried Quicken. Now, I think Quicken is an annoying, crashy little piece of software, but it is also quite capable; overall I think it has the features you want. You can enter your bills, broken down by category, in advance. You can enter your paychecks, broken down by category (gross income, f... |
Why is it rational to pay out a dividend? | First, you need to understand that not every investor's goals are the same. Some investors are investing for income. They want to invest in a profitable company and use the profit from the company as income. If that investor invests only in stocks that do not pay a dividend, the only way he can realize income is to se... |
Do I pay a zero % loan before another to clear both loans faster? | Use the $11k to pay down either car loan (your choice). You should be able to clear one loan very quickly after that lump sum. After that, continue to aggressively pay down the other car loan until it is clear. Lastly, pay off the mortgage while making sure you are financially stable in other areas (cash-on-hand, retir... |
How do I go about finding an honest & ethical financial advisor? | If someone recommends a particular investment rather than a class of investments, assume they are getting a commission and walk away. If someone recommends whole life insurance as an investment vehicle, walk away. Find someone whose fiduciary responsibility is explicitly to you as their client. That legally obligated t... |
Can another tax loss be used to offset capital gains taxes? How does it work? | Capital gains and losses offset each other first, then your net gain is taxed at the applicable rate. If you have a net loss, you can offset your other income by up to $3,000. In your example, you have no net-gain or loss, so no tax implications from your activity. |
What type of investments should be in a TFSA, given its tax-free growth and withdrawal benefits? | A questoin that I deal with almost every day. Like most investments it comes down to.....What is the purpose for this money? If it is truly a rainy day savings account that you may need in the short term, then fixed income investments like savings accounts, GIC's, Bonds, Bond funds and Fixed Income ETF's are ideal as... |
Should I wait to save up 20% downpayment on a 500k condo? | The simple answer is yes - put 20% (or more) down. In the past I have paid PMI and used a combination first and second mortgage to get around it. I recommend avoiding both of those situations. I am much more comfortable now with just a regular mortgage payment. The more equity you have in your home the more options you... |
If a put seller closes early, what happens to the buyer? | You're assuming options traded on the open market. To close open positions, a seller buys them back on the open market. If there's little on offer, this will drive the price up. |
What steps are required to transfer real estate into a LLC? | especially considering it has a mortgage on it (technically a home equity loan on my primary residence). I'm not following. Does it have a mortgage on it, or your primary residence (a different property) was used as a security for the loan? If it is HELOC from a different property - then it is really your business wh... |
What is the best way to stay risk neutral when buying a house with a mortgage? | You can hedge your house price from losing value if you believe that the housing market is correlated with major stock indices. Speak with a commodities broker because they will be able to help you buy puts on stock indices which if correlated with housing prices will offer somewhat of a hedge. Example. House prices dr... |
Primerica: All it claims to be? | Primerica's primary value proposition is that switching from whole or universal life to term life, and investing the difference is a good idea for most people. However, there are a number of other important factors to consider when purchasing life insurance, and I would also be wary of anyone claiming that one product ... |
When does Ontario's HST come into effect? | It looks like the HST will be in effect in Ontario on July 1st, 2010. As to whether it will replace GST with HST for all services, it looks like some sectors may get special treatment: Ontario may exempt mutual funds from HST (National Post). But it doesn't look final yet. However, I would suggest that most service-... |
Does borrowing from my 401(k) make sense in my specific circumstance? | You're getting great wisdom and options. Establishing your actionable path will require the details that only you know, such as how much is actually in each paycheck (and how much tax is withheld), how much do you spend each month (and yearly expenses too), how much spending can you actually cut or replace, how comfort... |
Why do some expiration dates have more open interest for options? | The third Friday of each month is an expiration for the monthly options on each stock. Stock with standardized options are in one of three "cycles" and have four open months at any give time. See http://www.investopedia.com/terms/o/optioncycle.asp In addition some stocks have weekly options now. Those generally have... |
Mortgage sold to yet another servicer. What are my options? | Are my mortgage terms locked in? Who oversees this? Yes your terms like rate, balance, penalties, due dates, are all covered in the mortgage documents. Those will not change. If the mortgage is an adjustable or has a balloon payment those terms will be followed by the new company. That being said, mistakes can be made.... |
