Question stringlengths 14 166 | Answer stringlengths 3 17k |
|---|---|
Priced out of London property market. What are my accommodation investment options? | Real Estate is all local. In the United States, I can show you houses so high the rent on them is less than 1/3% of their value per month, eg. $1M House renting for less than $3500. I can also find 3 unit buildings (for say $200K) that rent for $3000/mo total rents. I might want to live in that house, but buy the triplex to rent out. You need to find what makes sense, and not buy out of impulse. A house to live in and a house to invest have two different sets of criteria. They may overlap, but if the strict Price/Rent were universal, there would be no variation. If you clarify your goal, the answers will be far more valuable. |
What is the best way to get cash from my retirement accounts for a home down payment? | You can withdraw the contributions you made to Roth IRA tax free. Any withdrawals from Roth IRA count first towards the contributions, then conversions, and only then towards the gains which are taxable. You can also withdraw up to $10000 of the taxable portion penalty free (from either the Traditional IRA or the Roth IRA, or the combination of both) if it is applied towards the purchase of your first primary residence (i.e.: you don't own a place yet, and you're buying your first home, which will become your primary residence). That said, however, I cannot see how you can buy a $250K house. You didn't say anything about your income, but just the cash needed for the down-payment will essentially leave you naked and broke. Consider what happens if you have an emergency, out of a job for a couple of months, or something else of that kind. It is generally advised to have enough cash liquid savings to keep you afloat for at least half a year (including mortgage payments, necessities and whatever expenses you need to spend to get back on track - job searching, medical, moving, etc). It doesn't look like you're anywhere near that. Remember, many bankruptcies are happening because of the cash-flow problem, not the actual ability to repay debts on the long run. |
Leasing a car I intend to buy | I have a colleague who always leases cars first. He's very well off, has piles of money in savings, owns a home, and the cherry on top, he could just write a check for the car.... He sees the lease as an insurance policy on the first couple of years of the car's life. If it gets in an accident or he finds something about it he doesn't like, he can give it back to the dealer at the end of the term with no hassle and move on to the next car. Some people value the fact that a lease is a rental. If you're leasing a luxury car or something you couldn't otherwise afford, no amount of mental gymnastics will turn this in to a good idea. Separately, you should never make a down payment on a lease. If the car is totaled early on, you will not recoupe the money you put down. The issue here is that while the numbers all work out the same between a lease and a purchase your situation is different. If the leased car is totaled, the bank gets its money back from an insurer. If that payment doesn't cover the value of the car, the GAP insurance will cover it. In either situation, if there's an excess remaining it will be returned to you. The issue is the excess may not fully replace your down payment. If you then went to lease another car you would need to come up with that down payment again because you couldn't just simply choose to lease a used car; like you could in the case of a purchase. Additionally, GAP is generally included in a lease whether you want it or not. As far as I'm concerned it doesn't make financial sense to mitigate the value of the GAP coverage once you've decided to live in a lease situation. |
Why are Rausch Coleman houses so cheap? Is it because they don't have gas? | I have lived in my RC Home since 2008 and I have had ZERO PROBLEMS! We are in the process of building another RC home in a different community. The only thing I've done was replace the roof ONLY because of a very bad hail storm (baseball sized) that came through OKC. My mom also purchased a RC home in 2007 and didn't have any problems. What buyers have to do is be involved the whole time before, during, and after the build. Take lots of pictures of the entire process if you can. We went by our build daily (we didn't live that far), but if you can go by your build at least once a week, it helps. During my inspection, there was a hairline crack in the baseboard and it was corrected immediately. If you have a good inspector and sales rep that genuinely cares, you will be just fine and will love your home. Good Job RC HOMES! |
What's the benefit of opening a Certificate of Deposit (CD) Account? | If you've already got emergency savings sufficient for your needs, I agree that you'd be better served by sending that $500 to your student loan(s). I, personally, house the bulk of my emergency savings in CDs because I'm not planning to touch it and it yields a little better than a vanilla savings account. To address the comment about liquidity. In addition to my emergency savings I keep plain vanilla savings accounts for miscellaenous sudden expenses. To me "emergency" means lost job, not new water pump for my car; I have other budgeted savings for that but would spend it on a credit card and reimburse myself anyway so liquidity there isn't even that important. The 18 month CDs I use are barely less liquid than vanilla savings and the penalty is just a couple months of the accrued interest. When you compare a possible early distribution penalty against the years of increased yield you're likely to come out ahead after years of never touching your emergency savings, unless you're budgeted such that a car insurance deductible is an emergency expense. Emergency funds should be guaranteed and non-volatile. If I lose my job, 90 days of accrued interest isn't a hindrance to breaking open some of my CDs, and the process isn't so daunting that I'd meaningfully harm my finances. Liquidity in 2017 and liquidity in whatever year a text book was initially written are two totally different animals. My "very illiquid" brokerage account funds are only one transaction and 3 settlement days less liquid than my "very liquid" savings account. There's no call the bank, sell the security, wait for it to clear, my brokerage cuts a check, mail the check, cash the check, etc. I can go from Apple stock on Monday to cash in my hand on like Thursday. On the web portal for the bank that holds my CDs I can instantly transfer the funds from a CD to my checking account there net of a negligible penalty for early distribution. To call CDs illiquid in 2017 is silly. |
Is it correct to call an exchange-traded note a type of ETF? | They're exchange traded debt, basically, not funds. E.g. from the NYSE: An exchange-traded note (ETN) is a senior unsecured debt obligation designed to track the total return of an underlying market index or other benchmark, minus investor fees. Whereas an ETF, in some way or another, is an equity product - which doesn't mean that they can only expose you to equity, but that they themselves are a company that you buy shares in. FCOR for example is a bond ETF, basically a company whose sole purpose is to own a basket of bonds. Contrast that to DTYS, a bear Treasury ETN, which is described as The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Also from Barclays site: Because the iPath ETNs are debt securities, they do not have any voting rights. FCOR on the other hand is some sort of company owned/managed by a Fidelity trust, though my EDGAR skills are rusty. AGREEMENT made this 18th day of September, 2014, by and between Fidelity Merrimack Street Trust, a Massachusetts business trust which may issue one or more series of shares of beneficial interest (hereinafter called the Trust), on behalf of Fidelity Corporate Bond ETF (hereinafter called the Fund), and Fidelity Investments Money Management, Inc., a New Hampshire corporation (hereinafter called the Adviser) as set forth in its entirety below. |
When does it make sense for the money paid for equity to go to the corporation? | BigCo is selling new shares and receives the money from Venturo. If Venturo is offering $250k for 25% of the company, then the valuation that they are agreeing on is a value of $1m for the company after the new investment is made. If Jack is the sole owner of one million shares before the new investment, then BigCo sells 333,333 shares to Venturo for $250k. The new total number of shares of BigCo is 1,333,333; Venturo holds 25%, and Jack holds 75%. The amount that Jack originally invested in the company is irrelevant. At the moment of the sale, the Venturo and Jack agree that Jack's stake is worth $750k. The value of Jack's stake may have gone up, but he owes no capital gains tax, because he hasn't realized any of his gains yet. Jack hasn't sold any of his stake. You might think that he has, because he used to hold 100% and now he holds 75%. However, the difference is that the company is worth more than was before the sale. So the value of his stake was unchanged immediately before and after the sale. Jack agrees to this because the company needs this additional capital in order to meet its potential. (See "Why is stock dilution legal?") For further explanation and another example of this, see the question "If a startup receives investment money, does the startup founder/owner actually gain anything?" Your other scenario, where Venturo purchases existing shares directly from Jack, is not practical in this situation. If Jack sells his existing shares, you are correct that the company does not gain any additional capital. An investor would not want to invest in the company this way, because the company is struggling and needs new capital. |
Evidence For/Against Real Estate Investing Vis-a-vis Investing in ETFs | Real Estate potentially has two components of profit, the increase in value, and the ongoing returns, similar to a stock appreciating and its dividends. It's possible to buy both badly, and in the case of stocks, there are studies that show the typical investor lags the market by many percent. Real estate is not a homogeneous asset class. A $200K house renting for $1,000 is a far different investment than a $100K 3 family renting for $2,000 total rents. Both exist depending on the part of the country you are in. If you simply divide the price to the rent you get either 16.7X or 4.2X. This is an oversimplification, and of course, interest rates will push these numbers in one direction or another. It's safe to say that at any given time, the ratio can help determine if home prices are too high, a bargain, or somewhere in between. As one article suggests, the median price tracks inflation pretty closely. And I'd add, that median home prices would track median income long term. To circle back, yes, real estate can be a good investment if you buy right, find good tenants, and are willing to put in the time. Note: Buying to rent and buying to live in are not always the same economic decision. The home buyer will very often buy a larger house than they should, and turn their own 'profit' into a loss. e.g. A buyer who would otherwise be advised to buy the $150K house instead of renting is talked into a bigger house by the real estate agent, the bank, the spouse. The extra cost of the $225K house is the 1/3 more cost of repair, utilities, interest, etc. It's identical to needing a 1000 sq ft apartment, but grabbing one that's 1500 sq ft for the view. |
If I want a Credit Card offered through a different Credit Union should I slowly transition my banking to that CU? | As has been stated, you don't need to actively bank with a credit union to apply for one of their credit cards. That said, one benefit to having account activity, and significant capital with a CU, is to increase the likelihood of having a larger credit line granted to you, when you do apply. If you are going to use the card sparingly however, then this is a non issue. That said, if you really want to maximize card benefits, then you want to look for cards with large sign up bonuses (e.g. Chase Sapphire, or Ink Bold if you have a business) and sign up exclusively for those bonuses. These cards offer rewards in excessive value of $1000 in travel services (hotels/plane tickets), or $500 cash back if you prefer straight cash back redemptions. If you prefer to keep it really simple, you can sign up for a cash back card, like the Amex Fidelity, which offers 2% cash back everywhere, with no annual fee (albeit the cash back is through their investment account, which you don't actually have to 'invest' with). Personally, I have the Penfed card, and use it exclusively for gas (5% cash back). I also have a Charles Schwab bank account, which I keep funded exclusively for ATM withdrawals (free ATM usage, worldwide, 100% fee reimbursement). I use the accounts exclusively for the benefit they provide me, and no more and have never had an issue. I also have 3 dozen other credit cards which I signed up for exclusively for the sign up bonus, but that's outside the scope of this question. I only mention it because you seem to believe it is difficult to get approved for a new credit line. If your credit is good however, you won't have a problem. For a small idea, of how to maximize credit card bonus categories, I would advise you read this. As mentioned in the article, its possible to get rewards almost everywhere you shop. In short, anytime you use cash, you are missing out on a multitude of benefits a credit card offers you (e.g. see the benefits of a visa signature card) in addition to points/cash back. |
