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Open Interest vs Volume for Stock Options | For stock options, where I'm used to seeing these terms: Volume is usually reported per day, whereas open interest is cumulative. In addition, some volume closes positions and some opens positions. For example, if I am long one contract and sell it to someone who was short one contract, then that adds to volume and reduces open interest. If I hold no contracts and sell (creating a short position) to someone who also had no contracts, then I add to volume and I increase open interest. EDIT: With the clarification in your comment, then I would say some people opened and closed positions in that one day. Their opening and closing trades both contribute to "volume" but they have not net position in the "open interest." |
What one bit of financial advice do you wish you could've given yourself five years ago? | Maybe not exactly 5 years ago, but the big thing I wish I understood starting out my career was retirement accounts and how they worked. |
Why is tax loss harvesting helpful for passive investing? | The harvested losses are capital losses. See this IRS page: Generally, realized capital losses are first offset against realized capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040. Losses in excess of this limit can be carried forward to later years to reduce capital gains or ordinary income until the balance of these losses is used up. This means that your harvested losses can be used to offset ordinary income --- up to $3000 in a single year, and with extra losses carried forward to future years. It is pretty close to a free lunch, provided that you have some losses somewhere in your portfolio. This free lunch is available to anyone, but for a human, it can be quite a chore to decide when to sell what, keep track of the losses, and avoid the wash sale rules. The advantage of robo-advisors is that they eat that kind of bookkeeping for breakfast, so they can take advantage of tax loss harvesting opportunities that would be too cumbersome for a human to bother with. |
What mix of credit lines and loans is optimal for my credit score? | Over time, you'll have more loans, maybe a few store cards, mortgage, car loan, etc. I'm a fan of maximizing one's wealth, and the small rebate/reward adds up over time, so I'm not against the store cards, so long as you always pay the bill in full. As far as FICO is concerned, what they 'like' to see may not necessarily be optimum for you. I'd suggest you go about your business, and over time use the few cards that combine to give to the best benefit combination that works for you. |
How much house can a retired person afford | Consider a single person with a net worth of N where N is between one and ten million dollars. has no source of income other than his investments How much dividends and interest do your investments return every year? At 5%, a US$10M investment returns $500K/annum. Assuming you have no tax shelters, you'd pay about $50% (fed and state) income tax. https://budgeting.thenest.com/much-income-should-spent-mortgage-10138.html A prudent income multiplier for home ownership is 3x gross income. Thus, you should be able to comfortably afford a $1.5M house. Of course, huge CC debt load, ginormous property taxes and the (full) 5 car garage needed to maintain your status with the Joneses will rapidly eat into that $500K. |
What should I do with a savings account in another country? | If the fees to keep the account open are reasonable then it's worth keeping it open for now. It streamlines things if you need to visit or otherwise have business transactions (e.g. order things from online stores) with France or other EU countries. If you are not yet even in university, I think it is far too early to predict where you will end up spending your time in life. |
Figuring flood insurance into financing cost | Self-insure a $250K+ house that's deemed to be in a flood zone? Wake up, have coffee. If you don't change your mind, have another cup. |
Calculation, timing, and taxes related to profit distribution of an S-corp? | We will bill our clients periodically and will get paid monthly. Who are "we"? If you're not employed - you're not the one doing the work or billing the client. Would IRS care about this or this should be something written in the policy of our company. For example: "Every two months profits get divided 50/50" They won't. S-Corp is a pass-through entity. We plan to use Schedule K when filing taxes for 2015. I've never filled a schedule K before, will the profit distributions be reflected on this form? Yes, that is what it is for. We might need extra help in 2015, so we plan to hire an additional employee (who will not be a shareholder). Will our tax liability go down by doing this? Down in what sense? Payroll is deductible, if that's what you mean. Are there certain other things that should be kept in mind to reduce the tax liability? Yes. Getting a proper tax adviser (EA/CPA licensed in your State) to explain to you what S-Corp is, how it works, how payroll works, how owner-shareholder is taxed etc etc. |
What is the difference between a bad/bounced check and insufficient funds? | Insufficient funds will cause a check to bounce. If there is evidence that you "kited" the check deliberately, that's a potential fraud charge. If the vendor accepts that you were just stupid/careless, you'll probably just have to pay a penalty processing fee in addition to making good the payment. It is your responsibility to track your account balance and not write bad checks. If the timing could be bad, don't write the check yet. If you insist on paying with money you may not have, talk to your bank about setting up overdrafts to draw from another account, or automatic overdraft loans... or use a credit card rather than paying by check. |
Should I pay more than 20% down on a home? | I'd stick with 20% down. Truth is - we don't know enough about you. Are you single and staying that way? How is your retirement savings doing? As others asked, any other debt? You can put 20% down, take a breath and see how it's going. I did just that, the 20%. We then had a baby, and 5 nanny-years to pay for. When she was gone, all that money went to the mortgage, and after refinancing (with no points no closing) we have 7 years to go. Just under 20 years beginning to end. During that time we've saved for college (just about fully funded) and for retirement (both with matched 401(k) accounts). Remember, if you lose your job, a house with a lower mortgage means nothing when there's still the next payment due. But that cushion of cash can be handy. |
Deductible expenses paid with credit card: In which tax year would they fall? | Assuming that it's not inventory that is sold in the following year or a depreciable asset, you can deduct it when you make the purchase. The courts have ruled that credit cards balances are considered debt. It's treated the same way as if you went to the bank, got a loan, and used cash or a check to purchase the items. On your accounting books, you would debit the expense account and credit the credit card liability account. This is only for credit cards, which are considered loans. If you use a store charge card, then you cannot deduct it until you pay. Those are considered accounts payable. I'm an IRS agent and a CPA. |
How to sell a worthless option | The market maker will always take it off your hands. Just enter a market sell order. It will cost you a commission to pull the loss into this year. But that's it. |
1.4 million cash. What do I do? | Have you considered investing in real estate? Property is cheap now and you have enough money for several properties. The income from tenants could be very helpful. If you find it's not for you, you can also sell your property and recover your initial investment, assuming house prices go up in the next few years. |
Why is short-selling considered more “advanced” than a simple buy? | In addition to the higher risk as pointed out by @JamesRoth, you also need to consider that there are regulations against 'naked shorting' so you generally need to either own the security, or have someone that is willing to 'loan' the security to you in order to sell short. If you own a stock you are shorting, the IRS could view the transaction as a Sell followed by a buy taking place in a less than 30 day period and you could be subject to wash-sale rules. This added complexity (most often the finding of someone to loan you the security you are shorting) is another reason such trades are considered more advanced. You should also be aware that there are currently a number of proposals to re-instate the 'uptick rule' or some circuit-breaker variant. Designed to prevent short-sellers from driving down the price of a stock (and conducting 'bear raids etc) the first requires that a stock trade at the same or higher price as prior trades before you can submit a short. In the latter shorting would be prohibited after a stock price had fallen a given percentage in a given amount of time. In either case, should such a rule be (re)established then you could face limitations attempting to execute a short which you would not need to worry about doing simple buys or sells. As to vehicles that would do this kind of thing (if you are convinced we are in a bear market and willing to take the risk) there are a number of ETF's classified as 'Inverse Exchange Traded Funds (ETF's) for a variety of markets that via various means seek to deliver a return similar to that of 'shorting the market' in question. One such example for a common broad market is ticker SH the ProShares Short S&P500 ETF, which seeks to deliver a return that is the inverse of the S&P500 (and as would be predicted based on the roughly +15% performance of the S&P500 over the last 12 months, SH is down roughly -15% over the same period). The Wikipedia article on inverse ETF's lists a number of other such funds covering various markets. I think it should be noted that using such a vehicle is a pretty 'aggressive bet' to take in reaction to the belief that a bear market is imminent. A more conservative approach would be to simply take money out of the market and place it in something like CD's or Treasury instruments. In that case, you preserve your capital, regardless of what happens in the market. Using an inverse ETF OTOH means that if the market went bull instead of bear, you would lose money instead of merely holding your position. |
can the government or debt collectors garnish money from any bank account to which the debtor has access? | I would call the bank and ask how the person is on the account. If they are an owner, or are an authorized user, or what type of owner they are, etc. If the bank makes the distinction between "user" and "owner" then most likely, your funds are not able to be seized. If they are a joint owner, then, typically, 100% of the money is yours and 100% of the money is theirs and either of you could withdraw all the money, close the account, or have the money seized as part of a legal action. |
What do I need to be aware of if I choose to resell property early (in Alberta)? | You will have no problem doing this for one home and living in it for one or two years. There's a recent court case with around six homes bought and sold by the same person in that time frame. That's what you've probably heard about. There's no hard and fast rule about when it becomes a business but here are some highlights from that court case. Among the criteria developed by the case law, the following are of note: Constantin v. The Queen, 2014 TCC 327 (CanLII) |
What does a CFP do? | CFP stands for "Certified Financial Planner", and is a certification administered by the CFP board (a non-government non-profit entity). This has nothing to do with insurance, and CFP are not insurance agents. Many States require insurance agents to be explicitly licensed by the State as such, and only licensed insurance agents can advise on insurance products. When you're looking for an insurance policy as an investment vehicle, a financial adviser (CFP, or whatever else acronym on the business card - doesn't matter) may be helpful. But in any case, when dealing with insurance - talk to a licensed insurance agent. If your financial adviser is not a licensed tax adviser (EA/CPA licensed in your State) - talk to a licensed tax adviser about your options before making any decisions. |