I'm thinking about selling some original artwork: when does the government start caring about sales tax and income tax and such? | First - get a professional tax consultation with a NY-licensed CPA or EA. At what point do I need to worry about collecting sales taxes for the city and state of New York? Generally, from the beginning. See here for more information on NYS sales tax. At what point do I need to worry about record-keeping to report the ... |
How to convince someone they're too risk averse or conservative with investments? | Remind him that, over the long-term, investing in safe-only assets may actually be more risky than investing in stocks. Over the long-term, stocks have always outperformed almost every other asset class, and they are a rather inflation-proof investment. Dollars are not "safe"; due to inflation, currency exchange, etc.,... |
Will I be paid dividends if I own shares? | Yes, as long as you own the shares before the ex-dividend date you will get the dividends. Depending on your instructions to your broker, you can receive cash dividends or you can have the dividends reinvested in more shares of the company. There are specific Dividend ReInvestment Plans (or DRIPs) if you are after stoc... |
Tenant wants to pay rent with EFT | I am able to set this up for my tenants by providing them with a form to fill out so that they provide their name and bank account information, and then I gave that to my bank and they establish a recurring ACH transfer. This way the tenant never gets my bank information. One note about this, I had a tenant break her ... |
If accepting more than $10K in cash for a used boat, should I worry about counterfeiting? | If you get counterfeit money, then you're dealing with the criminal who is going to be punished by the law for doing that. The portion of the total sum that was paid with the counterfeit currency is considered unpaid and you can claim the money from the criminal and sue him, while he's in jail. He'll work hard on those... |
Allocation between 401K/retirement accounts and taxable investments, as a young adult? | First off, great job on your finances so far. You are off on the right foot and have some sense of planning for the future. Also, it is a great question. First, I agree with @littleadv. Take advantage of your employer match. Do not drop your 401(k) contributions below that. Also, good job on putting your contributio... |
Why would a bank take a lower all cash offer versus a higher offer via conventional lending? | One other point to consider is that cash offers often include no contingencies. That is, the offer comes in and if the seller signs then the deal is done, without any chance that the buyer backs out. As you can imagine, this is an attractive option in some situations. |
Tax Efficiency with Index Investing | Your tax efficient reasoning is solid for where you want to distribute your assets. ETFs are often more tax efficient than their equivalent mutual funds but the exact differences would depend on the comparison between the fund and ETF you were considering. The one exception to this rule is Vanguard funds and ETFs which... |
Wash Sales and Day Trading | Yes, an overall $500 loss on the stock can be claimed. Since the day trader sold both lots she acquired, the Wash Sale rule has no net impact on her taxes. The Wash Sale rule would come into play if within thirty days of second sale, she purchased the stock a third time. Then she would have to amend her taxes because c... |
IRA contributions in a bear (bad) market: Should I build up cash savings instead? | You have heard the old adage "Buy low, sell high", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with "Don't walk in front of a moving car" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so ... |
How much would it cost me to buy one gold futures contract on Comex? | Brokers usually have this kind of information, you can take a look at interactive brokers for instance: http://www.interactivebrokers.co.uk/contract_info/v3.6/index.php?action=Details&site=GEN&conid=90384435 You are interested in the initial margin which in this case is $6,075. So you need that amount to buy/sell 1 fut... |
Should I buy a home or rent in my situation? | MY recommendation is simple. RENT The fact that you have to ask the question is a clear sign that you have no business buying a home. That's not to say that it's a bad question to ask though. Far more important then rather it's finically wise for you to buy a home, is the more important question of "are you emotionall... |
Can I invest in gold through Vanguard (Or another instrument that should perform well in financial crisis)? | In 2008, 10 year treasuries were up 20.1%, to gold's 4.96%. Respectfully, if I were certain if a market drop, I'd just short the market, easily done by shorting SPY or other index ETFs. If you wish to buy gold, the easiest and least expensive way is to buy an ETF, GLD to be specific. It trades like a stock, for what t... |
Would it make sense to take a loan from a relative to pay off student loans? | Personally, I avoid making business deals with friends and relatives. There's just too much of a possibility that things can go wrong. Let's assume that you're honest people and you have no intention of cheating your mother-in-law. Still, all sorts of things could happen that could make it difficult for you to repay t... |