Should I pay cash or prefer a 0% interest loan for home furnishings? | 0% furniture loans can hurt your credit rating. I was told by a bank mortgage officer (sorry I can't cite a document) that credit rating algorithms consider "consumer" loans like 0% appliance loans and certain store-specific credit cards as a negative factor, lowering your overall score. The rationalization given was that that taking that type of credit is an indicator that you have zero cash reserves. The actual algorithms are proprietary, so I don't know how you could verify this. If true, it runs counter to the conventional wisdom that getting credit and then paying it off builds your credit score. |
How to exclude stock from mutual fund | Chris - you realize that when you buy a stock, the seller gets the money, not the company itself, unless of course, you bought IPO shares. And the amount you'd own would be such a small portion of the company, they don't know you exist. As far as morals go, if you wish to avoid certain stocks for this reason, look at the Socially Responsible funds that are out there. There are also funds that are targeted to certain religions and avoid alcohol and tobacco. The other choice is to invest in individual stocks which for the small investor is very tough and expensive. You'll spend more money to avoid the shares than these very shares are worth. Your proposal is interesting but impractical. In a portfolio of say $100K in the S&P, the bottom 400 stocks are disproportionately smaller amounts of money in those shares than the top 100. So we're talking $100 or less. You'd need to short 2 or 3 shares. Even at $1M in that fund, 20-30 shares shorted is pretty silly, no offense. Why not 'do the math' and during the year you purchase the fund, donate the amount you own in the "bad" companies to charity. And what littleadv said - that too. |
Is an Income Mutual Fund a good alternative to a savings account? | The value will certainly fluctuate up and down (but on average gain more than a savings account), but so long as you have enough liquid assets for emergencies, then yes, it's a perfectly good alternative to savings accounts. how risky, in general, are Index Income Funds. How are you defining "risk"? If you mean "probability that I'll lose it all" then it's virtually zero. If you mean "how much the value can fluctuate" then it's certainly not risk-free, but it has less volatility that individual stocks. If you take the S&P 500 as a proxy, you might expect the change in value over any given year to fluctuate between -30% (like 2008) and +40%, with an average change of around 8%. There will be funds that have less volatility, but produce less return, and funds that have more volatility but higher average returns. |
Why do 1099 forms take so long for brokerages to prepare and send out? | The simple answer is that brokerages have to close the books at the end of the year before they can send out the tax forms (what this entails is off topic for this site). I doubt that printing and mailing the forms takes very long. It is simply the process of reconciling the books so they don't have to send out corrected forms if errors are corrected during that reconciliation process. |
Hedging against Exchange Rate Risk | How can I calculate my currency risk exposure? You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar. Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar. Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate. That would tell you how much risk you need to mitigate. how can I hedge against it? There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above. Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 . Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs. |
What are the tax liabilities for an international transaction? | After a bit of rooting around the HMRC sites, I found this page which says this: One key difference is that digitised products are classed as electronically-supplied services for VAT and customs duties. These services are: For VAT purposes, the place of supply of these services is the country in which the customer lives. If you supply electronic services to a business customer in another European Union (EU) country, the customer accounts for any VAT due in that country. You should not charge UK VAT. If you supply electronic services to a consumer, charity or government body in another EU country, you have to account for UK VAT. If you supply electronic services to anyone in a country outside the EU, you don't pay any VAT. If, as a UK business, you buy electronic services from a company outside the UK, you have to account for VAT. If I read this correctly, I as the supplier of the website need to account for VAT only if the sponsor is a consumer, charity or government body in another EU country. It is not covered in this site, but I assume I must also account for VAT for a customer based in the UK. So in answer to the original question, a customer from Canada (which is currently outside the EU) would account for the VAT themselves, and I would simply charge the gross amount. |
Is there any reason not to put a 35% down payment on a car? | I am going to give advice that is slightly differently based on my own experiences. First, regarding the financing, I have found that the dealers do in fact have access to the best interest rates, but only after negotiating with a better financing offer from a bank. When I bought my current car, the dealer was offering somewhere around 3.3%, which I knew was way above the current industry standard and I knew I had good credit. So, like I did with my previous car and my wife's car, I went to local and national banks, came back with deals around 2.5 or 2.6%. When I told the dealer, they were able to offer 2.19%. So it's ok to go with the dealer's financing, just never take them at face value. Whatever they offer you and no matter how much they insist it's the best deal, never believe it! They can do better! With my first car, I had little credit history, similar to your situation, and interest rates were much higher then, like 6 - 8%. The dealer offered me 10%. I almost walked out the door laughing. I went to my own bank and they offered me 8%, which was still high, but better than 10%. Suddenly, the dealer could do 7.5% with a 0.25% discount if I auto-pay through my checking account. Down-payment wise, there is nothing wrong with a 35% down payment. When I purchased my current car, I put 50% down. All else being equal, the more cash down, the better off you'll be. The only issue is to weigh that down payment and interest rate against the cost of other debts you may have. If you have a 7% student loan and the car loan is only 3%, you're better off paying the minimum on the car and using your cash to pay down your student loan. Unless your student loan balance is significantly more than the 8k you need to finance (like a 20k or 30k loan). Also remember that a car is a depreciating asset. I pay off cars as fast as I can. They are terrible debt to have. A home can rise in value, offsetting a mortgage. Your education keeps you employed and employable and will certainly not make you dumber, so that is a win. But a car? You pay $15k for a car that will be worth $14k the next day and $10k a year from now. It's easy to get underwater with a car loan if the down payment is small, interest rate high, and the car loses value quickly. To make sure I answer your questions: Do you guys think it's a good idea to put that much down on the car? If you can afford it and it will not interfere with repayment of much higher interest debts, then yes. A car loan is a major liability, so if you can minimize the debt, you'll be better off. What interest rate is reasonable based on my credit score? I am not a banker, loan officer, or dealer, so I cannot answer this with much credibility. But given today's market, 2.5 - 4% seems reasonable. Do you think I'll get approved? Probably, but only one way to find out! |
How to prevent myself from buying things I don't want | One approach is to control your budget more effectively. For example work out your essential living expenses things like food, rent and other bills you are committed to and compare this to your regular income. Then you can set up a regular automatic payment to a savings account so you limit the disposable income in your current account. If you keep a regular check on this balance it should make you feel like you have less 'spare' money and so less temptation to spend on impulse purchases. Similarly it may help to set a savings goal for something you really do want, even if this is itself a bit frivolous it will at least help you to discipline yourself. Equally it may be useful to set a fixed budget for luxuries, then you have a sense that when it's gone it's gone but you don't have to completely deny yourself. |
Are those “auto-pilot” programs a scam or waste of time? | Genuine (nearly) passive income can be had from some kinds of investing. Index funds are an example of a mostly self-managing investment. Of course investment involves some risk (the income is essentially paying you for taking that risk) and returns are reasonable but proportional to the risk -- IE, not spectacular unless the risk is high. If someone is claiming they can get you better than market rate of return, look carefully at what they are getting out of it and what the risks are. Fees subtract directly from your gains, and if they claim there is no additional risk, they need to prove that. You are giving someone your money. Be very sure you are going to get it back. If it isn't self-evident where the income comes from, it's probably a scam. If someone is using the term "auto-pilot", it is almost certainly a scam. If they are talking about website advertising and the like, it is far from autopilot if you want to make any noticable amount of money (though you may make money for them). |
What's are the differences between “defined contribution” and “defined benefit” pension plans? | As others have explained defined contribution is when you (or your employer) contributes a specified amount and you reap all the investment returns. Defined benefit is when your employer promises to pay you a specified amount (benefit) and is responsible for making the necessary investments to provide for it. Is one better than the other? We can argue this either way. Defined benefit would seem to be more predictable and assured. The problem being of course that it is entirely reliant upon the employer to have saved enough money to pay that amount. If the employer fails in that responsibility, then the only fallback is government guarantees. And of course the government has limitations on what it can guarantee. For example, from Wikipedia: The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans that end in 2016, workers who retire at age 65 can receive up to $5,011.36 per month (or $60,136 per year) under PBGC's insurance program for single-employer plans. Benefit payments starting at ages other than 65 are adjusted actuarially, which means the maximum guaranteed benefit is lower for those who retire early or when there is a benefit for a survivor, and higher for those who retire after age 65. Additionally, the PBGC will not fully guarantee benefit improvements that were adopted within the five-year period prior to a plan's termination or benefits that are not payable over a retiree's lifetime. Other limitations also apply to supplemental benefits in excess of normal retirement benefits, benefit increases within the last five years before a plan's termination, and benefits earned after a plan sponsor's bankruptcy. By contrast, people tend to control their own defined contribution accounts. So they control how much gets invested and where. Defined contribution accounts are always 100% funded. Defined benefit pension plans are often underfunded. They expect the employer to step forward and subsidize them when they run short. This allows the defined benefits to both be cheaper during the employment period and more generous in retirement. But it also means that employers have to subsidize the plans later, when they no longer get a benefit from the relationship with the employee. If you want someone else to make promises to you and aren't worried that they won't keep them, you probably prefer defined benefit. If you want to have personal control over the money, you probably prefer defined contribution. My personal opinion is that defined benefit plans are a curse. They encourage risky behavior and false promises. Defined contribution plans are more honest about what they provide and better match the production of employment with its compensation. Others see defined benefit plans as the gold standard of pensions. |