Now that Microsoft Money is gone, what can I do? [duplicate] | Mint.com is a fantastic free personal finance software that can assist you with managing your money, planning budgets and setting financial goals. I've found the features to be more than adequate with keeping me informed of my financial situation. The advantage with Mint over Microsoft Money is that all of your debit/credit transactions are automatically imported and categorized (imperfectly but good enough). Mint is capable of handling bank accounts, credit card accounts, loans, and assets (such as cars, houses, etc). The downsides are: |
Is there any evidence that “growth”-style indexes and growth ETFs outperform their respective base indexes? | They don't, actually. Though in some time frames S&P 500 growth out performs S&P 500, it often lags. This is because "growth" doesn't refer to what happens to your account, but rather the type of stock in the index -- roughly speaking, it's the half of the S&P with the best earnings growth. That would be great, except it's not looking for is to see if that growth is worth buying. A stock with a 20% growth rate is a great buy at a P/E of 15, but a terrible buy at P/E/ 50. That leads to what JB King was talking about -- there's also the S&P 500 Value, which is roughly the cheapest stocks relative to earnings. Value does tend to beat the broad index over the long haul, because there's nothing like getting a good deal (note a stock can be in both the growth and value categories). This holds true with other indexes as well like the Russel 2000. All that said, you're not going to see a huge difference between S&P 500 and S&P 500 Growth. I believe this is because the S&P 500 itself leans a bit to the growthy side. PS: With VOOG Vanguard is tracking the S&P 500 Growth Index, which is actually a thing and not Vanguard itself filtering stocks. |
How do I adjust to a new social class? | I live in one of the highest cost of living areas in my country. For the cost of less than half the down payment my spouse and I have saved up for a house we could easily buy a home in most of the lower cost of living areas (and several homes in, say, Detroit). As for the rest of your question, though, we've chosen not to live that way. Because, like all high cost of living areas, ours is near a city there are more free and inexpensive things to do than you would think at first. While others in our area think a great time is pre-gaming drinks at a nice bar, an expensive restaurant, then some more drinks we've taught ourselves how to make great meals from scratch using sale and inexpensive ingredients from the grocery store and often do that on weekends, topped off by a movie from the redbox that we promptly return the next day. We have chosen friends who will hang out with us over potluck dinners and board games instead of out on the town. On weekend days we visit free museums, do hikes, wander around revitalized downtown strips, or play at the local parks. Our groceries, as I mentioned, are sale items or use coupons and we go for less expensive meats and produce. We visit our local farmer's market for fun, not to buy the expensive produce. We might find ourselves wandering through the mall to window shop, but when it comes time to actually buy clothing or goods for the apartment we shop around for up to months to find a good deal. Plenty of our friends have money enough to spend, and the most debt they are usually wallowing in is a big car payment, no consumer debt. At the same time I have trouble imagining some of them buying a house any time soon, because they simply can't be saving all that much (since I know their incomes). They may eventually be able to afford a condo and ride rising housing prices to a townhome and then a house - it's what lots of people do around here, loosing buckets money in realtor fees and closing costs along the way. Even with these choices, it's hard to view my friends as selfish knowing that most of them give around 10% of their income to charity. There are probably plenty of people around here swimming in debt (somebody recently asked in a Q&A with the local paper editors how she could stop going to the city's most expensive restaurants and start living within her means when she only liked expensive places), but lots of folks can stretch themselves and afford to get by while wasting a lot of money. It's not what my spouse and I have chosen to do, because we want to be able to live very responsibly and plan for a rainy day, but the longer you live with and around the money that tends to permeate high cost of living areas, the more it will seem normal to you. Also, if it's really $1000/mo for a 2 br. apartment, your cost of living is still lower than mine is. If I were you I wouldn't try to acclimate myself to the spendy habits of your surroundings. Instead I'd find friends who are frugal and work on maintaining your good financial habits. If you ever want one of those $4, $5, or $6K (plus!) houses, you're going to need them. |
60% Downpayment on house? | Voluntarily assuming a loan is a bad idea, especially for a non-investment purpose. It would be one thing to take on a loan to operate a business or buy a piece of capital equipment, like a machine that would make you money. Borrowing money to have a more luxurious house is foolish. The smart move is to buy a good quality home that will meet your needs for as little as possible. Having $800,000 leaves a quit a bit of leeway in that department. You don't say where you live, but if this occurred in my area (eastern Massachusetts) I would buy a house for $500,000 and then invest the remaining $300,000. If I lived in the California bay area, it might be necessary to spend the whole $800,000. Either way there should be no need to borrow money. Also, if you buy a house for cash, often you can get a substantially better deal than if you have to involve a bank. Not owing anyone money is a huge psychological advantage in business and in life in general. View being debt-free as a springboard to success and happiness. |
How much should I save up per trade? | I'd answer it this way: What do you want to do? I'd say any amount is acceptable from as low as $100. When you look at the specific "tree" of investing paying $5 for a $100 seems unacceptable. However when observing the "forest" what does it matter if you "waste" $5 on a commission? Your friends (and maybe you) probably waste more than $5 multiple times per day. For them buying a latte might empower them, if buying another share of HD, for a similar cost, empowers you than do it. In the end who will be better off? Studies show that the more important part of building a significant investment portfolio is actually doing it. Rate of return and the cost of investing pales in comparison to actually doing it. How many of your peers are doing similar things? You are probably in very rare company. If it makes you happy, it is a wonderful way to spend your money. |
Buying a truck to write off on taxes | Assuming your country is the United States there is. See schedule C line 9 and the corresponding instructions. There are many rules associated with this, in some cases the entire purchase can be written off but typically if the truck is only used for business. Most people write off partial usage in the form of credits for mileage. You are best to consult with a CPA once your business earns a profit. Good luck. |
Should I include my hard assets as part of my net worth? | If the value of these hard assets is significant you probably have them insured, and for significant art work you should have had them appraised as part of getting them insured. Therefore the process of adding them into the net worth calculation would be trivial. Your goals should be a mix of liquid assets, and assets that are harder to sell, such as real estate. It should also include those items you are more reluctant to sell. In some cases these "investments" do need to be included in official calculations, such as applying for a student loan or financial aid, required financial disclosure statements for some government jobs, or applications for government assistance. |
What should I look at before investing in a start-up? | You seem to have all your financial bases covered, and others have given you good financial advice, so I will try to give you some non-financial ideas. The first and most important thing is that you are investing with a long time friend, so the dynamics are a lot different that if you had recently met a stranger with an "interesting" new idea. The first thing you need to ask yourself is if your friendship will survive if this thing doesn't go well? You've already said you can afford to lose the money so that's not a worry, but will there be any "recriminations?" The flip side is also true; if the venture succeeds, you should be able to go further with it because he's your friend. You know your friend better (back to grade school) than almost anyone else, so here are some things to ask yourself: What does your friend have that will give him a chance to succeed; tech savvy, a winning personality, a huge rolodex, general business savvy, something else? If your guardian angel had told you that one of your friends was planning to embark on an internet/advertising venture, is this the one you would have guessed? Conversely, knowing that your friend was planning to do a start up, is this the kind of venture you would have guessed? How does "internet" and "advertising" fit in with what you are doing? If this venture succeeds, could it be used to help your professional development and career, maybe as a supplier or customer? Can you see yourself leaving your current job and joining your friend's (now established) company as a vice president or acting as a member of its board of directors, the latter perhaps while pursuing your current career path? Are your other mutual friends investing? Are some of them more tech savvy than you and better able to judge the company's prospects of success? To a certain extent, there is "safety in numbers" and even if there isn't, "misery loves company." On the upside, would you feel left out if everyone in your crowd caught "the next Microsoft" except you? |
The Benefits/Disadvantages of using a credit card | paying it off over time, which I know is the point of the card That may very well be the card issuer's goal, but it need not be yours. The benefits, as your question title seems to ask for - That said, use the card, but don't spend more than you have in your checking account to pay it when the bill comes. What you may want to hear - "Charge the furniture. Pay it off over the next year, even at 20%/yr, the total interest on $2000 of furniture will only be $200, if you account for the declining balance. That's $4/week for a year of enjoying the furniture." You see, you can talk yourself into a bad decision. Instead, shop, but don't buy. Lay out the plan to buy each piece as you save up for it. Consider what would happen if you buy it all on the card and then have any unexpected expenses. It just gets piled on top of that and you're down a slippery slope. |
How can I get a home loan within 2 years of bankruptcy? | Your only option might be finding a seller-financed property with a motivated seller who is willing to take the risk of loaning you money. However, be prepared to pay a hefty rate on that loan if you can even pull it off. |
What steps should be taken, if any, when you find out your home's market value is underwater, i.e. worth less than the mortgage owed? | That's easy, keep making the payments and go on with life. The number that matters more than loan/market value is loan/equity. As long as you can sell it for enough to pay the balance on your loan you should be okay. Not saying it doesn't suck, but financially you are fine. If you owe more than the house is worth, I'd suggest paying it down as quickly as possible to fix that ratio to reduce your financial risk in case you lose your source of income. Personally, I think it is pretty slimy for people to walk away from house notes or try to short sell them when they can afford to continue payments just because the market value of the house fell. How would you feel if, when house prices were skyrocketing, the bank canceled your loan and repossessed your house because they could resell it for more money? (not that they could realistically, just speaking hypothetically.) |