Learning investing and the stock market | I would recommend getting a used set of Chartered Financial Analyst books. The series is a great broad introduction to the most important aspects of investing and the markets. Combining both day-to-day knowledge and fundamental theory. CFA materials include in depth discussions of: After you have a strong base then s... |
How can foreign investor (residing outside US) invest in US company stocks? | (Note: out of my depth here, but in case this helps...) While not a direct answer to your question, I'll point out that in the inverse situation - a U.S. investor who wants to buy individual stocks of companies headquartered outside US - you would buy ADRs, which are $-denominated "wrapper" stocks. They can be listed ... |
Market Making vs Market Taking (Quotes vs Orders) | Quote driven markets are the predecessors to the modern securities market. Before electronic trading and HFTs specifically, trading was thin and onerous. Today, the average investor can open up a web page, type in a security, and buy at the narrowest spread permitted by regulators with anyone else who wants to take th... |
How would one follow the “smart money” when people use that term? | To supplement Ben's answer: Following 'smart money' utilizes information available in a transparent marketplace to track the holdings of professionals. One way may be to learn as much as possible about fund directors and monitor the firms holdings closely via prospectus. I believe certain exchanges provide transaction... |
Why do some people go through contortions to avoid paying taxes, yet spend money on expensive financial advice, high-interest loans, etc? | I think sometimes this is simply ignorance. If my marginal tax rate is 25%, then I can either pay tax deductible interest of $10K or pay income tax of $2.5K. I think most americans don't realize that paying $10K of tax deductible interest (think mortgage) only saves them $2.5K in taxes. In other words, I'd be $7.5K... |
Why is the price of my investment only updated once per day? | Mutual funds are only traded once per day, while other securities can be traded any time during the day. Mutual funds are actually a collection of other things that have value, such as stocks. The price of a mutual fund is calculated at the end of the day after the market closes by looking at how much the collection of... |
What happened when the dot com bubble burst? | What happened was that people would start an "Internet" company without any viable business plan, and investors would pour money. Any company with ".COM" or "eSomething" or "netXXX" or whatever would get tons of money from investors, basically selling dreams of getting rich fast. The companies that flourished back than... |
Optimal Asset Allocation | There are a couple of reasons to diversify your assets. First, since we cannot predict which of our investments will perform best, we want to "cast our net" broadly enough to have something invested in what's going to be performing well. Second, diversification isn't intended to provide the highest returns, but rather ... |
One Share Stock Reverse Split | Any time there is a share adjustment from spin-off, merger, stock split, or reverse slit; there is zero chance for the stockholders to hang on to fractional shares. They are turned into cash. For the employees in the 401K program or investors via a mutual fund or ETF this isn't a problem. Because the fraction of a sh... |
Why does it take two weeks (from ex-date) for dividends to pay out? | Why does it take two weeks (from ex-date) for dividends to pay out? For logistical and accounting purposes. This article says on the payment date: This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled. It is fo... |
Incorporating real-world parameters into simulated(paper) trading | I think you're on the wrong track. Getting more and more samples from the real world does not make your backtest more accurate, it just confirms that your strategy can withstand one particular sample path of a stochastic process. The reason why you find it simple to incorporate fees, commissions, taxes, etc. is becaus... |
Is this mortgage advice good, or is it hooey? | I think the idea here is that because of the way mortgages are amortized, you can drop additional principal payments in the early years of the mortgage and significantly lower the overall interest expense over the life of the loan. A HELOC accrues interest like a credit card, so if you make a large principal payment us... |
Why have U.S. bank interest rates been so low for the past few years? | These rates are so low because the cost of money is so low. Specifically, two rates are near zero. The Federal Reserve discount rate, which is "the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount... |
Is there any way to buy a new car directly from Toyota without going through a dealership? | sadly, it is illegal in most states to buy a car directly from the manufacturer. as such, most manufacturers do not offer the option even where it is legal. if you really do know exactly what you want (model, color, options, etc.) i recommend you write down your requirements and send it to every dealer in town (via ema... |
should the Market Capitalization be equal to the Equity of the firm | Lots of questions: In general, no. Market Capitalization and Equity represent 2 different things. Equity first, the equity of a firm is the value of the assets (what it owns) less its liabilities (what it owes) and consists (broadly) of two components - share capital (what the firm gets when it sells to investors as p... |
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