Profiting from the PWC Money Tree | The hardest part seems to be knowing exactly when to sell the stock. Well yes, that's the problem with all stock investing. Reports come out all the time, sometimes even from very smart people with no motivation to lie, about expected earnings for this company, or for that industry. Whether those predictions come true is something you will only find out with time. What you are considering is using financial information available to you (and equally available to the public) to make investment choices. This is called 'fundamental analysis'; that is, the analysis of the fundamentals of a business and what it should be worth. It forms the basis of how many investment firms decide where to put their money. In a perfectly 'efficient' market, all information available to the public is immediately factored into the market price for that company's stock. ie: if a bank report states with absolute certainty (through leaked documents) that Coca-Cola is going to announce 10% revenue growth tomorrow, then everyone will immediately buy Coca-Cola stock today, and then tomorrow there would be no impact. Even if PwC is 100% accurate in its predictions, if the rest of the market agrees with them, then the price at the time of IPO would equal the future value of the cashflows, meaning there would be no gain unless results surpassed expectations. So what you are proposing is to take one sliver of the information available to the public (have you also read all publicly available reports on those businesses and their industries?), and using that to make a high risk investment. Are you going to do better than the investment firms that have teams of researchers and years of experience in the investment world? You can do quite well by picking individual stocks, but you can also lose a lot of money if you do it haphazardly. Be aware that there is risk in doing any type of investing. There is higher than average risk if you invest in equities ('the stock market'). There is higher risk still, if you pick individual stocks. There is yet even higher risk, if you pick small startup companies. There are some specific interesting side-elements with your proposal to purchase stock about to have an IPO - those are better dealt with in a separate question if you want more information; search this site for 'IPO' and you should find a good starting point. In short, the company about to go public will hire a firm of analysts who will try to calculate the best price the public will accept for an offering of shares. Stock often goes up after IPO, but not always. Sometimes the company doesn't even fill its full IPO order, adding a new type of risk to a potential investor, that the stock will drop on day 1. Consider an analogy outside the investing world: Let's say Auto Trader magazine prints an article that says "all 2015 Honda Civics are worth $15,000 if they have less than 50,000 Miles." Assume you have no particular knowledge about cars. If you read this article, and you see an ad in the paper the next day for a Honda Civic with 40k miles, should you buy it for $14k? The answer is not without more research. And even if you determine enough about cars to find one for $14k that you can reasonably sell for $15k, there's a whole world of mechanics out there who buy and sell cars for a living, and they have an edge both because they can repair the cars themselves to sell for more, and also because they have experience to spot low-offers faster than you. And if you pick a clunker (or a stock that doesn't perform even when everyone expected it would), then you could lose some serious money. As with buying and selling individual stocks, there is money to be made from car trading, but that money gets made by people who really know what they're doing. People who go in without full information are the ones who lose money in the long run. |
Can you sell a security through a different broker from which it was purchased? | I'm in the US and I once transferred shares in a brokerage account from Schwab to Fidelity. I received the shares from my employer as RSUs and the employer used Schwab. After I quit and the shares vested, I wanted to move the shares to Fidelity because that is where all my other accounts are. I called Fidelity and they were more than happy to help, and it was an easy process. I believe Schwab charged about $50 for the transfer. The only tricky part is that you need to transfer the cost basis of the shares. I was on a three-way phone call with Schwab and Fidelity for Schwab to tell Fidelity what the purchase price was. |
What makes a Company's Stock prices go up or down? | It's been said before, but to repeat succinctly, a company's current share price is no more or less than what "the market" thinks that share is worth, as measured by the price at which the shares are being bought and sold. As such, a lot of things can affect that price, some of them material, others ethereal. A common reason to own stock is to share the profits of the company; by owning 1 share out of 1 million shares outstanding, you are entitled to 1/1000000 of that company's quarterly profits (if any). These are paid out as dividends. Two key measurements are based on these dividend payments; the first is "earnings per share", which is the company's stated quarterly profits, divided by outstanding shares, with the second being the "price-earnings ratio" which is the current price of the stock divided by its EPS. Your expected "yield" on this stock is more or less the inverse of this number; if a company has a P/E ratio of 20, then all things being equal, if you invest $100 in this stock you can expect a return of $5, or 5% (1/20). As such, changes in the expected earnings per share can cause the share price to rise or fall to maintain a P/E ratio that the pool of buyers are willing to tolerate. News that a company might miss its profit expectations, due to a decrease in consumer demand, an increase in raw materials costs, labor, financing, or any of a multitude of things that industry analysts watch, can cause the stock price to drop sharply as people look for better investments with higher yields. However, a large P/E ratio is not necessarily a bad thing, especially for a large stable company. That stability means the company is better able to weather economic problems, and thus it is a lower risk. Now, not all companies issue dividends. Apple is probably the most well-known example. The company simply retains all its earnings to reinvest in itself. This is typically the strategy of a smaller start-up; whether they're making good money or not, they typically want to keep what they make so they can keep growing, and the shareholders are usually fine with that. Why? Well, because there's more than one way to value a company, and more than one way to look at a stock. Owning one share of a stock can be seen quite literally as owning a share of that company. The share can then be valued as a fraction of the company's total assets. Sounds simple, but it isn't, because not every asset the company owns has a line in the financial statements. A company's brand name, for instance, has no tangible value, and yet it is probably the most valuable single thing Apple owns. Similarly, intellectual property doesn't have a "book value" on a company's balance sheet, but again, these are huge contributors to the success and profitability of a company like Apple; the company is viewed as a center of innovation, and if it were not doing any innovating, it would very quickly be seen as a middleman for some other company's ideas and products. A company can't sustain that position for long even if it's raking in the money in the meantime. Overall, the value of a company is generally a combination of these two things; by owning a portion of stock, you own a piece of the company's assets, and also claim a piece of their profits. A large company with a lot of material assets and very little debt can be highly valued based solely on the sum of its parts, even if profits are lagging. Conversely, a company more or less operating out of a storage unit can have a patent on the cure for cancer, and be shoveling money into their coffers with bulldozers. |
Is there an application or website where I can practice trading US stocks with virtual money? | I traded futures for a brief period in school using the BrokersXpress platform (now part of OptionsXpress, which is in turn now part of Charles Schwab). They had a virtual trading platform, and apparently still do, and it was excellent. Since my main account was enabled for futures, this carried over to the virtual account, so I could trade a whole range of futures, options, stocks, etc. I spoke with OptionsXpress, and you don't need to fund your acount to use the virtual trading platform. However, they will cancel your account after an arbitrary period of time if you don't log in every few days. According to their customer service, there is no inactivity fee on your main account if you don't fund it and make no trades. I also used Stock-Trak for a class and despite finding the occasional bug or website performance issue, it provided a good experience. I received a discount because I used it through an educational institution, and customer service was quite good (probably for the same reason), but I don't know if those same benefits would apply to an individual signing up for it. I signed up for top10traders about seven years ago when I was in secondary school, and it's completely free. Unfortunately, you get what you pay for, and the interface was poorly designed and slow. Furthermore, at that time, there were no restrictions that limited the number of shares you could buy to the number of outstanding shares, so you could buy as many as you could afford, even if you exceeded the number that physically existed. While this isn't an issue for large companies, it meant you could earn a killing trading highly illiquid pink sheet stocks because you could purchase billions of shares of companies with only a few thousand shares actually outstanding. I don't know if these issues have been corrected or not, but at the time, I and several other users took advantage of these oversights to rack up hundreds of trillions of dollars in a matter of days, so if you want a realistic simulation, this isn't it. Investopedia also has a stock simulator that I've heard positive things about, although I haven't used it personally. |
What risk of a diversified portfolio can be specifically offset by options? | As I stated in my comment, options are futures, but with the twist that you're allowed to say no to the agreed-on transaction; if the market offers you a better deal on whatever you had contracted to buy or sell, you have the option of simply letting it expire. Options therefore are the insurance policy of the free market. You negotiate a future price (actually you usually take what you can get if you're an individual investor; the institutional fund managers get to negotiate because they're moving billions around every day), then you pay the other guy up front for the right of refusal later. How much you pay depends on how likely the person giving you this option is to have to make good on it; if your position looks like a sure thing, an option's going to be very expensive (and if it's such a sure thing, you should just make your move on the spot market; it's thus useful to track futures prices to see where the various big players are predicting that your portfolio will move). A put option, which is an option for you to sell something at a future price, is a hedge against loss of value of your portfolio. You can take one out on any single item in your portfolio, or against a portion or even your entire portfolio. If the stock loses value such that the contract price is better than the market price as of the delivery date of the contract, you execute the option; otherwise, you let it expire. A call option, which is an option to buy something at a future price, is a hedge against rising costs. The rough analog is a "pre-order" in retail (but more like a "holding fee"). They're unusual in portfolio management but can be useful when moving money around in more complex ways. Basically, if you need to guarantee that you will not pay more than a certain per-share price to buy something in the future, you buy a call option. If the spot price as of the delivery date is less than the contract price, you buy from the market and ignore the contract, while if prices have soared, you exercise it and get the lower contract price. Stock options, offered as benefits in many companies, are a specific form of call option with very generous terms for whomever holds them. A swaption, basically a put and a call rolled into one, allows you to trade something for something else. Call it the free market's "exchange policy". For a price, if a security you currently hold loses value, you can exchange it for something else that you predicted would become more valuable at the same time. One example might be airline stocks and crude oil; when crude spikes, airline stocks generally suffer, and you can take advantage of this, if it happens, with a swaption to sell your airline stocks for crude oil certificates. There are many such closely-related inverse positions in the market, such as between various currencies, between stocks and commodities (gold is inversely related to pretty much everything else), and even straight-up cash-for-bad-debt arrangements (credit-default swaps, which we heard so much about in 2008). |
How to prevent myself from buying things I don't want | Remember where they said "Life, liberty and the pursuit of happiness? That is the essence of this problem. You have freedom including freedom to mess up. On the practical side, it's a matter of structuring your money so it's not available to you for impulse buying, and make it automatic. Have you fully funded your key necessities? You should have an 8-month emergency fund in reserve, in a different savings account. Are you fully maxing out your 401K, 403B, Roth IRA and the like? This single act is so powerful that you're crazy not to - every $1 you save will multiply to $10-100 in retirement. I know a guy who tours the country in an RV with pop-outs and tows a Jeep. He was career Air Force, so clearly not a millionaire; he saved. Money seems so trite to the young, but Seriously. THIS. Have auto-deposits into savings or an investment account. Carry a credit card you are reluctant to use for impulse buys. Make your weekly ATM withdrawal for a fixed amount of cash, and spend only that. When your $100 has to make it through Friday, you think twice about that impulse buy. What about online purchases? Those are a nightmare to manage. If you spend $40 online, reduce your ATM cash withdrawal by $40 the next week, is the best I can think of. Keep in mind, many of these systems are designed to be hard to resist. That's what 1-click ordering is about; they want you to not think about the bill. That's what the "discount codes" are about; those are a fake artifice. Actually they have marked up the regular price so they are only "discounting" to the fair price. You gotta see the scam, unsubscribe and/or tune out. They are preying on you. Get angry about that! Very good people to follow regularly are Suze Orman or Dave Ramsey, depending on your tastes. As for the ontological... freedom is a hard problem. Once food and shelter needs are met, then what? How does a free person deny his own freedom to structure his activities for a loftier goal? Sadly, most people pitching solutions are scammers - churches, gurus, etc. - after your money or your mind. So anyone who is making an effort to get seen by you and promise to help you is probably not a good guy. Though, Napoleon Hill managed to pry some remarkable knowledge from Andrew Carnegie in his book "Think and Grow Rich". Tony Robbins is brilliant, but he lets his staff sell expensive seminars and kit, which make him look like just another shyster. Don't buy that stuff, you don't need it and he doesn't need you to buy it. |