Why will the bank only loan us 80% of the value of our fully paid for home? | I am going to add just one more item to what are some very well thought out answers. The element of "Cash Out" If you are taking out 80% of the value of the home that you already own free and clear the bank considers this a "Cash Out" transaction - meaning you would effectively walk away from closing with a check for 80% of your home's value. So in a hypothetical situation you have a $200,000 home value - you would be handed a check for $160,000 with which you could do anything that you wanted. Granted, you are likely going to do something responsible with it and purchase another home - BUT (big BUT) the bank can't control what you do with it and that is the part they don't like - and therefore they treat these types of transactions with a higher degree of scrutiny. It is all about control - if the property you are downsizing to fits their rules for lending they may actually loan you a higher loan to value on that purchase than they would on your "cash out" refinance transaction on your current home. With the purchase loan the money you get goes immediately to the purchase of a new home. In the "cash out" transaction it goes to a check with which you could do anything you want . . . and then not pay the loan back . . . I know no one here would do that - but there are some folks that would . . . and this is one of the reasons "Cash Out" loans are not nearly as easy as they once were to get. http://www.justice.gov/usao/az/mortgagefraud.html |
Why do 10 year Treasury bond yields affect mortgage interest rates? | The simple answer is that, even though mortgages can go for 10, 15, 20 and 30 year terms in the U.S., they're typically backed by bonds sold to investors that mature in 10 years, which is the standard term for most bonds. These bonds, in the open market, are compared by investors with the 10-year Treasury note, which is the gold standard for low-risk investment; the U.S. Government has a solid history of always paying its bills (though this reputation is being tested in recent years with fights over the debt ceiling and government budgets). The savvy investor, therefore, knows that he or she can make at least the yield from the 10-year T-note in that time frame, with virtually zero risk. Anything else on the market is seen as being a higher risk, and so investors demand higher yields (by making lower bids, forcing the issuer to issue more bonds to get the money it needs up front). Mortgage-backed securities are usually in the next tier above T-debt in terms of risk; when backed by prime-rate mortgages they're typically AAA-rated, making them available to "institutional investors" like banks, mutual funds, etc. This forms a balancing act; mortgage-backed securities issuers typically can't get the yield of a T-note, because no matter how low their risk, T-debt is lower (because one bank doesn't have the power to tax the entire U.S. population). But, they're almost as good because they're still very stable, low-risk debt. This bond price, and the resulting yield, is in turn the baseline for a long-term loan by the bank to an individual. The bank, watching the market and its other bond packages, knows what it can get for a package of bonds backed by your mortgage (and others with similar credit scores). It will therefore take this number, add a couple of percentage points to make some money for itself and its stockholders (how much the bank can add is tacitly controlled by other market forces; you're allowed to shop around for the lowest rate you can get, which limits any one bank's ability to jack up rates), and this is the rate you see advertised and - hopefully - what shows up on your paperwork after you apply. |
I file 83(b) election, but did't include a copy of it in that year’s tax return | This may be relevant: it suggests that IRS is lenient with the attachment of the form with 1040. To paraphrase: "The ruling involved a taxpayer who timely filed the election with the IRS within 30 days of the property transfer but who did not attach a copy of the election to his or her Form 1040 for the year of the transfer. Fortunately for the taxpayer in question, the ruling indicated that the submission of the election to the IRS within 30 days of the property transfer fulfilled the requirements for a valid election, and the failure to attach the copy to the tax return did not affect the validity of the election. The IRS requested that the taxpayer forward a copy of the election to the IRS to be associated with the processing of the tax return. - See more at: http://www.bnncpa.com/services/employee_benefit_plans/blog/irs_rules_that_failure_to_attach_83b_election_to_form_1040_did_not_invalida#sthash.0c3h2nJY.dpuf" If someone wants to grok the IRS ruling: http://www.irs.gov/pub/irs-wd/1405008.pdf And this is the article where I saw the above referenced. www.bnncpa.com/services/employee_benefit_plans/blog/irs_rules_that_failure_to_attach_83b_election_to_form_1040_did_not_invalida |
Why is the stock market closed on the weekend? | After-hours trading and alternate venues allow one to trade outside of regular market hours. However there are a few reasons why you would not want to: The purpose of an exchange is to improve liquidity by gathering all buyers and sellers in the same place at the same time. If trading was 24/7, not all market participants would be trading at the same time. Some markets (including NASDAQ) depend on market makers or specialists to help liquidity. These exchanges are able to mandate that the market maker actively make a market in a security during a meaningful percentage of the trading day. Requiring 24/7 active market making may not be reasonable. Trading systems, meaning both exchange infrastructure and market participant infrastructure, need maintenance time. It's nice to have the evenings and weekends for scheduled work. Post-trade clearing and settlement procedures are still somewhat manual at times. You need staff around to handle these processes. |
Where should I be investing my money? | Pay off your debt. As you witnessed, no "investment" % is guaranteed. But your debt payments are... so if you have cash, the best way to "invest" it is to pay off your debt. Since your car is depreciating while your house may be appreciating (don't know but it's possible) you should pay off your car loan first. You're losing money in more than one way on that investment. |
Are these really bond yields? | But it also can't be 1.46%, because that would imply that a 30Y US Treasury bond only yields 2.78%, which is nonsensically low. The rates are displayed as of Today. As the footnote suggests these are to be read with Maturities. A Treasury with 1 year Maturity is at 1.162% and a Treasury with 30Y Maturity is at 2.78%. Generally Bonds with longer maturity terms give better yields than bonds of shorter duration. This indicates the belief that in long term the outlook is positive. |
Are REIT worth it and is it a good option to generate passive income for a while? | In financial markets, the gains you can expect to make (whether in the form of dividends or capital gains) correspond to the risks you are bearing. There are a variety of REITs but you can expect to make only as much money in them as you bear risk (meaning you can also lose a lot of money in the ones that earn a lot). In that sense they are just like other financial assets like stocks. If you are generically trying to increase your wealth by bearing risk, you can get a better risk/reward ratio in a fully diversified portfolio including stocks and bonds as well and REITs. "Passive income" means making money by bearing risk. REITs alone, without diversifying into other financial assets, do a poor job of generating income for the amount of risk you bear. So why are REITs not very comparable to buying a house and renting it out? Because in the latter case you are being paid not only for bearing the risk of the house depreciating but also you are being compensated for the work you do as a landlord. Moreover, because the house doesn't trade in a liquid market like REITs do, it is possible to actually get a good deal, as opposed to the fair deal you will get on a REIT. TL;DR: The "passive income" generated by REIT investment is more similar to generic equity/bond investment than it is to an investment in a physical home that you rent out. If what you want is to make money without doing anything besides bear risk, you should invest in a fully diversified portfolio of financial assets (equity and bonds being the primary constituents but REITs potentially being a part as well). |
Company stock listed in multiple exchanges? | If a company's shares trade in multiple exchanges, the prices in every exchange are very near to each other, otherwise you could earn money by doing arbitrage deals (buying in one, selling in the other) - and people do that once it becomes worth it. Which stock exchange you use is more a convenience for the buyer/seller - many investment banks offer only something local/near, and you have to go to specific investment banks to use other exchanges. For example, in Germany, it is easy to deal in Frankfurt, but if you want to trade at the the NASDAQ, you have to run around and find a bank that offers it, and you probably have to pay extra for it. In the USA, most investment banks offer NASDAQ, but if you want to trade in Frankfurt, you will have run around for an international company that offers that. As a stock owner/buyer, you can sell/buy your shares on any stock exchange where the company is listed (again, assuming your investment broker supports it). So you can buy in Frankfurt and sell in Tokyo seconds later, as nothing needs to be physically moved. Companies that are listed in multiple stock exchangs are typically large, and offer this to make trading their shares easier for a larger part of the world. Considering your 'theoretical buy all shares' - the shares are not located in the exchanges, they are in the hands of the owners, and not all are for sale, for various reasons. The owners decide if and when they want them offered for sale, and they also decide which stock exchange they offer them on; so you would need to go to all exchanges to buy them all. However, if you raise your offer price in one exchange only slightly, someone will see the arbitrage and buy them in the other locations and offer them to you in your stock exchange; in other words, for a small fee the shares will come to you. But again, most shares are typically not for sale. It's the same as trying to buy all Chevy Tahoes - even if you had the money, most owners wouldn't know or care about you. You would have to go around and contact every single one and convince them to sell. |
Learning stock trading financing etc for someone from mathematical background [duplicate] | Security Analysis(very difficult for beginners )& Intelligent Investor by Benjamin Graham. All about(book series by McGraw) on Stocks,Derivatives,Options,Futures,Market Timings. Reminiscence of a Stock Operator (Life of jesse Livermore). Memoirs , Popular Delusions and Madness of the Crowds by Charles Mackay. Basics of Technical analysis includig Trading Strategies via Youtube videos & Google. Also opt for Seeking alpha free version to learn about portfolio allocation under current scenario there will be few articles as it will ask for premium version if you love it then opt for it. But still these books will do. |
Buying a foreclosed property | That may depend largely in which country you are in, the legislation in that country and the state of the economy and property market (more specifically) at the time of the foreclosure. In Australia, where we do not have non-recourse loans (except in SMSFs) the banks are obliged to recoup as much as possible for the mortgagee, however they would not hold on to the property indefinitely, as that could cause other problems and they have to return the mortgagee portion of the funds back to them (if there is any funds left after the bank takes their portion). In 2008, when the property market here was weak we had bought some foreclosure houses and were able to get them 20% to 25% below what they were selling at the year before. If there was a forclosure in today's strong market in Australia (and especially in Sydney), I dought you would get much of a discount at all. So it may largly depend on the demand and supply at the time of the forclosure. |