The Benefits/Disadvantages of using a credit card | Personally the main disadvantages are perpetuation of the credit referencing system, which is massively abused and woefully under regulated, and encouraging people to think that it's ok to buy things you don't have the money to buy (either save up or question price/necessity). |
Long vs. short term capital gains on real estate | No, it's not all long-term capital gain. Depending on the facts of your situation, it will be either ordinary income or partially short-term capital gain. You should consider consulting a tax lawyer if you have this issue. This is sort of a weird little corner of the tax law. IRC §§1221-1223 don't go into it, nor do the attendant Regs. It also somewhat stumped the people on TaxAlmanac years ago (they mostly punted and just declared it self-employment income, avoiding the holding period issue). But I did manage to find it in BNA Portfolio 562, buried in there. That cited to a court case Comm'r v. Williams, 256 F.2d 152 (5th Cir. 1958) and to Revenue Ruling 75-524 (and to another Rev. Rul.). Rev Rul 75-524 cites Fred Draper, 32 T.C. 545 (1959) for the proposition that assets are acquired progressively as they are built. Note also that land and improvements on it are treated as separate assets for purposes of depreciation (Pub 946). So between Williams (which says something similar but about the shipbuilding industry) and 75-524, as well as some related rulings and cases, you may be looking at an analysis of how long your property has been built and how built it was. You may be able to apportion some of the building as long-term and some as short-term. Whether the apportionment should be as to cost expended before 1 year or value created before 1 year is explicitly left open in Williams. It may be simpler to account for costs, since you'll have expenditure records with dates. However, if this is properly ordinary income because this is really business inventory and not merely investment property, then you have fully ordinary income and holding period is irrelevant. Your quick turnaround sale tends to suggest this may have been done as a business, not as an investment. A proper advisor with access to these materials could help you formulate a tax strategy and return position. This may be complex and law-driven enough that you'd need a tax lawyer rather than a CPA or preparer. They can sort through the precedent and if you have the money may even provide a formal tax opinion. Experienced real estate lawyers may be able to help, if you screen them appropriately (i.e. those who help prepare real estate tax returns or otherwise have strong tax crossover knowledge). |
Online Foreign Exchange Brokerages: Which ones are good & reputable for smaller trades? | The following have been recommended to me for the UK: When I was doing my investigations, all had good reputations but Interactive Investor looked to have the nicer service and their fees seemed a bit more reasonable. TD Waterhouse has the advantage of a number of sites serving local markets (TD Ameritrade for the US, for instance). |
If banks offer a fixed rate lower than the variable rate, is that an indication interest rates may head down? | Usually that is the case that when fixed rates are lower than the variable rates, it is an indication that the banks feel the next movement in rates could be down. You also need to look at the fixed rates for different periods, for example 1 year fixed compared to 3 year fixed and 5 year fixed rates. If you find the 3 and 5 year fixed rates are higher than the 1 year fixed rates this could be an indication that the banks feel rates will fall in the short term but the falls won't last long and will continue to rise after a year or so. If the 3 year fixed rates are also low in comparison, then the banks may feel that the economy is heading for a longer term down trend. The banks won't want to lose out, so will change their fixed rates on their perception of where they feel the economy is headed. Since your post in May 2011, the standard variable rate has since dropped twice (in November and December) to be at 7.30%. You will also find that fixed rates have also been dropped further by the banks, indicating additional future cuts in the variable rates. Regards, Victor |
Why does Yahoo Finance and Google Finance not match historical prices? | The difference is that Yahoo is showing the unadjusted price that the security traded for on that date, while google is adjusting for price splits. This means that Google is showing how much you would have had to pay to get what is now one share. Since 1979, JNJ has split 3-for-1 once, and 2-for-1 four times. 3x2x2x2x2 = 48. If you bought 1 share at that time, you would now have 48 shares today. Yahoo is showing a price of $66 for what was then 1 share. $66/48 = 1.375, which Google rounds to 1.38. You can see this if you get the prices from May 14-21, 1981. The stock split 3-for-1, and the price dropped from 108 to 36.38. Yahoo's adjusted close column has not been accurate since they re-wrote the Finance website. It now just represents the closing price. The other relevant field on Yahoo is the Adj. Close. This adjusts for splits, but also adjusts for dividends. Hence why this doesn't match either the Google or Yahoo numbers. |
Deductible expenses paid with credit card: In which tax year would they fall? | I'm assuming you're operating on the cash basis of accounting, based on your comment "Cash, I think that's the only way for a sole propriator (sic)" Consider: There are two distinct but similar-name concepts here: "paid for" (in relation to a expense) and "paid off" (in relation to a debt). These both occur in the case you describe: Under the cash basis of accounting, when you can deduct an expense is based on when you paid for the expense, not when you eventually pay off any resulting debt arising from paying for the expense. Admittedly, "cash basis" isn't a great name because things don't solely revolve around cash. Rather, it's when money has changed hands – whether in the form of cash, check, credit card, etc. Perhaps "monetary transaction basis" might have been a better name since it would capture the paid-for concept whether using cash or credit. Unfortunately, we're stuck with the terminology the industry established. |
Where can I find open source portfolio management software? | I've just recently launched an open source wealth management platform - wealthbot.io ... "Webo" is mostly targeted at RIA's to help the manage multiple portfolios, etc. Take a look at the demo at demo.wealthbot.io, you'll also find links to github, etc. there. It's a rather involved project, but if you are looking for use cases of rebalancing, portfolio accounting, custodian integration, tax loss harvesting, and many other features available at some of the popular robo-advisors, you might find it interesting. |
Is an analyst's “price target” assumed to be for 12 months out? | I don't think you can always assume a 12-month time horizon. Sometimes, the analyst's comments might provide some color on what kind of a time horizon they're thinking of, but it might be quite vague. |
How much would it cost me to buy one gold futures contract on Comex? | The lot size is 100 troy ounce. See the contract specification at the same site; http://www.cmegroup.com/trading/metals/precious/gold_contract_specifications.html So with the current price of around $1785, one lot would cost you around 178,500. There may be other sites that offer smaller lots you would need to check with your broker. if the price moves up by $500, you gain $50,000 for a lot. The margin required changes from time to time: Currently it's $3666, with a maintenance of $3332, so a drop of $3.34 per oz of gold will cause a margin call. You make or lose 100 times the per oz movement as there are 100oz in the contract you cited. There's also a broker fee analogous to the commission on a stock trade. The other option would be to buy a fund that invests in Gold, this will be more easier to buy and the lot sizes will be much less. I hope you jumped into this great opportunity. At the time, experts said gold would have a straight run to $5000. |
Economics: negative consumer sentiment following failure to upsell | There are several different participants in the transaction, and you may not be aware of all the issues: In some business (fast food) they are required to ask if you want to super size, they are expected to do this at every transaction, but aren't paid more if you buy more. The employee can also decide that too much pressure to up-sell may push you to purchase the item online. That will cost them a commission, the store location a sale, and maybe drive you to a different company. It is also possible they don't have the training to be able to explain the difference between the items. |
What's the best application, software or tool that can be used to track time? | People rave about Basecamp by 37signals. The impressive part is all the add-ins you can get for it. There are add-ins for invoicing, billing, accounting, and time tracking. |
What is a good 5-year plan for a college student with $15k in the bank? | I just checked TCF's rates, and they only pay a miserly rate of 0.25%. Banks like Capital One or Sallie Mae pay about 1.15%, which is more than 4x, though still nothing great. Do you expect to use these funds in 5 years (e.g. for down payment on a house), or could you contribute them to an IRA? |
I can make a budget, but how can I get myself to consistently follow my budget? | To me, this question is really about setting and meeting goals. The process is the same, whether it's about exercising regularly, or saving, or whatever. You need to have clear, personally-relevant reasons for doing something. Write down: Exactly why you want to save. It may seem trivial, but if you can't visualize the prize it's hard to stay motivated. How much can you afford to save? Use something like Mint.com to find out your real monthly expenses, as opposed to what you think you're spending. Also, don't get overzealous... leave yourself some money for small luxuries and unexpected expenses so you don't feel like a miser. Saving should be a joy, not torture. Automate the saving process. Set up an automatic transfer to move the amount you figured out in step 2 to your savings account on the same date you get paid. This is very important. By saving early you ensure there will be enough money to save. If you wait until the end of the month, there will usually not be anything left. Don't you dare touch your savings! (Except in a real emergency) If you must dip into your savings, immediately create a plan to put it back as soon as possible. Also, get into the habit of reading personal finance books, blogs, sites, etc. I recommend authors like Robert Kiyosaki, and Suze Orman. Good luck! |
Companies that use their cash to buy back stock, issue dividends, etc. — how does this this typically affect share price? | If a company is valued correctly, then paying dividends should lower the share price, and buying back shares should leave the share price unchanged. If the share price is $100, and the company pays a $10 dividend, then either its cash goes down by $10 per share, it is has to borrow money for the same amount, or some mixture. Either way, the value of the company has gone down by $10 per share. If the share price is $100, and the company buys back 10 percent of its shares, then it also has to find the money, just as for the dividend, and the value of the company goes down by 10 percent. However, the number of shares also goes down by 10 percent, so the amount of value per share is the same, and the share price should stay unchanged. Now there are psychological effects. Many people like getting paid dividends, so they will want to own shares of a company paying dividends, so the share price goes up. Similar with a share buyback; the fact that someone buys huge amounts of shares drives the price up. Both effects are purely psychological. A buyback has another effect if the shares are not valued correctly. If the company is worth $100 per share but for some reason the shareprice is down to $50, then after the buyback the value per share has even gone up. Basically the company buys from stupid investors, which increases the value for clever investors holding on to their shares. If the shareprice were $200, then buying back shares would be a stupid move for the company. |
Theory/Strategy for pricing by volume | Actually, the rate of change could be more or less constant, but you might have a minimum price that represents your fixed costs. So you might sell a milligram for $1 (which is ridiculous in terms of per-unit pricing) to cover fixed costs, and add $0.50/lb for each step in size to cover variable costs (cost of raw materials and packaging), so a 2lb bag would be $2, a 5lb bag would be $3.50, a ton would be $1,001, etc. At the end of the day, you want the marginal revenue (the price that you charge for each additional pound) to be more than the marginal cost (the price per pound it takes to produce the bag). Any amount over that goes towards your fixed costs - the cost you'd incur if you sold zero product (rent, utilities, overhead, etc.) It's not an exact science, and there are many variables that go into pricing. |
Where to find Vanguard Index Funds? | No, some of Vanguard's funds are index funds like their Total Stock Market Index and 500 Index. In contrast, there are funds like Vanguard PRIMECAP and Vanguard Wellington that are actively managed. There are index funds in both open-end and exchange-traded formats. VTI is the ticker for Vanguard's Total Stock Market ETF while VTSMX is an open-end mutual fund format. VOO would be the S & P 500 ETF ticker while VFINX is one of the open-end mutual fund tickers, where VIIIX has a really low expense ratio but a pretty stiff minimum to my mind. As a general note, open-end mutual funds will generally have a 5 letter ticker ending in X while an ETF will generally be shorter at 3 or 4 letters in length. |
Buy car vs lease vs long term rent for 10 years period | If you plan to keep this asset for ten years then you can take the deprecation of its cost over that time period. For simplicity lets treat that as 120 monthly payments. So at a purchase price of $60,000 you are committing around $500 per month not including vehicle maintenance. I typically allocate around 20 percent of the purchase price of my vehicles for future maintenance costs. Since you have the cash to purchase this outright you have an option not afforded to most people. This adds for additional consideration. Here is an example. You purchase a $60,000 car and put $10,000 down. You finance $50,000 at 2.84% over 60 months. Your total finance cost is $53,693 if you do not miss any payments. The question here is can you make more than $3,693 on the $50,000 that you would retain in this situation over a five year period? I know that I most certainly can and is an excellent example of why I finance my vehicles. Obviously this all goes out the window if you do not have the credit for top rates. I have also negotiated a vehicle maintenance plan with the dealership at the time of my vehicle purchases. Most dealerships offer this service, the key here is negotiating. On my last truck I was able to get an all inclusive maintenance policy for 72 months for 8% of the purchase price. Your mileage will vary with manufacturer and dealership. As described in the comments above it is never beneficial for an individual to lease. You end up paying more for the newer models. I consider that to be a lifestyle choice as it is most certainly not a sound financial decision. |
If a startup can always issue new shares, what value is there to stocks/options? | Companies normally do not give you X% of shares, but in effect give you a fixed "N" number of shares. The "N" may translate initially to X%, but this can go down. If say we began with 100 shares, A holding 50 shares and B holding 50 shares. As the startup grows, there is need for more money. Create 50 more shares and sell it at an arranged price to investor C. Now the percentage of each investor is 33.33%. The money that comes in will go to the company and not to A & B. From here on, A & C together can decide to slowly cut out B by, for example: After any of the above the % of shares held by B would definitely go down. |
Can I default on my private student loans if I was an international student? | What are the consequences if I ignore the emails? If you ignore the emails they will try harder to collect the money from you until they give up. Unlike what some other people here say, defaulting on a loan is NOT a crime and is NOT the same as stealing. There is a large number of reasons that can make someone unable to pay off a loan. Lenders are aware of the risk associated with default; they will try to collect the debt but at the end of the day if you don't have money/assets there is not much they can do. As far as immigration goes, there is nothing on a DS-160 form that asks you about bankruptcies or unpaid obligations. I doubt the consular officer will know of this situation, but it is possible. It is not grounds for visa ineligibility however, so you will be fine if everything else is fine. The only scenario in which unpaid student loans can come up relevant in immigration to the US is if and when you apply for US Citizenship. One of the requirements for Citizenship is having good moral character. Having a large amount of unpaid debt constitutes evidence of a poor moral character. But it is very unlikely you'd be denied Citizenship on grounds of that alone. I got a social security number when I took up on campus jobs at the school and I do have a credit score. Can they get a hold of this and report to the credit bureaus even though I don't live in America? Yes, they probably already have. How would this affect me if I visit America often? Does this mean I would not ever be able to live in America? No. See above. You will have a hard time borrowing again. Will they know when I come to America and arrest me at the border or can they take away my passport? No. Unpaid debt is no grounds for inadmissibility, so even if the CBP agent knows of it he will not do anything. And again, unpaid debt is not a crime so you will not be arrested. |
How does a TFSA work? Where does the interest come from? | As to where the interest comes from: The same place it comes from in other kinds of savings accounts. The bank takes the money you deposit and invests it elsewhere, traditionally by lending it out to others (hence the concept of a "savings and loan" bank). They make a profit as long as the interest they give for "borrowing" from you, plus the cost of administering the savings accounts and loans, is less than the interest they charge for lending to others. No, they don't have to pay you interest -- but if they didn't, you'd be likely to deposit your funds at another bank which did. Their ideal goal is to pay as little as possible without losing depositors, while charging as much as possible without losing borrowers. (yeah, I know, typo corrected) Why do they get higher interest rate than they pay you? Mostly because your deposits and interest are essentially guaranteed, whereas the folks they're lending to may be late paying or default on those loans. As with any kind of investment, higher return requires more work and/or higher risk, plus (ususally) larger reserves so you can afford to ride out any losses that do occur. |
Can stock market gains be better protected under an LLC arrangement? | All corporate gains are taxed at the same rate as corporate income, for the corporate entity, so this actually can be WORSE than the individual capital gains tax rates. There are a lot of things you can do with trading certain asset classes, like opening you up to like-kind re-investment tax perks, but I can't think of anything that helps with stocks. Also, in the US there is now a law against doing things solely to avoid tax if they have no other economic purpose. So be conscious about that, you'll need to be able to rationalize at least a thin excuse for why you jumped through all the hoops. |
I have $10,000 sitting in an account making around $1 per month interest, what are some better options? | There are many considerations before deciding on the best place for your funds: How liquid do you need the funds to be? If this is for an emergency fund I would keep at least some in an account that you have instant access to, What is your risk (volatility) tolerance? Would you be OK with the value dropping by as much as 30% in a year knowing that over time you'll probably earn 8-12% on it? If not, then equity funds or other stock investments are probably not the best move for you. Do you need the funds now or are they for long-term (retirement) savings? Are you eligible to fund an IRA? That would defer your taxes until you withdraw the funds from the account, but there are age restrictions that you must heed to avoid penalties. Are CDs a good idea? They do pay decent interest, but in return for that you lock up your funds for a set period of time. All that to say that there are many facets to determining the best place for your funds. If you provide more specifics you can get a more specific answer. |
Should I buy a house with a friend? | I'll chime in here with the "don't do it crowd." I think it's fraught with ugly possibilities. However, you may, for various reasons, decide to say, "to hell with it, we'll make it work." If that is the case, treat it like a business transaction and not an emotional transaction. Work up a binding contract with your attorney for how the two of you will handle issues such as: Of absolutely critical importance is the bail-out clause: how will you handle it when one person says, "Sayonara." None of this ensures a smooth road - god knows I wouldn't do it - but it could help protect your sanity and some of your investment down the road. Good luck. |
Taxation of shares | If you sell your shares for more than their value at the time you received them (i.e. you make a profit) then you will be liable for capital gains tax - but only if the profit exceeds your annual allowance (£11,100, in tax year 2015-16). This is unrelated to how you came by the shares in the first place. (Note that there are certain exemptions to this, which includes some employer share schemes.) |
For very high-net worth individuals, does it make sense to not have insurance? | I'm going to take a very crude view of this: Suppose that you have an event that would cost $100,000 if it occurred. If there's a 10% chance that it'll happen to you and the insurance costs less than $10,000, you'll make a profit "on average." This is, of course, assuming that you could afford a $100,000 loss. If you can't, the actual loss could be much higher (or different). For example, if you couldn't afford surgery because you didn't have health insurance, it could be a lot more "costly" in a way that could be difficult to compare to the $100,000. Obviously, this is a very simplistic view of things. For example, making more than you paid on the premium typically isn't the only reason you'd buy insurance (even if you're high net worth). Just wanted to throw this out there for what it's worth though. |
New vending route business, not sure how to determine taxes | Actually, calculating taxes isn't that difficult. You will pay a percentage of your gross sales to state and local sales tax, and as a single-owner LLC your profits (after sales taxes) should pass through to your individual tax tax return (according to this IRS article. They are not cumulative since they have different bases (gross sales versus net profit). That said, when determining if your future business is profitable, you need to ask "what aspects of the business can I control"? Can you control how much each item sells for? Increasing your prices will increase your gross margins, which should be higher than your fixed and variable costs. If your margins do not exceed your costs, then you will note be profitable. Note that as a vendor you are at a slight disadvantage to a retailer, since tax has to be baked in to your prices. A retailer can advertise the pre-tax price, and pass-through sales tax at the point of sale. However, people expect to pay more at a vending machine, so the disadvantage is very small (you aren't directly competing with retailers anyways). |
Where can one graph portfolio performance over time? | I've just started using Personal Capital (www.personalcapital.com) after seeing the recommendation at several places. I believe it gives you what you want to see, but I don't think you can back populate it with old information. So if you log in and link accounts today, you'll have it going forward. I only put in my investment accounts as I use another tool to track my day-to-day spending. I use Personal Capital to track my investment returns over time. How did my portfolio compare to S&P 500, etc. And here is a shot of the "You Index" which I think is close to what you are looking for: |
ESPP advantages and disadvantages | The answer is simple. If your employer is offering you a discount, that is free money. You always take free money, always. |
How to get information about historical stock option prices for a defunct company? | Though you're looking to repeat this review with multiple securities and events at different times, I've taken liberty in assuming you are not looking to conduct backtests with hundreds of events. I've answered below assuming it's an ad hoc review for a single event pertaining to one security. Had the event occurred more recently, your full-service broker could often get it for you for free. Even some discount brokers will offer it so. If the stock and its options were actively traded, you can request "time and sales," or "TNS," data for the dates you have in mind. If not active, then request "time and quotes," or "TNQ" data. If the event happened long ago, as seems to be the case, then your choices become much more limited and possibly costly. Below are some suggestions: Wall Street Journal and Investors' Business Daily print copies have daily stock options trading data. They are best for trading data on actively traded options. Since the event sounds like it was a major one for the company, it may have been actively traded that day and hence reported in the papers' listings. Some of the print pages have been digitized; otherwise you'll need to review the archived printed copies. Bloomberg has these data and access to them will depend on whether the account you use has that particular subscription. I've used it to get detailed equity trading data on defunct and delisted companies on specific dates and times and for and futures trading data. If you don't have personal access to Bloomberg, as many do not, you can try to request access from a public, commercial or business school library. The stock options exchanges sell their data; some strictly to resellers and others to anyone willing to pay. If you know which exchange(s) the options traded on, you can contact the exchange's market data services department and request TNS and / or TNQ data and a list of resellers, as the resellers may be cheaper for single queries. |