How good is Wall Street Survivor for learning about investing? | I find this site to be really poor for the virtual play portion, especially the options league. After you place a trade, you can't tell what you actually traded. The columns for Exp and type are blank. I have had better luck with OptionsXpress virtual trader. Although they have recently changed their criteria for a non funded accounts and will only keep them active for 90 days. I know the cboe has a paper trading platform but I haven't tried it out yet. |
Should I set a stop loss for long term investments? | You should definately have a stop loss in place to manage your risk. For a time frame of 5 to 10 years I would be looking at a trailing stop loss of 20% to 25% off the recent high. Another type of stop you could use is a volatility stop. Here the more volatile the stock the larger the stop whilst the less volatile the stock the smaller the stop. You could use 3 or 4 x Weekly ATR (Average True Range) to achieve this. The reason you should always use a stop loss is because of what can happen and what did happen in 2008. Some stock markets have yet to fully recover from their peaks at the end of 2007, almost 9 years later. What would you do if you were planning to hold your positions for 5 years and then withdrawal your funds at the end of June 2021 for a particular purpose, and suddenly in February 2021 the market starts to fall. By the time June comes the market has fallen by over 50%, and you don't have enough funds available for the purpose you planned for. Instead if you were using a trailing stop loss you would manage to keep at least 75% of the peak of your portfolio. You could even spend 10 minutes each week to monitor your portfolio for warning signs that a downtrend may be around the corner and adjust your trailing stop to maybe 10% in these situations, protecting 90% of the peak of your portfolio. If the downtrend does not eventuate you can adjust your trailing back to a higher percentage. If you do get stopped out and shortly after the market recovers, then you can always buy back in or look for other stocks and ETFs to replace them. Sure you might lose a bit of profits if this happens, but it should always be part of your investment plan and risk management how you will handle these situation. If you are not using stop losses, risk management and money management you are essentially gambling. If you say I am going to buy these stocks and ETFs hold them for 10 years and then sell them, then you are just hoping to make gains - which is essentially gambling. |
Repaying Debt and Saving - Difficult Situation | Like everybody else I'm picking up on the school loans - you're mother isn't exactly earning a massive amount of money given her cost of living, why is she taking out student loans that benefit you and your sister? I'm not trying to be offensive but it's fairly obvious that she can't afford it. As a first step I think you should at least take over paying your own student loans (you sound like you're out of college already and if you have $8k to "lend" to your mother you probably have enough money to pay the student loans that benefited you, after all) or as someone else also recommended, assume your loans. As to your sister, maybe it's time for her to get (another) job to pay for the tuition so her mother doesn't have to go further into debt. Again, I'm not trying to be mean here but your mother is digging herself deeper and deeper into a hole because of the tuition. Something's gotta give, and delivering pizza or getting a paper round is a small sacrifice here. Next, the car - unless she has a managed to work herself out of some of this mess, I would consider getting a much cheaper car instead. This is provided that she isn't upside down on the loan. Personally I wouldn't trade in a vehicle with an upside down loan, if anything that's another bad financial decision. Assuming that she isn't upside down on the loan and has some equity in the car, I would seriously consider selling the car and using the equity to buy something small and cheap. That should also hopefully reduce the cost of gas and maybe insurance somewhat. I think these points are probably the quickest steps that can be taken towards recovering this situation. You already mentioned the longer term plans like downsizing the apartment, but TBH I'm not sure that this is really necessary. The big elephant in the room are the college costs and removing those from the equation would give her a serious amount of breathing room. |
What gives non-dividend stocks value to purchasers? [duplicate] | Dividends are not fixed. A profitable company which is rapidly expanding, and thus cash-strapped may very well skip dividends, yet that same fast growth makes it valuable. When markets saturate, and expansion stops, the same company may now have a large free cash flow so it can pay dividends. |
Should I “hedge” my IRA portfolio with a life cycle / target date mutual fund? | I choose lifecycle funds because I am placing faith (perhaps foolishly) that a full time fund manager knows better what to pick than I. The same reason I go with mutual funds in general apply to to why I also have the lifecycle funds. Presently my diversification strategy is really just index funds and lifecycle funds. The radio advice guy Clark Howard often promotes them. http://www.wacotrib.com/none/content/shared/money/stories/clark/0601/060425money.html (I count in the intimidated group) |
How does giving to charity work? | A simpler view is that tax deductions allow you to give to charities from your gross salary, not your net salary. |
Buying a car - advice needed | If it costs more to fix the car than the car is worth, then those repairs are not worth it. Hit craigslist and look for another junker that runs, but is in your cash price range. Pay to get it looked at by a mechanic as a condition of sale. Use consumer reports to try and find a good model. Somebody in your position does not need a $15K car. You need a series of $2K or $4K cars that you will replace more often, but pay cash for. Car buying, especially from a dealer financed, place isn't how I would recommend building your credit back up. EDIT in response to your updates: Build your credit the smart way, by not paying interest charges. Use your lower limit card, and annually apply for more credit, which you use and pay off each and every month. Borrowing is not going to help you. Just because you can afford to make payments, doesn't automatically make payments a wise decision. You have to examine the value of the loan, not what the payments are. Shop for a good price, shop for a good rate, then purchase. The amount you can pay every month should only be a factor than can kill the deal, not allow it. Pay cash for your vehicle until you can qualify for a low cost loan from a credit union or a bank. It is a waste of money and time to pay a penalty interest rate because you want to build your credit. Time is what will heal your credit score. If you really must borrow for the purchase, you must secure a loan prior to shopping for a car. Visit a few credit unions and get pre-qualified. Once you have a pre-approved loan in place, you can let the deal try and beat your loan for a better deal. Don't make the mistake of letting the dealer do all the financing first. |
As an American working in the UK, do I have to pay taxes on foreign income? | A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them http://www.irs.gov/businesses/international/article/0,,id=169552,00.html B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income. sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction. |
Any Ubiquitous Finance App That is on Mac, iOS and Windows? | I have been using bearsofts money app, both in mac and iOS. I think only down side with this apps is you need to buy them separately. http://ibearmoney.com/money-mac.html |
Should I buy stocks of my current employer because of its high dividend yield? | Your cons say it all. I would not be buying stocks based soley on a high dividend yield. In fact companies with very high dividend yields tend to do poorer than companies investing at least part of their earnings back into the company. Make sure at least that the company's earnings is more than the dividend yield being offered. |
What are the usual terms of a “rent with an option to buy” situation? | The typical deal would be a premium to the normal rent, say $1200 instead of $1000, in return he has the option to buy the house at a fixed price by the end of the agreement term. |
Should I pay a company who failed to collect VAT from me over 6 months ago? | Note: I am not a lawyer. This is my personal opinion and interpretation. First, your source is European Law, which obviously doesn't apply outside of the EU. The EU cannot make laws that bind entities in other countries; so you cannot claim that the VAT was needed to be mentioned. Second, if you owe something, you owe it; it doesn't matter if it was forgotten to be mentioned. At best, you can say that under those circumstances you don't want the software anymore, and i would assume you can send it back and get your money back (minus a fee for having it used for a while...) - this gets quite difficult to calculate clearly, so it's probably not a good avenue to follow for you. As the company has to send the VAT to your country (they will not be allowed to keep a dime of it, and have to bear the complete cost for the handling), it is a debt you have to your government; they are just the entity responsible for collecting it. Still, if you just ignore them, they will probably suck it up, and your government will also not do a thing to you. If they only have your email address, they have no way of knowing if you even still have/use this address; for all they know, it could be you never got it. They also cannot simply charge your card, as they probably don't have the card data any more (they are not supposed to keep it after the transaction is complete, and they thought it was complete at the time). All in all, you should be safe to ignore it. It's between you and your god/consciousness, if you feel obliged to pay it, as technically you owe it. |
Can I rely on my home equity to finance large home repairs? | Personally, I'd use my emergency fund first. It is unlikely (though possible, of course) that I will entirely lose my income at the same time I need to replace my roof or my furnace. I'd rather pay my emergency fund back with installment payments than pay off a HELOC to my bank. The lost interest on my emergency fund, which, after all, should be in cash, is much less than the cost of the loan. I could even set up an amortization schedule in a spreadsheet and charge myself interest when paying back into the emergency fund. That said, if I didn't have the cash in my emergency fund, I'd rather borrow against the house than finance with a contractor. If they'd even do that, which is unlikely--I've never dealt with a roofer or heating contractor that required anything but full payment at time of service. Home equity borrowing is generally the cheapest kind. I'm firmly in the camp of those who look at home ownership as a consumption decision rather than an investment. If the value goes up, great, but I just build in about 1% of the cost of building a new house (excluding the land price) into the housing budget each year, right along with mortgage interest, property taxes and basic utilities. Usually, that's enough to cover the major wear-and-tear related repairs (averaged over 3-5 year periods, anyway). |
Ideal investments for a recent college grad with very high risk tolerance? | Congratulations on being in this position. Your problem - which I think that you identified - is that you don't know much about investing. My recommendation is that you start with three goals: The Motley Fool (www.fool.com) has a lot of good information on their site. Their approach may or may not align with what you want to do; I've subscribed to their newsletters for quite a while and have found them useful. I'm what is known as a value investor; I like to make investments and hold them for a long time. Others have different philosophies. For the second goal, it's very important to follow the money and ask how people get paid in the investment business. The real money in Wall Street is made not by investment, but by charging money to those who are in the investment business. There are numerous people in line for some of your money in return for service or advice; fees for buying/selling stocks, fees for telling you which stocks to buy/sell, fees for managing your money, etc. You can invest without spending too much on fees if you understand how the system works. For the third goal, I recommend choosing a few stocks, and creating a virtual portfolio. You can then then get used to watching and tracking your investments. If you want a place to put your money while you do this, I'd start with an S&P 500 index fund with a low expense ratio, and I'd buy it through a discount broker (I use Scottrade but there are a number of choices). Hope that helps. |