Whats the difference between day trading and flipping and their tax implications? | Flipping usually refers to real-estate transaction: you buy a property, improve/renovate/rehabilitate it and resell it quickly. The distinction between flipper and investor is similar to the distinction between trader and investor, even though the tax code doesn't explicitly refer to house flipping. Gains on house flipping can be considered as active business gain or passive activity income, which are treated differently: passive income goes on Schedule E and Schedule D, active income goes on Schedule C. The distinction between passive and active is based on the characteristics of the activity (hours you spent on it, among other things). Trading income can similarly be considered as either passive (Schedule D/E treatment) or active (Schedule C treatment). Here's what the IRS has to say about traders: Special rules apply if you are a trader in securities, in the business of buying and selling securities for your own account. This is considered a business, even though you do not maintain an inventory and do not have customers. To be engaged in business as a trader in securities, you must meet all of the following conditions: The following facts and circumstances should be considered in determining if your activity is a securities trading business: If the nature of your trading activities does not qualify as a business, you are considered an investor... Investor, in this context, means passive income treatment (Schedule D/E). However, even if your income is considered active (Schedule C), stock sale proceeds are not subject to the self-employment tax. As you can see, there's no specific definition, but the facts and circumstances matter. You may be considered a trader by the IRS, or you may not. You may want to be considered a trader (for example to be able to make a mark-to-market election), or you may not. You should talk to a professional tax adviser (EA/CPA licensed in your State) for more details and suggestions. |
Owner-Financed home sale or Land Contract — how to handle the transaction and the ongoing entity? | I've done this, but on the other side. I purchased a commercial property from someone I had a previous relationship with. A traditional bank wouldn't loan me the money, but the owner was willing to finance it. All of the payments went through a professional escrow company. In our case it was a company called Westar, but I'm sure there are plenty out here. They basically serve as the middle-man, for a fee (something like $5 a payment, plus something to set it up). They have the terms of the loan, and keep track of balances, can handle extra principle payments and what that does to the term of the loan, etc. You want to have a typical mortgage note that is recorded with the local clerk's office. If you look around, you should be able to find a real estate lawyer who can set all this up for you. It will cost you a bit up front, but it is worth it to do this right. As far as taxes, my understanding is that the property itself is taxed the same as any other property transfer. You would owe taxes on the difference between the value of the property when you inherited it and when you sold it. The interest you get from the loan would be taxed as regular income. The escrow company should send you tax forms every year listing the amount of interest that you received. There are also deductions you can take for expenses in the process. |
What should one look for when opening a business bank account? | From my experience, I opened a business account to handle my LLC which owns a rental property. The account process and features were similar to shopping for a personal checking account. There would be fees for falling below a minimum balance, and for wanting a paper statement. In my case, keeping $2000 avoids the fee, and I pull the statements online and save the PDFs. Once open for a certain amount of time, you might be able to get credit extended based on the money that flows through that account. The online access is similar to my personal checking, as is the sending of payments electronically. |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | Firstly, playing the lottery is not investing it is gambling. The odds in gambling are always against you and with the house. Secondly, no one would ever give you a payout of 3 to 1 when the odds are 50:50, unless they were looking to give away money. Even when you place your chips on either red or black on a roulette table your payout if you are correct is 100% (double your money), however the odds of winning are less than 50%, there are 18 reds, 18 blacks and 2 greens (0 and 00). Even if you place your chips on one single number, your payout will be 35:1 but your odds of winning are 1:38. The odds are always with the house. If you want to play the lotto, use some money you don't need and expect to lose, have some fun and enjoy yourself if you get any small winnings. Gambling should be looked at as a source of entertainment not a source of investing. If you take gambling more serious than this then you might have a problem. |
Student loan payments and opportunity costs | If I understand correctly, your question boils down to this: "I have $X to invest over 25 years, are guaranteed returns at a 0.6% lower rate better than what I expect to get from the stock market over the same period?" Well, I believe the standard advice would go something like: Rational investors pay a premium to reduce risk/volatility. Or, put another way, guaranteed returns are more valuable than risky returns, all things equal. I don't know enough about student loans in America (I'm Australian). Here a student loan is very low interest and the minimum repayments scale with what you earn not what you owe, starting at $0 for a totally liveable wage - Here I'd say there's a case to just pay the minimum and invest extra money elsewhere. If yours is a private loan though, following the same rules as other loans, remember the organisation extending your loan has access to the stock market too! why would they extend a loan to you on worse terms than they would get by simply dumping money into an index fund? Is the organisation that extends student loans a charity or subsidised in some way? If not, someone has already built a business on the the analysis that returns at 6.4% (including defaults) beats the stock market at 7% in some way. What I would put back to you though, is that your question oversimplifies what is likely your more complex reality, and so answering your question directly doesn't help that much to make a persuasive case - It's too mathematical and sterile. Here are some things off the top of my head that your real personal circumstances might convince you to pay off your loan first, hit up Wall Street second: |
If a mutual fund did really well last year, then statistically speaking, is it likely going to do bad this year? | Nearly all long-lived active funds underperform the market over the long run. The best they can hope for in almost all cases is to approximate the market return. Considering that the market return is ~9%, this fund should be expected to do less well. In terms of predicting future performance, if its average return is greater than the average market return, its future average return can be expected to fall. |
meaning of qualifying/disqualifying distribution as separate from capital gains implications | A qualifying distribution seems guaranteed to fall under long term capital gains. But a disqualifying distribution could also fall under long term capital gains depending on when it is sold. So what's the actual change that occurs once something becomes a qualifying as opposed to a disqualifying distribution? Yes a qualifying distribution always falls under long term capital gain. The difference between qualifying and disqualifying is how the "bargain element" of benefit is calculated. In case of disqualifying distribution it is always the discount offered, Irrespective of the final sale price of the stock. In case of qualifying distribution it is lower of actual discount or profit. Thus if you sell the stock at same price or slightly lower price than the price on exercise date, your "bargain element" is less. This is not the case with disqualifying distribution. |
Using credit cards online: is it safe? | Why do online services ask for all those CVV codes and expiration date information, if, whenever you poke the card out of your wallet, all of its information becomes visible to everyone in the close area? What can I do to secure myself? I'd guess that's to protect the card company, not you. The number of the card is guessable, but each other bit of information makes it much harder to guess (the CVV code makes it ~1000 times harder, the expiration date makes it about 50-100 times harder). Since you wouldn't be responsible for the payment anyway, adding security for online transactions provides the company with less liability. As for the security of your information online, that's trickier. It depends entirely on the site you're using whether they've implemented the appropriate security measures or not (and, given the SSL attacks we've seen, even that might not help). (source: I'm a web developer, and have worked on payments systems before that implemented the security mandated by the cards). At the very least never, ever type in your information on a non-https site (there's normally a little "lock" icon that will display if you're on HTTPS instead of HTTP). |
How to invest in stocks without using an intermediary like a broker? Can shares be bought direct? | Agree with Michael here. The exchanges help you more than they will hurt. It begs the question why you want to avoid exchanges and the brokers since they do provide a valuable service. If you want to avoid big fees, most of the discount brokerages have tiny fees these days (optionshouse is down to $4), plus many have deals where you get 60 or more trades for free. |
Are there guidelines for whom you should trust for financial advice (online, peer, experts, only myself, etc) | Nothing beats statistics like that found on Morning Star, Yahoo or Google Finance. When you are starting out, there is no need to reinvent the wheel. Pick a couple of mutual funds with good track records and start there. Keep in mind the financial press, to some degree, has a vested interest in having their readership chase the next hot thing. So while sites like Seeking Alpha, Kiplingers, or Money do provide some good advice, there is also an element that placates their advertisers. The only peer-to-peer lending I would consider is Lending Club. However, you are probably better off in the long run investing in mutual funds. One way to get involved in individual stocks without getting burned is to participate in Dividend Reinvestment Plans (DRIPs). Companies that have them tend to be very well established, and they are structured to discourage trading. Buying is easy, dividend reinvestment is easy, dividend payouts are easy; but, starting and selling is kind of a pain. That is a good thing. |
Does it make sense to buy an index ETF (e.g. S&P 500) when the index is at an all-time high? | Here is, from Yahoo Finance, the S&P 500 over the last ~60 years (logarithmic scale): The behavior since ~2000 has been weird, by historical standards. And it's very easy, looking at that graph, to say "yes! I would have made so much money had I invested in March '09!". Of course, back in March '09, it wasn't so clear that was the bottom. But, yes, over the last 10 years or so, you could have made more money by adopting a rule that you'll accumulate cash in a FDIC (or similar) insured savings account, and dump it into an S&P index fund/ETF when the index is n% off its high. Of course, if you look at the rest of the chart, that strategy looks a lot less promising. Start in the early 80's, and you'd have held cash until the crash in 2000. Except for the recent weirdness, the general trend in the S&P 500 (and stock markets in general) has been upward. In other words, to a first-order approximation, the S&P 500 is always at an all-time high. That's just the general trend. |
Why does short selling require borrowing? | This can be best explained with an example. Bob thinks the price of a stock that Alice has is going to go down by the end of the week, so he borrows a share at $25 from Alice. The current price of the shares are $25 per share. Bob immediately sells the shares to Charlie for $25, it is fair, it is the current market price. A week goes by, and the price does fall to $20. Bob buys a share from David at $20. This is fair, it is the current market value. Then Bob gives the share back to Alice to settle what he borrowed from her, one share. Now, in reality, there is interest charged be Alice on the borrowed value, but to keep it simple, we'll say she was a friend and it was a zero interest loan. So then Bob was able to sell something he didn't own for $25 and return it spending $20 to buy it, settling his loan and making $5 in the transaction. It is the selling to Charlie and buying from David (or even Charlie later, if he decided to dump the shares), without having invested any of your own money that earns the profit. |
How do I enter Canadian tax info from US form 1042-S and record captial gains from cashing in stock options? | There are two parts in this 1042-S form. The income/dividends go into the Canada T5 form. There will be credit if 1042-S has held money already, so use T2209 to report too. |
Does a withdrawal of $10000 for 1st home purchase count against Roth IRA basis? | From Schwab With a Roth, withdrawals of contributions are always tax-free because you've already paid income taxes on that money. So are withdrawals of earnings of up to $10,000 under the homebuyer exemption, assuming you've had the Roth for five-plus years. But if you withdraw more than $10,000 in earnings, that money will be subject to both ordinary income taxes and the 10 percent penalty. |
How does a bank make money on an interest free secured loan? | Other answers didn't seem to cover it, but most "0%" bank loans (often offered to credit card holders in the form of balance transfer checks), aside from less-obvious fees like already-mentioned late fees, also charge an actual loan fee, typically 2-3% (or a minimum floor amount) - that was the deal with every single transfer 0% offer I ever saw from a bank. So, effectively, even if you pay off the loan perfectly, on time, and within 0% period, you STILL got a 3% loan and not 0% (assuming 0% period lasts 12 months which is often the case). |
In NYC is there sales tax on services like computer / cell phone repair? | According to the New York State Department of Taxation and Finance, your service would appear to be exempt from taxes. However, if you are charging for tangible items, those would incur a sales tax. |
Cashing in stocks for house downpayment | Assuming that you have capital gains, you can expect to have to pay taxes on them. It might be short term, or long term capital gains. If you specify exactly which shares to sell, it is possible to sell mostly losers, thus reducing or eliminating capital gains. There are separate rules for 401K and other retirement programs regarding down payments for a house. This leads to many other issues such as the hit your retirement will take. |
Making an offer on a property - go in at market price? | Firstly, the agent doesn't work for you. He works for himself. It's in his interest not to get you a house at the lowest cost but to sell you a house. The higher the price the higher his commission is, or the higher the probability that the seller will sell it meaning less work for him. It depends on the market what price you should give. If I were you, I would do my own research about this area and not just trust the agent's assessment of it being a "seller's" market. Not sure where we are talking about but as you know, house prices have fallen a lot in the last few years and the economy isn't doing that well. It also depends on yourself. Every house is different and there's an emotional attachment to buying property. How much do you really want this house? Would it matter if you didn't get it? Are you prepared to keep looking? If this is your dream house, then maybe it is worth offering a bit more to ensure that you get it. If not, and you are prepared to wait, then yeah, I would shoot a little lower and see what they say. One thing I will say though is generally even if you give them a low offer, unless they're getting lots of other offers or they have to sell urgently, alot of the times the seller will come back and try to negotiate with you anyway. After all, it's business and they're there to get the highest price. |
How profitable is selling your customer base? | but what about non-identifying information like emails or even telephone numbers? Are you allowed to do this? Most countries have privacy laws that would explicitly forbid companies from selling data not just to other companies, but even to other divisions within the company without explicit approval from customer. There are adequate regulatory controls that would stop companies from indulging in such practises. However tons of smaller / un-registered companies or companies operating from certain countries are definitely a source for such practises. |
Would you withdraw your money from your bank if you thought it was going under? | There's obviously a lot of discussion surrounding your question, but if I thought a bank was going under, then yes, absolutely I would withdraw my money. Now, we can debate whether me thinking the bank was going under was foolish or not, but if I truly believed it, I can't see why I would sit around and do nothing. |
1040 Schedule A Un-Reimbursed Business Expense Reporting | It would be unusual but it is possible that the expenses could be very high compared to your income. The IRS in pub 529 explains the deduction. You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business. An expense doesn't have to be required to be considered necessary. The next part lists examples. I have cut the list down to highlight ones that could be large. You may be able to deduct the following items as unreimbursed employee expenses. Damages paid to a former employer for breach of an employment contract. Job search expenses in your present occupation. Legal fees related to your job. Licenses and regulatory fees. Malpractice insurance premiums. Research expenses of a college professor. Rural mail carriers' vehicle expenses. Tools and supplies used in your work. Work clothes and uniforms if required and not suitable for everyday use. Work-related education. If the term of employment was only part of the year, one or more of the these could dwarf your income for the year. Before deducting something that large be sure you can document it. I believe the IRS computers would flag the return and I wouldn't be surprised if they ask for additional proof. |
How to motivate young people to save money | Are you sure the question even makes sense? In the present-day world economy, it's unlikely that someone young who just started working has the means to put away any significant amount of money as savings, and attempting to do so might actually preclude making the financial choices that actually lead to stability - things like purchasing [the right types and amounts of] insurance, buying outright rather than using credit to compensate for the fact that you committed to keep some portion of your income as savings, spending money in ways that enrich your experience and expand your professional opportunities, etc. There's also the ethical question of how viable/sustainable saving is. The mechanism by which saving ensures financial stability is by everyone hoarding enough resources to deal with some level of worst-case scenario that might happen in their future. This worked for past generations in the US because we had massive amounts (relative to the population) of (stolen) natural resources, infrastructure built on enslaved labor, etc. It doesn't scale with modern changes the world is undergoing and it inherently only works for some people when it's not working for others. From my perspective, much more valuable financial skills for the next generation are: |
Should you keep your stocks if you are too late to sell? | In my opinion, the average investor should not be buying individual stocks. One reason why is that the average investor is not capable of reading financial statements and evaluating whether a stock is overpriced or underpriced. As such, they're often tempted to make buy/sell decisions based solely on the current value of a stock as compared to the price at which they bought it. The real reasons to buy (or sell) a stock is the expectation of future growth of the company (or continued profit and expected dividends). If you aren't able to analyze a company's financial statements and business plan, then you really aren't in a position to evaluate that company's stock price. So instead of asking whether to sell based on a recent drop in stock price, you should be investigating why the stock price is falling, and deciding whether those reasons indicate a trend that you expect to continue. If you buy and sell stocks based solely on recent trends in the stock price, you probably will end up buying stocks that have recently risen and selling stocks that have recently fallen. In that case, you are buying high and selling low, which is a recipe for poor financial outcomes. |
Can I buy only 4 shares of a company? | One of my university professors suggested doing this systematically to get access to shareholder meetings where there is typically a nice dinner involved. As long as the stock price + commission is less than the price of a nice restaurant it's actually not a bad idea. |
Can you buy gift cards at grocery store to receive a higher reward rate? | If you go to a grocery store and purchase retail gift cards along with other products, and you pay with a credit card, your credit card company generally does not know what you spent the money on; they don't get an itemized receipt.* If this is the case with your rewards card, then yes, you would get the cashback reward on the gift cards, because all the credit card company knows is that you spent $100 at the grocery store; they don't know (or care, really) that $50 of it was for an Olive Garden gift card. This, of course, should be fairly easy to test. Buy the gift card, wait for your statement, and see if they included the purchase when calculating your rewards. * Note: I don't have an American Express card, but from some quick googling I see that it is possible that American Express does actually receive itemized billing details on your purchases from some merchants. If your grocery store is sending this data to AmEx, it is possible that the gift cards could be excluded from rewards. But again, I suggest you just test it out and see. |
Why do banks finance shared construction as mortgages instead of financing it directly and selling the apartments in a building? | Why should a bank get into construction specifically? Lots of business opportunities require capital. Conceivably banks could build factories, develop consumer electronics, complete with SpaceX, etc. It's all capital in, profits out, with varying levels of risk and returns. There's nothing special about constructing apartments. The reason banks don't run businesses is because there are plenty of private firms that compete with each other for business. What's the chance that a bank, with all its bureaucracy, can deliver cheaper apartments than an apartment developer? Pretty low in fact, and that's why they would rather lend to an apartment developer rather than building the apartments themselves. Banks are in the business of competing with other banks. The main work they do is to sort out good investments from poor ones. And if they can do that just a bit more efficiently than their competitors, they make big bucks. For example, it might only take a few additional hours to better vet a deal worth millions. Whereas with an apartment building, you wouldn't be able to make that amount of money per hour even if the materials and labor cost you nothing. |
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. |
15 year mortgage vs 30 year paid off in 15 | Why would anyone ever get a 15 year instead of just paying off a 30 year in 15 years? Because the rate is not the same. Never that I've seen in my 30 years of following rates. I've seen the rate difference range from .25% to .75%. (In March '15, the average rate in my area is 30yr 3.75% / 15yr 3.00%) For a $150K loan, this puts the 15yr payment at $1036, with the 30 (at higher rate) paid in 15 years at $1091. This $55 difference can be considered a flexibility premium," as it offers the option to pay the actual $695 in any period the money is needed elsewhere. If the rate were the same, I'd grab the 30, and since I can't say "invest the difference," I'd say to pay at a pace to go 15, unless you had a cash flow situation. A spouse out of work. An emergency that you funded with a high interest rate loan, etc. The advice to have an emergency fund is great until for whatever reason, there's just not enough. On a personal note, I did go with the 15 year mortgage for our last refinance. I was nearing 50 at the time, and it seemed prudent to aim for a mortgage free retirement. |
Quantiative Easing fuels stock markets, but why? | There's a premium or discount for various stocks subject to influence by the alternatives available to investors, meaning investments are susceptible to the principle of supply and demand. This is easily seen when industries or business models get hot, and everybody wants a tech company, a social media company, or a solar company in his portfolio. You'll see bubbles like the dotcom bubble, the RE bubble, etc., as people start to think that the industry and not its performance are all that matters. The stock price of a desired industry or company is inflated beyond what might otherwise be expected, to accommodate the premium that the investment can demand. So if bonds become uniformly less attractive in terms of returns, and certain institutional investors are largely obliged to continue purchasing them anyway, then flexible investors will need to look elsewhere. As more people want to buy stocks, the price rises. Supply and demand is sometimes so elementary it feels nearly counter-intuitive, but it applies here as elsewhere. |
How do credit card payments work? What ensures the retailer charges the right amount? | When you give your credit card number and authorize a merchant to charge your credit card, the merchant then gives the information to their merchant processor which in turns bills the bank that issued the card (it's a little more complex and it all happens instantly unless the merchant is using the very old fasion imprinting gizmos). It is possible for a merchant to attempt to charge you more than you authorized but if they do they risk a fine ($25-$50 for a chargeback) from their processor, the legitimate portion of the charge as well as increasing the processing fees charged by their processor or even the possibility of loosing their merchant account entirely and being permanently blacklisted by Visa/Mastercard. In short no legitimate business is going to intentionally over charge your credit card. There really isn't significant risk in using a reputable online retailer's order forms. There is the possibility that their database could be compromised but that risk is lower than the risk of having an employee steal your credit number when you give it to them in person. Besides in the US at least the most you can legally be held liable for is $50 assuming you notice the discrepancy within 60 days of statement the charge appears on and most banks limit liability to $0. Over the years I have had a number of different credit card numbers stolen and used fraudulently and I have never had to pay any fraudulent charges. |