Are there any issues with registering an LLC in a foreign state? | No, there are no issues. When you form the corp in DE, you pick a business there to serve as your "agent" (essentially someone who knows to get in contact with you). The "agent" will notify you about taxes and any mail you get, but besides the fee they charge you for being the agent, you should file all the taxes directly with DE (franchise tax is easy to file on the web) instead of going through the agent and paying a surcharge. When your LLC files taxes, you'll do so in DE and then the LLC will issue you a federal and state K1. You'll file taxes where you reside and use the federal K1, but I think you might have to file DE state taxes (unsure about this part, feel free to edit or comment and I'll correct). |
I am a small retail investor. Can I invest in the Facebook IPO at the IPO price? [duplicate] | I have an account with ETrade. Earlier this week I got an offer to participate in the IPO proper (at the IPO price). If Charles Schwab doesn't give you the opportunity, that's a shortcoming of them as a brokerage firm; there are definitely ways for retail investors to invest in it, wise investment or no. (Okay, technically it wasn't an offer to participate, it was a notice that participation was possibly available, various securities-law disclaimers etc withstanding. "This Web site is neither an offer to sell nor a solicitation to buy these securities. The offer is by prospectus only. This Web site contains a preliminary prospectus for each offering." etc etc). |
What options do I have at 26 years old, with 1.2 million USD? | You need the services of a hard-nosed financial planner. A good one will defend your interests against the legions of creeps trying to separate you from your money. How can you tell whether such a person is working in your best interest? Here are some ways. You'll be able to tell pretty quickly whether the planner lets you get through the same story you told us. The ability to listen carefully without interrupting is a good way to tell whether the planner is going to honor your needs. You're looking for a human service professional, not an investment or business guru. There are planners who specialize in helping people navigate big changes in their financial situation. Some of the best of those planners are women. (Many of their customers are people whose spouses recently died. But they also serve people in your situation. Ask if they work with other people like you.) Of course, you need to take the planner's advice, especially about spending and saving levels. |
When are stock trade fees deducted? | As others have said, it depends on the brokerage firm. My broker is Scottrade. With Scottrade the commission is assessed and applied the moment the order is filled. If I buy 100 shares of XYZ at $10 a share then Scottrade will immediately deduct $1007.02 out of my account. They add the commission and fees to the buy transaction. On a sale transaction they subtract the commission and fees from the resulting money. So if I sell 100 shares of XYZ at $11 a share I will get 1,092.98 put into my account, which I can use three business days later. |
Oh, hail. Totaled car, confused about buy-back options | It seems like there are a few different things going on here because there are multiple parties involved with different interests. The car loan almost surely has the car itself as collateral, so, if you stop paying, the bank can claim the car to cover their costs. Since your car is now totaled, however, that collateral is essentially gone and your loan is probably effectively dead already. The bank isn't going let you keep the money against a totaled car. I suspect this is what the adjuster meant when he said you cannot keep the car because of the loan. The insurance company sounds like they're going to pay the claim, but once they pay on a totaled car, they own it. They have some plan for how they recover partial costs from the wreck. That may or may not allow you (or anyone else) to buy it from them. For example, they might have some bulk sale deal with a salvage company that doesn't allow them to sell back to you, they may have liability issues with selling a wrecked car, etc. Whatever is going on here should be separate from your loan and related to the business model of your insurance company. If you do have an option to buy the car back, it will almost surely be viewed as a new purchase by the insurances company and your lender, as if you bought a different car in similar condition. |
Why can't house prices be out of tune with salaries | They can't keep rising with respect to people's income because eventually you run out of buyers. If there's roughly one house for every five people, then you'd better make sure that the price you set to sell your house is affordable to people in the upper fifth of income scales, or else you are mathematically guaranteed not to have any customers. Now, it's true that the price of particular houses can get much higher, but they tended to be higher in the first place. Housing isn't exactly an efficient market, but for the most part you have to pay for the house that you get, or else someone else will outbid you. An individual area might, temporarily, buck these trends because it suddenly becomes popular and there are a lot of extra buyers putting money on the table. In the long run, someone is going to build for those buyers, even if it means moving up the chain from enormous rural lots to suburban single-family homes to low-density garden apartments to residential towers. |
Insurance company sent me huge check instead of pharmacy. Now what? | You mentioned depositing the check and then sending a personal check. Be sure to account for time, since any deposit over $10,000 the money will be made available in increments, so it may take 10-14 days to get the full amount in your account before you could send a personal check. I would not recommend this option regardless, but if you do, just a heads up. |
Does it make sense to talk about an ETF or index in terms of technical indicators? | Yes, it makes sense. Like Lagerbaer says, the usefulness of technical indicators can not be answered with a simple yes or no. Some people gain something from it, others do not. Aside from this, applying technical indicators (or any other form of technical analysis - like order flow) to instruments which are composed of other instruments, such as indexes (more accurately, a derivative of it), does make sense. There are many theories why this is the case, but personally i believe it is a mixture of self fulfilling prophecy, that the instruments the index is composed of (like the stocks in the S&P500) are traded in similar ways as the index (or rather a trade-able derivative of it like ETFs and futures), and the idea that TA just represents human emotion and interaction in trading. This is a very subjective topic, so take this with a grain of salt, but in contrast to JoeTaxpayer i believe that yields are not necessary in order to use TA successfully. As long as the given instrument is liquid enough, TA can be applied and used to gain an edge. On the other hand, to answer your second question, not all stocks in an index correlate all the time, and not all of them will move in sync with the index. |
Is the stock market too risky for long term retirement funds? Why should a 20- or 30-something person invest in stocks? | I recommend that people think for themselves and get a multitude of counselors. The more you understand about what drives the prices of various assets, the better. Getting to good advice for a particular person depends on the financial picture for that person. For example, if they have a lot of consumer debt, then they probably would be better off paying off the debt before investing, as earning 5% (say) in the stock market year over year will be eaten up by the 18%+ they may be paying on their credit cards. Here's a starter list of the types of information that would be better to have in order to get fair investment advice. |
How can I determine if my rate of return is “good” for the market I am in? | A good measurement would be to compare to index's. Basically a good way to measure your self would be to ask "If I put my money somewhere else how much better or worse would I have done?" Mutual funds and Hedge funds use the SP500 as a bench mark. Some funds actually wave their fee if they do not outperform the SP or only take a fee on the portion that has outperformed the SP500. in today's economy i dont know how to expect such a return The economy is not a good benchmark on what to expect from the stock market. For example in 2009 by certain standards the economy was worse then today but in 2009 the market rallied a great deal so your returns should have reflected that. You can use the SP500 as a quick reference to compare your returns (this is also considered the "standard" for a quick comparison). The way you compare your performance is also dependent on how you invest your money. If you are outperforming the SP500 you are doing well. Many mutual funds DO NOT outperform the SP500. Edit Additional Info: Here is an article with more comprehensive information on how to gauge your performance. In the article is a link to a free tool from morning star. Use the Right Benchmark to Accurately Measure Investment Performance |
Understanding the phrase “afford to lose” better | I think that people only use the phrase "only spend what you can afford to lose" when they are talking about the most risky or speculative investments, or even gambling. When talking about gambling, the following quote is a bottom line: The speculative investment that brought me to this question via google is how much should I invest in Bitcoin? I was tempted to put in 10% of my investments, not including the 6 month safety fund and not including equity in my home. Now thinking about this question, it seems that it depends on your income as a percentage of your investment income (which should grow in proportion to the whole over time). For example: Early stage of career, not much investment income: 20% Mid career: 5% Mid-late career, moving to more safe investments: 5% Late career, retirement: 1% Another way to calculate would be as a percentage of the amount you put into retirement savings per year. Maybe 10% of this figure when you're young and 1% nearer to retirement. |
Why are American Express cards are not as popular as Visa or MasterCard? | I have a merchant account and accept Visa, Mastercard, and Discover but not AMEX. I don't take AMEX because they want me to go through another approval process (on top of what was required to get merchant status) and their fees are a percent or two higher than the other cards. This doesn't sound like a lot - but for a business that grosses $1M per year, an extra 2 percentage points is $20K. I don't gross $1M, but the additional cost for me to take AMEX would still use the word "thousand" and I don't see any reason to jump through extra hoops and fill out more forms for the privilege of giving extra money away. I haven't found anyone yet who wanted to pay me with AMEX who can't pay me with another card or a check instead. |
Do developed country equities have a higher return than emerging market equities, when measured in the latter currency? | First of all, the answer to your question depends on your starting dates and ending dates. So developed markets returns are higher over one period, and emerging markets returns over other periods. So far, there does not appear to be a systematic tilt in favor of one or the other. The reasons are as you said. Emerging markets tend to have higher returns in nominal terms, but developed markets currency movements (sometimes) cancel this out. So watch out for periods of strong and weak developed markets (e.g. U.S) currencies. In "strong" currency periods (such as those of the past five years or so), you want U.S. market exposure, and in "weak" currency periods, the larger nominal local returns will be fully reflected in dollar terms as well. |
Are stores that offer military discounts compensated by the government? | Company X located outside a military base offer discounts to military as a form of marketing. They want to encourage a group of potential customers to use their store/service. In some cases they are competing with subsidized store on the base. In other cases their only competition is other stores outside the base. The smart ones also understand the pay structure of military pay to make it easier for enlisted to stretch their money for the entire month. The government doesn't offer compensation to the business near bases. The businesses see their offer and discount as advertising expenses, and are figured into the prices they have to charge all customers. You will also see these types of discounts offered by some businesses in college towns. They are competing with the services on the campus and with other off-campus businesses. Some also allow the use of campus dollars to make it easier for the student to spend money. |
Can my employer limit my maximum 401k contribution amount (below the IRS limit)? | My old company did this and set a limit at 13 percent which for me kept me well below putting the max into 401k. One had to make 120 - 130k to hit the irs max at 13 percent. So any explanation that the limit restricts high wage earner is BS. This limit restricts all low wage earners as their 13 percent max will be less than the max allowed. If a person making only 70k wants to put 17k into 401k fact is theycannot do this because they do not make enough the limit is discrimination against low-wage earners. Period. |
How can banks afford to offer credit card rewards? | Michael Pryor's answer is accurate to the actual question asked. The current accepted answer from Dheer is not entirely true but roughly provides an overview of the different entities involved in a typical transaction, with some wrong terminologies, corrected and improved below. The issuing bank, the one that issues the credit card to the customer. When it comes to the service fee split, the issuer bank takes on the majority of the cut in the service fee paid by the merchant to the different entities. For example, on a 2.5% overall fee paid by merchant, roughly 1.5% goes to the issuer, 0.3% goes to the card network (visa, master card, etc) and the remaining 0.7% goes to the acquiring bank. Reward programs have a partnership with participating merchants, where merchants are charged a higher service fee, for the likelihood of driving a higher volume of transactions to the merchant. A portion of the rewards also comes from the issuer, who shares a percentage of their fee back to the customer, in exchange for the same likelihood of making more profit through increased volume in total transactions. For example, a reward program may charge merchants 4.5% fee, with 3.5% of it going to the issuer. Upto 3% of this can be given back to the customer for their loyalty in using the card service. The banks can afford to take as little as 0.5% instead of their regular 1.5% due to the increased volume of transactions and the fixed fee they collect as membership fee. Note that costco has a similar business plan, but they make money entirely of membership fee. So with enough clients, banks can theoretically afford to run their program entirely on membership fees, costing no additional service fee to merchants. The service fee depicted above is arbitrary, and it can be lowered if the merchant is also a client of the issuing bank, that is, both the issuing bank and acquiring bank are the same. So it is kind of a win-win-win situation. And as usual, the banks can afford to make a larger income, if the customer ends up paying interest for their credit - although the rewards program is not designed accounting on this. |
Higher auto insurance costs: keep car or switch to public transit? | I'm guessing Toronto? Sell the car! Use public transit. Save a ton of money. You can always rent a car for the day or weekend (or use a service like Uber) when necessary at a fraction of the cost of car ownership, and feel good about it! |
Should I exclude bonds from our retirement investment portfolio if our time horizon is still long enough? | Having cash and bonds in your portfolio isn't just about balancing out the risk and volatility inherent in equities. Consider: If you are 100% invested in equities and the market declines by 30%, you'll be hard pressed to come up with additional money to "buy low". You'll miss out on the rebalancing bonus. But, if you make a point of keeping some portion of your portfolio in cash and bonds, then when the market has such a decline (and it will), you'll be able to rebalance your portfolio back to target weights — i.e. redeploy some of your cash and bonds into equities to take advantage of the lower prices. |
Real Estate: Please review my recent investment (with numbers from recent purchase) | Okay so I am going to break this answer into a couple sections: Okay so first things first. Did you get a good deal? This is challenging to answer for a number of reasons. First, a good deal is relative to the buyers goals. If you're attempting to buy an asset that provides passive income then maybe you met your goal and got a good deal. If you're attempting to buy an asset that provides long term growth, and you purchased above market (I'm speculating of course) then you may have made a bad deal. So how do you determine if you got a good deal? Does your "Gross Rental Multiplier" equal that or is less than that of the average GRM in your area. The lower the better. So how do you use the GRM to determine if you're getting a good deal? Divide your purchase price by the average city (or area) GRM and that will tell you what you should be getting annually in rent. You can also use the GRM to determine if a future purchase is over or under priced. Just replace purchase price with asking price. Alright, so these are the tools you can use to decide if you made a bad business deal or not. There are many ways to skin a cat so to speak. These are the tools I use BEFORE I purchase a home. Many people are penny wise and pound foolish. Take your time when making large purchases. It's OKAY to say PASS. Okay next thing is this new purchase you're looking at. The number one rule when working a franchise is you don't open a second store until you have a perfect working model to go off of. If you've never had to file a tax return for your current rental. Then you need to wait. If you've never read your local and state rental laws. Then you need to WAIT. If you've never had to leave an event early, wake up in the middle of the night, or get a text while you're on a date from one of your tenants. THEN YOU NEED TO WAIT. Give it a year or two. Just learn the unknown about rental properties. Use your first as your test bed. It's WAY more cheaper then if you make a bad mistake and roll it over multiple properties. Finally I will leave you with this. No one on this site, myself included, knows everything there is to know about real estate. Anyone that claims they do, send their ass packing. This is a complex COMPLEX business. There is always something to learn and if you don't have the passion to continue learning then hand it off to someone who does. There is tax law, rental law, city repair law, contract law and this doesn't even include the stuff that makes you money, like knowing how to leverage low or no money down loans. Please take some time and go out and learn. Good luck! -AR |
Where do I invest my Roth IRA besides stock market and mutual funds? | In general, investors with a long period of time until they would need to withdraw the cash are best off holding mostly equities. While the dividends that equities would return are less than the interest you would get in peer-to-peer lending, over long periods of time not only do you get the dividends from equity investment but the value of the stock will grow faster than interest on loans. The higher returns from stocks, however, comes with more risk of big downturns. Many people pull their investments out of stocks right after crashes which really hurts their long term returns. So, in order to get the benefit of investing in stocks you need to be strong enough to continue to hold the stocks through the crash and into the recovery. As for which stocks to invest in, generally it is best to invest in low-fee index funds/etfs where you own a broad collection of stocks so that if (when) any one stock goes bust that your portfolio does not take much damage. Try to own both international and domestic stocks to get good diversification. The consensus recommends adding just a little bit of REITs and bonds to your investments, but for someone at 25 it might not be worth it yet. Warren Buffett had some good thoughts on index investing. |
How can I find ISIN numbers for stock options? | Go to http://www.isincodes.net/, and enter your data. For example entering Alphabet gives you the ISIN US02079K1079 (for standard US shares). If you want to understand the number format (and build them yourself), check wikipedia: https://en.wikipedia.org/wiki/International_Securities_Identification_Number |
why do I need an emergency fund if I already have investments? | Let me first start by defining an emergency fund. This is money which is: Because emergency's usually need to be deal with ASAP, boiler breaks, gears box in a car. Generally you need these to be solved as soon as possible, because ou depend on these things working and you can't budget for this type of expenditure using just your monthly salary. This is a personal opinion but I prefer investment types that don't have another fee on access. I really don't like having another fee on top on money that I need right now. Investment Options: Market based investments should be seen as long term investments, therefore they do not really satisfy requirement one, they can also have broker fees, therefore you might pay a small extra charge for taking money out, and so do not satisfy requirement two. Investment Options for Emergency Funds You want to get the best return on your money even if it's your emergency fund. So use regular saving accounts, but from you emergency fund or use tax effective savings accounts, like a cash ISA if based in the UK. Don't think of an emergency money as just sitting there, you have options just makes sure the options fit the requirements. UPDATE Given feedback I appreciate there are levels of emergency fund, the above details things which might be about 1-2 month salary in cost, car repairs, leaks, boiler repairs. Now I have another fund which is in P2P funds which is higher risk than a deposit account but then gives me a better return and is less subject to market fluctuations and it would be the place I go to for loss of job level emergencies say 6 months of salary, this takes a bit longer to access but given I have the above emergency fund I have given myself time to get the money from the P2P account. |
I am looking for software to scan and read receipts | Try the following apps/services: Receipt Bank (paid service, gathers paper receipts, scans them and processes the data), I've tested it, and it recognizing receipts very well, taking picture is very quick and easy, then you can upload the expenses into your accounting software by a click or automatically (e.g. FreeAgent), however the service it's a bit expensive. They've apps for Android and iPhone. Expentory (app and cloud-based service for capturing expense receipts on the move), |
Separate bank account for security deposit from tenant | In Massachusetts, we have a similar law. Each tenant fills out a W9 and the account is in their name. You need to find a bank willing to do this at no cost, else fees can be problematic. With today's rates, any fee at all will exceed interest earned. |