College student - I'm a 'dependent' and my parents won't apply for the Parent PLUS loan or cosign a private loan | Smart parents not wanting to get stuck with a student loan or co-signing on a loan. because rent is so high Are you able to live with your parents? Is there anyway to reduce the cost of rent like renting a room? Can you move somewhere where the rent is cheaper? working 25 hours per week Working 25 hours per week and taking 6 hours is a pretty light schedule. It is not even 40 hours per week. What is stopping you from working 40 hours and paying for school from your salary? In my own life I created a pretty crappy situation for myself when I was a young man. I really wanted to go to a prestigious university, but ended up going to a community college, and then to a university that was lesser known in a less expensive area. I had to work like crazy, upwards of 50 hours per week. I also took a full load in a difficult degree program. You probably don't have to go to the extremes that I went through, but you can work more. Most adults work at their jobs well more than 40 hours per week, then come home and continue to work (on the house, raising kids, trying to start a side business, etc...). So you might as well become an adult now. There are ways to become independent from your parents for FAFSA like have a baby, get married, or join the military. I'd only recommend the last one as you will also receive the GI Bill. Another option is to try and obtain a job that offers financial aid. |
What can I replace Microsoft Money with, now that MS has abandoned it? | I suggest you to test AlauxSoft Accounts and Budget. This software is a money-like. There is a freeware and a shareware (24 EUR). You will find its at http://www.alauxsoft.com Best regards, Michel ALAUX. |
How risky are penny stocks? | The biggest problem with penny stocks is that they are easily manipulated, and they frequently are. Many of the companies trading as penny stocks have poor track histories of accurate financials, and what information that is available is not very reliable or verifiable. I recall a few years ago when there were articles out there in financial circles talking about how more than a few penny stocks were being manipulated by organized crime syndicates. Another big issue with penny stocks is liquidity. Since they're so thinly traded (not a great deal of daily volume), anyone who puts enough money into a penny stock to make it worth the effort almost certainly becomes the biggest trader in the stock, which can make it tough to liquidate positions. There are not enough market makers in the stock to be competitive, so you have to accept the bid/ask prices of whoever is willing to execute the trades, so the margins evaporate quickly. Penny stocks are something you can trade if you're bored, have money to burn, and just want to toy around with something just for the heck of it that you'll ultimately lose out on. |
How and Should I Invest (As a college 18 year old with minimal living expenses)? | I'd suggest you keep putting money in your savings account and start investing after you land that first big job. As another answer mentioned, unless you're fortunate enough to have all of your tuition and living expenses paid for, an emergency fund is an invaluable tool for a college student. And the bigger the better. Your laptop gets stolen or your car's air conditioner (or heater) dies -- both of these things happened to me in college -- and it would have been a much bigger deal for me if I didn't have some money tucked away. |
Is inflation a good or bad thing? Why do governments want some inflation? | Although there are some good points made here as to the cause of inflation (mostly related to supply and demand), azcoastal does head in a different direction, one which I myself was going to take. Let me give a different angle, however. Another cause of inflation is the printing of money by the government (not simply replacing old money with new, but adding to the total money in circulation). If the government doubles the amount of currency in circulation (for the sake of argument and easy math), the value of all money decreases by a factor of 2. That's inflation, and the way G. Edward Griffin in The Creature From Jekyll Island puts it, it's really tantamount to a hidden tax. In a nutshell, the federal government wants to buy some cool stuff like new tanks or planes, or they want to give a bunch of food stamps to poor people, or they want to fly their private jets around, but they don't have enough money from taxes. So, they print money and spend it and buy their stuff. Because they've just increased the money in circulation, however, money loses its value. For example, your savings has dropped in value by half, despite the fact that the same number of dollars is in your savings account. This is just a way the government can tax you without taxing you. They buy stuff and you now have less money (i.e., your retirement is worth less) and you don't even know you just got taxed. Makes me sick that we let our "leaders" get away with this. |
Why would people sell a stock below the current price? | This happens on dark pools quite often. If I am a large institutional investor with tens of millions of shares, I may want to unload slowly and limit the adverse affects on the price of the stock. Dark pools offer anonymity and have buyers / sellers that can handle large volume. In the case of a day trader, they often trade stocks with light volume (since they have large fluctuations that can be quite profitable throughout the session). At the end of the session, many traders are unwilling to hold positions on margin and want to unload fast. |
Tax implications of corporate housing | If the employer provides housing to the employee, the employer has to identify whether it is taxable or not. If it is - the amounts would be added to the taxable income on your W2. All the withholding and FICA tax calculations will be performed based on that taxable income. If the employer fails to do that, and you get audited, you can be left on the hook for the unpaid taxes on the unreported income. In some cases, employee housing is a non-taxable fringe benefit, in others it is taxable. Your tax adviser will help identify which case applies to you. After you added in a comment that you're trying to see if you should be asking your boss to pay your personal expenses vs. giving you a raise - as I said in the comments, your personal expenses are not deductible neither for you nor for anyone else. If your boss pays your rent instead of a raise - its taxable income for you. |
Is paying off your mortage a #1 personal finance priority? | If you can make enough ROI from the capital you retain by not paying off your mortgage, then why not? I do, I could pay off a significant chunk of mortgage if I wanted but whilst interest rates are low there's little incentive. As for another crash... Well, there's no reason to expect a crash would result in high interest rates, more the opposite, but you should consider what you would or could do if interest rates did jump to 15% for whatever reason. As long as your investments aren't too risky or difficult to liquidate, etc, you could always consider paying off a big chunk then, when it makes sense. |
Do market shares exhaust? | As @ApplePie pointed out in their answer, at any given time there is a finite amount of stock available in a company. One subtlety you may be missing is that there is always a price associated with an offer to buy shares. That is, you don't put in an order simply to buy 1 share of ABC, you put in an order to buy 1 share of ABC for $10. If no one is willing to sell a share of ABC for $10, then your order will go unfilled. This happens millions of times a day as traders try to figure the cheapest price they can get for a stock. Practically speaking, there is always a price at which people are willing to sell their shares. You can put in a market order for 1 share of ABC, which says essentially "I want one share of ABC, and I will pay whatever the market deems to be the price". Your broker will find you 1 share, but you may be very unhappy about the price you have to pay! While it's very rare for a market to have nobody willing to sell at any price, it occasionally happens that no one is willing to buy at any price. This causes a market crash, as in the 2007-2008 financial crisis, when suddenly everyone became very suspicious of how much debt the major banks actually held, and for a few days, very few traders were willing to buy bank stocks at any price. |
Should I deduct or capitalize the cost to replace a water heater in my rental property? (details Below) | You may be able to choose. As a small business, you can expense certain depreciable assets (section 179). But by choosing to depreciate the asset, you are also increasing the cost-basis of the property. Are you planning to sell the property in the next couple of years? Do you need a higher basis? Section 179 - Election to expense certain depreciable business assets |
What is the role of a manager in a passively managed index fund? | There still is some buying and selling to do in a passively-managed fund. The stocks might pay dividends. If the fund manager didn't reinvest these dividends, the fund would begin to accumulate a cash position, which would cause it to stray from being an index fund. Stocks come and go from an index as well; if the fund is to maintain a composition that matches a particular index, this must be taken into account as well. The role of the manager is to ensure that the fund maintains the composition that it was intended to replicate. It doesn't involve as much "stock picking" that active managers do. The manager has less leeway as to what s/he buys and sells, but there still is work involved. |
Principal 401(k) managed fund fees, wow. What can I do? | In my opinion, the fee is criminal. There are ETFs available to the public that have expenses as low as .05%. The index fund VIIIX an institution level fund available to large 401(k) plans charges .02%. I'll pay a total of under 1% over the next 50 years, Consider that at retirement, the safe withdrawal rate has been thought to be 4%, and today this is considered risky, perhaps too high. Do you think it's fair, in any sense of the word to lose 30% of that withdrawal? Another angle for you - In my working years, I spent most of those years at either the 25% or 28% federal bracket taxable income. I should spend my retirement at 15% marginal rate. On average, the purpose of my 401(k) was to save me (and my wife) 10-13% in tax from deposit to withdrawal. How long does it take for an annual 1.1% excess fee to negate that 10% savings? If one spends their working life paying that rate, they will lose half their wealth to those managing their money. PBS aired a show in its Frontline series titled The Retirement Gamble, it offers a sobering look at how such fees are a killer to your wealth. |
Should I pay off my credit card online immediately or wait for the bill? | It is COMPLETELY no use to pay earlier (during a billing cycle) to better your credit score! Your credit score gets affected ONLY once a month from each creditor, and that happens when they post your monthly statement. Thus, no matter what you do or pay and how many times a month or how many days earlier than your due date, it has NO EFFECT WHATSOEVER on your score. Anything you do will be reflected only after the statement. What you pay in between those two statements is irrelevant. So, as far as credit score goes IT DOESN'T MATTER. However, if you want to save on interest being charged, it is wise to pay as early as possible, so your balance is as low as possible for day-by-day calculation of your interest. |
How long do credit cards keep working after you disappear? | Generally speaking the bank accounts and credit card accounts remain open. Banks and the credit card companies don't monitor public records on a daily basis. Instead, whoever is handling your estate will need to obtain copies of your death certificate and they will then search your paper records to identify all accounts (reason to get your act together - there are books on the subject). The executor will work with the banks and card companies to make sure all your charges and payments clear (common to have them open for months or even a year) and to make close or transfer autopays. They will make sure to notify the credit agencies to flag your accounts so no new accounts can be created. MANY copies of the death certicates are needed. |
Does a rescheduled conference call generally mean “something's wrong” with a company? | Insiders (those who are aware of non-public material information, not necessarily employees) are the ones who actually cannot sell once they learned about whatever, by law. Martha Stewart went to jail for that. Any such deviation from the norm triggers abnormal response and avalanche of rumors, so by default investors assume something bad and try to minimize the loss. When dealing with a tiny company (market cap of less than 15M) with a tiny market volume (6.2M), the swings can be very significant. For such a small company, it is safe to assume that something happened that lead them to delay the conference call, and since they didn't tell what happen, investors assume the worst. It might end up as the CEO and CFO having bad stomach after celebrating 100% growth in revenue they were going to announce, but you'll have to wait and see.... |
Tax considerations for selling a property below appraised value to family? | Is this legal? If the purpose of the sale at that price is to defraud somebody else, you could have a legal issue. For example if the purpose was to make yourself appear poorer to make you eligible for government aid; Or to increase your chances of getting a college grant; or to not have to pay money to your spouse as part of a divorce settlement; or if there is an unwritten part of the transaction for the sibling to sell the house back to in a few years when you no longer need to appear poor. The answer by @littleadv covers the tax complications. I do have one additional point. The sale can't be a short sale. The bank will never approve. The short sale can only be approved when the bank is convinced that there are no viable purchasers at a level to get all their money back. Your sibling is not an arms length transaction. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.