What options do I have at 26 years old, with 1.2 million USD? | Until you get some financial education, you will be vulnerable to people wanting your money. Once you are educated, you will be able to live a tidy life off this-- which is exactly why this amount was awarded to you, rather than some other amount. They gave you enough money. This is not a lottery win. I mean "financial counselors" who will want to help you with strategies to invest your money. Every one will promise your money will grow. The latter case describes every full-service broker, e.g. what will happen if you walk into EdwardJones. This industry has a long tradition of charmingly selling investments which significantly underperform the market, and making their money by kickbacks (sales commissions) from those investments (which is why they significantly underperform.) They also offer products which are unnecessarily complex meant to confuse customers and hide fees. One mark of trouble is "early exit" fees, which they need to recoup the sales commission they already paid out. Unfortunately, one of those people is you. You are treating this like a windfall, falling into old, often-repeated cliché of "lottery-win thinking". "Gosh, there's so much money there, what could go wrong?" This always ends in disaster and destitution, on top of your other woes. It's not a windfall. They gave you just enough money to live on - barely. Because these lawyers and judges do this all day every day, and they know exactly how much capital will replace a lifelong salary, and if anything you got cheated a bit. Read on. You don't want to feel like greedy Scrooge, hoarding every penny. I get that. But generous spending won't fix that. What will is financial education, and once you have real understanding and certainty about your financial situation, you will be able to both provide for yourself and be giving in a sensible manner. This stuff isn't taught in school. If it was, there'd be a lot more millionaires, because wealth isn't about luck, it's about intelligent management of money. Good advisers do exist. They're hard to find. Good advisors work only one way: for a flat rate or hourly fee. This is called a "Fee-only advisor". S/he never takes commissions. Beware of brokers who normally work on commission but will happily take an upfront fee. Even if they promise to hand you their commission check, they're still recommending you into the same sub-par investments because that's their training! I get the world of finance is extremely confusing and it's hard to know where to start. Just make one leap of faith with me: You can learn this. One place it's not confusing: University endowments. They get windfalls just like you, and they need to manage it to support them for a very long time, just like you. Endowments are very closely watched by the smartest people in finance -- no lottery fever here. It's agreed by all that there is one best way to invest an endowment. And it's mandatory by law. An endowment is a chunk of money (say, $1.2 million) that must fund a purpose (say, a math professorship or "chair") in perpetuity. You're not planning to live quite that long, but when you're in your 20's, the investment strategy is the same. The endowment is designed to generate income of some amount, on average, over the long term. You can draw from the endowment even in "down years". The rule of thumb is 4-6% is a sustainable rate that won't overtax the endowment (usually, but you have to keep an eye on it). On $1.2M, that's $48,000 to $72,000 per year. Not half bad. See, I told you it could work. Read Jane Austen? Mister Darcy, referred to as a gentleman of 10,000 pounds -- meaning his assets were many times that, but they yield income of £10,000 a year. Same idea. Keep in mind that you need to pay taxes. But if you plan your investments so you're holding them more than a year, you're in the much lower 0-10-15% capital gains tax bracket. So, here's where I'd like you to go. I would say more, but this will give you quite an education by itself. Say you gave all your money to me. And said "Your nonprofit needs an executive director. Fund it. In perpetuity." I'd say "Thank you", "you're right", and I'd create an endowment and invest it about like this. That is fairly close to the standard mix you'll find in most endowments, because that is what's considered "prudent" under endowment law (UPMIFA). I'd carry all that in a Vanguard or Fidelity account and follow Bogle's advice on limiting fees. That said, dollar-cost-averaging is not a suicide pact, and bonds are ugly right now (for reason Suze Orman describes) and real estate seems really bubbly right now... so I'd back out of those for now. I'd aim to draw about $60k/year out of it or 5%, and on average, in the very long term, the capital should grow. I would adjust it downward somewhat if the next few years are a hard recession, to avoid taking too much out of the capital... and resist the urge to take more out in boom years, because that is your hedge against the next recession. Over 7% is not prudent per the law (absent very reasonable reasons). UPMIFA doesn't apply to you, but I'd act as if it did. A very reasonable reason to take more than 7% would be to shift investment into a house for living in. I would aim for a duplex/triplex to also have income from the property, if the numbers made sense, which they often don't in California, but that's another question. At your financial level -- never, never, never give cash to a charity. You will get marked as a "soft target" and every commercial fundraiser on earth will stalk you for the rest of your life. At your level, you open a Donor Advised Fund, and let the Fund do your giving for you. Once you've funded it (which is tax deductible) you later tell them which charities to fund when. They screen out fake charities and protect your identity. I discuss DAFs at length here. Now when "charities" harass you for an immediate handout, just tell them that's not how you support charities. |
Do stock prices drop due to dividends? | Yes, the stock price drops on official listing. But what gonna happen on first trade after the dividend date, is up to the market. The market is the market, the rules are the rules. I saw prices going up more than once just after the dividend date, exactly because people think will be cheaper. Market doesn't always follow rules. |
Pay off credit cards in one lump sum, or spread over a few months? | Should I allow the credit cards to be paid out of escrow in one lump sum? Or should I take the cash and pay the cards down over a few months. I have heard that it is better for your credit score to pay them down over time. Will it make much of a difference? Will the money you save by increasing your credit score (assuming this statement is true) be larger than by eliminating the interest payments for the credit card payments over "a few months" (13% APR at $24,000 is $3120 a year in interest; $260 a month, so if "a few months" is three, that would cost over $700 - note that as you pay more principal the overall amount of interest decreases, so the "a year" in interest could go down depending on the principal payments). Also, on a related note regarding credit score, it doesn't look good to have more than a third of a credit line available balance exceeded (see number 2 here: http://credit.about.com/od/buildingcredit/tp/building-good-credit.htm). |
In a competitive market, why is movie theater popcorn expensive? | With all due respect to economics everywhere and the armchair economist. I think they overlook one very basic fact. The alternative to buying popcorn at the cinema is buying it cheaper at the store, or making your own and bringing it to the cinema. Cinemagoing is something you tend to do with a date (and sometimes your friends) and who wants to look cheap to their date (and perhaps their spouse/friends) bringing popcorn to the cinema? This "cheapo-gentlemens" effect together with convenience is probably the reason why popcorn can remain so expensive at cinemas. |
If stock price drops by the amount of dividend paid, what is the use of a dividend | Another plus, besides supplemental income, to receiving dividend checks as opposed to reinvesting them is that those $$ are now out of the market and can't drop 50% or 60% like Y2K and 2008. The idea of investing for the long term is now fraught with worry after those two events, because the next time, (smart economists say), it might not come back - a la 25 years to recover from the great depression. Plusfact technological quantum leaps, IT, automation, and the robots are taking over - can't hold that back forever, and the market will be the first one to smell the end of the economic status quo, and head for the hills, or in this case, deep dark scary valleys. |
Highest market cap for a company from historical data | Everything would depend on whether the calculation is being done using the company's all-time high intraday trading price or all-time high closing price. Further, I've seen calculations using non-public pricing data, such as bid-offer numbers from market makers, although this wouldn't be kosher. The likelihood is that you're seeing numbers that were calculated using different points in time. For the record, I think Apple has overtaken Microsoft's all-time highest market cap with a figure somewhere north of $700 billion (nominal). Here's an interesting article link on the subject of highest-ever valuations: comparison of highest market caps ever |
Does the Black-Scholes Model apply to American Style options? | Black-Scholes is "close enough" for American options since there aren't usually reasons to exercise early, so the ability to do so doesn't matter. Which is good since it's tough to model mathematically, I've read. Early exercise would usually be caused by a weird mispricing for some technical / market-action reason where the theoretical option valuations are messed up. If you sell a call that's far in the money and don't get any time value (after the spread), for example, you probably sold the call to an arbitrageur who's just going to exercise it. But unusual stuff like this doesn't change the big picture much. |
Why do some people say a house “not an investment”? | Your house is not an asset, it is a liability. Assets feed you. Liabilites eat you. Robert Kiyosaki From a cash flow perspective your primary residence (ie your house) is an investment but it is not an asset. If you add up all the income your primary residence generates and subtract all the expenses it incurs, you will see why investment gurus claim this. Perform the same calculations for a rental property and you're more likely to find it has a positive cash flow. If it has a negative cash flow, it's not an asset either; it's a liability. A rental property with a negative cash flow is still an investment, but cash flow gurus will tell you it's a bad investment. While it is possible that your house may increase in value and you may be able to sell it for more than you paid, will you be able to sell it for more than all of the expenses incurred while living there? If so, you have an asset. Some people will purchase a home in need of repair, live in it and upgrade it, sell it for profit exceeding all expenses, and repeat. These people are flipping houses and generating capital gains based on their own hard work. In this instance a person's primary residence can be an asset. How much of an asset is calculated when the renovated house is sold. |
Why should we expect stocks to go up in the long term? | The last 300 years of civilization have been amazingly atypical. We have experienced industrial revolution after industrial revolution. Economic revolutions that would have changed the world in 1000 AD show up as noise. Coal, Canal, Rail, Trade, Electricity, Refrigeration, Oil, Gas, Nuclear, Assembly Line, Vacuum Tube, Mass Education, Transistor, Integrated Circuit, Nano-tech, Antibiotics, Slaying of absolute Poverty, Democratic, Feminism, Superhighway, Automobile, Airplane, and on and on and on. A cascade of miracles and world-shaking events that have intertwined and together generated a many century long economic singularity that has upended the entire world and generated today's world. The question you should ask, is tomorrow going to be like today? And the answer is yes; in weather, and in economics, the most likely bet bet is always "things keep on going like they have in the short term". But next week? Next month? That is often not much like today. There is reason to believe that the yield on the above revolutions will continue to propel the economy forward, and that there are multiple promising new revolutions on the horizon. But barring that kind of world-shaking revolution, you are not going to maintain a 5% real return on investment over another centuries for the stock market. The value of investments has to go up by a factor of over 100 in order for that to happen, and the US stock market is already close to 20 trillion dollars. For it to have a market cap of 2 quadrillion dollars the world economy will have to be much larger than it is today. And to be that much larger, the world would have to be a much stranger place that values very different things. We are currently roughly a K-type 0.72 civilization. A simple linear expansion of our power of 100x brings us up to K-type 0.92, which is going to cook the planet from waste heat (not from CO2, but just from the waste heat of the energy it uses!) Efficiency can mitigate this, but only to a degree. 100x more efficient technology is going to less believable than a beanstalk and space colonies. If you believe that the stock market is going to continue to grow at 5%/year for the next century, start investing in really out-there technologies. Gene editing, virtual and augmented reality, space beanstalks and private lift, miraculously cheap energy storage, etc. Because simply refining the technology of today won't get us there. Modern industrial civilization has been a miracle factory. That is what pulled off that growth rate. If the miracles stop coming, so does the growth. There is a road to it. It would involve clean energy, mass personal automation and friendly (not smarter than human) AI, and the entire world lifted up to the standard of living of the top 3% of the USA on average. But it is far from guaranteed. |
Can a CEO short his own company? | (yes, this should probably be a comment, not an answer ... but it's a bit long). I don't know what the laws are specifically about this, but my grandfather used to be on the board of a company that he helped to found ... and back in the 1980s, there was a period when the stock price suddenly quadrupled One of the officers in the company, knowing that the stock was over-valued, sold around a third of his shares ... and he got investigated for insider trading. I don't recall if he was ever charged with anything, but there were some false rumors spreading about the company at the time (one was that they had something that you could sprinkle on meat to reduce the cholesterol). I don't know where the rumors came from, but I've always assumed it was some sort of pump-and-dump stock manipulation, as this was decades before they were on the S&P 500 small cap. After that, the company had a policy where officers had to announce they were selling stock, and that it wouldn't execute for some time (1? 2 weeks? something like that). I don't know if that was the SEC's doing, or something that the company came up with on their own. |
Owner-Financed home sale or Land Contract — how to handle the transaction and the ongoing entity? | Great question, but I'm thinking you'll want to get a professional who can look at your specific situation and do it right. I wouldn't go solely on advice here. Having said that, though, my decidedly non-professional advice: The other alternative is to take a bit of a profit hit, and demand that the seller pay cash. Then the transaction becomes much easier and quicker. But again, I urge you to have a pro look at this! |
I earn $75K, have $30K in savings, no debt, rent from my parents who are losing their home. Should I buy a home now or save? | You earn $75,000 yearly and saved $30,000 while living at home, for two years, rent-free. I am assuming you have been making good money for at least 2 years. How is it possible you only put away $30,000 on $150,000 of income? Were you giving something to your parents each week as rent, so they don't lose their home? Second, if you're not sure if you will be relocated in a year or two it makes no sense to buy. House prices won't spike like they have in the past any time soon. In one year, you can save another $30,000 without suffering since you live rent free. Many couples don't even make $75,000 and they got a mortgage, 2 kids and car payments. |
What are the downsides that prevent more people from working in high-income countries, and then retiring in low-income (and cost of living) ones? | One thing not mentioned is that in so called third world countries, a lot of "stuff" isn't actually less expensive. Food is almost always less expensive, housing is often less expensive, but cars, fuel, computers, smartphones, electronics, brand name clothing, shoes, cosmetics, tools, art supplies, internet service, bicycles, sporting goods and many other consumer items are typically more expensive. |
Online tutorials for calculating DCF (Discounted Cash Flow)? | Check out Professor Damodaran's website: http://pages.stern.nyu.edu/~adamodar/ . Tons of good stuff there to get you started. If you want more depth, he's written what is widely considered the bible on the subject of valuation: "Investment Valuation". DCF is very well suited to stock analysis. One doesn't need to know, or forecast the future stock price to use it. In fact, it's the opposite. Business fundamentals are forecasted to estimate the sum total of future cash flows from the company, discounted back to the present. Divide that by shares outstanding, and you have the value of the stock. The key is to remember that DCF calculations are very sensitive to inputs. Be conservative in your estimates of future revenue growth, earnings margins, and capital investment. I usually develop three forecasts: pessimistic, neutral, optimistic. This delivers a range of value instead of a false-precision single number. This may seem odd: I find the DCF invaluable, but for the process, not so much the result. The input sensitivity requires careful work, and while a range of value is useful, the real benefit comes from being required to answer the questions to build the forecast. It provides a framework to analyze a business. You're just trying to properly fill in the boxes, estimate the unguessable. To do so, you pore through the financials. Skimming, reading with a purpose. In the end you come away with a fairly deep understanding of the business, how they make money, why they'll continue to make money, etc. |
Is there extra risk in owning an ADR vs. the underlying stock? | Yes, the ADR will trade on a separate exchange from the underlying one, and can (and does) see fluctuations in price that do not match the (exchange corrected) fluctuations that occur in the original market. You are probably exposing yourself to additional risk that is related to: |
How do I get a Tax Exemption Certificate for export from the US if I am in another country? | How do you know you are playing their cost plus tax? Retailers in the US currently only collect state sales tax on purchasers who are based in the same state they are in. For example, our business is in NY so we charge NY state sales tax. We do not charge sales tax for anyone living in any other state (or country). If your shipping address is in South America, the people you are buying from in the US should not be charging you any tax. You may have to pay customs duties and fees, but these are not sales tax. |
Is it true that more than 99% of active traders cannot beat the index? | What decision are you trying to make? Are you interested day trading stocks to make it rich? Or are you looking at your investment options and trying to decide between an actively managed mutual fund and an ETF? If the former, then precise statistics are hard to come by, but I believe that 99% of day traders would do better investing in an ETF. If the latter, then there are lots of studies that show that most actively managed funds do worse than index funds, so with most actively managed funds you are paying higher fees for worse performance. Here is a quote from the Bogleheads Guide to Investing: Index funds outperform approximately 80 percent of all actively managed funds over long periods of time. They do so for one simple reason: rock-bottom costs. In a random market, we don't know what future returns will be. However, we do know that an investor who keeps his or her costs low will earn a higher return than one who does not. That's the indexer's edge. Many people believe that your best option for investing is a diverse portfolio of ETFs, like this. This is what I do. |
Are warehouse clubs like Costco and Sam's Club worth it? | Also don't just assume that everything that Costco or Sams (we use Costco) sells is cheaper. Still shop around and look for the best price. For us it is definitely worth it. |
Medical Bill Consolidation | In short, no, or not retroactively. There really are multiple companies involved, each of which bills you separately for the services they provided. This can be partly avoided by selecting either a high-end health plan with lower out-of-pocket maximum, (costs more up front, of course) or by selecting a genuine Health Management Organization (not a PPO) which gathers more of the services into a single business. Either of these would result in fewer cash payments needing to be sent. But I don't know of any way to simplify things after the fact. Even if there was a consolidation service, you would have to forward the bills to them, which really wouldn't be any easier than just paying the bills. (I'm assuming you are in the US, where we have a health insurance system rather than a health system. Other countries may handle this differently.) |
Blog income taxes? | If thinking about it like a business you normally only pay taxes on Net income, not gross. So Gross being all the money that comes in. People giving you cash, checks, whatever get deposited into your account. You then pay that out to other people for services, advertisement. At the end of the day what is left would be your 'profit' and you would be expected to pay income tax on that. If you are just an individual and don't have an LLC set up or any business structure you would usually just have an extra page to fill out on your taxes with this info. I think it's a schedule C but not 100% |
What are investment options for young married couple with no debt that have maxed out retirement savings? | Paying the mortgage down is no different than investing in a long term taxable fixed instrument. In this economy, 4.7% isn't bad, but longer term, the stock market should return higher. When you have the kid(s), is your wife planing to work? If not, I'd first suggest going pre-tax on the IRAs, and when she's not working, convert to Roth. I'd advise against starting the 529 accounts until your child(ren) is actually born. As far as managed funds are concerned, I hear "expenses." Why not learn about lower cost funds, index mutual funds or ETFs? I'd not do too much different aside from this, until the kids are born. |
How do you find reasonably priced, quality, long lasting clothing? | The idea that you should buy quality, long lasting clothes shouldn't go unchallenged. It's just not true for everybody. If you have a job or a lifestyle that makes it so your clothes are going to get worn out fast regardless of quality, buying expensive clothes doesn't make sense. With that said: look for heavier-feeling fabrics, avoid colors that will fade (or worse: bleed into your other clothes in the wash). Check the laundry instructions so you can see whether they're on the delicate end of the spectrum. Re: how to extend the life: avoid bleach. Even color safe bleach contains peroxide which can break down fabrics faster. |
Why would a stock opening price differ from the offering price? | The offering price is what the company will raise by selling the shares at that price. However, this isn't usually what the general public sees as often there will be shows to drive up demand so that there will be buyers for the stock. That demand is what you see on the first day when the general public can start buying the stock. If one is an employee, relative or friend of someone that is offered, "Friends and Family" shares they may be able to buy at the offering price. Pricing of IPO from Wikipedia states around the idea of pricing: A company planning an IPO typically appoints a lead manager, known as a bookrunner, to help it arrive at an appropriate price at which the shares should be issued. There are two primary ways in which the price of an IPO can be determined. Either the company, with the help of its lead managers, fixes a price ("fixed price method"), or the price can be determined through analysis of confidential investor demand data compiled by the bookrunner ("book building"). Historically, some IPOs both globally and in the United States have been underpriced. The effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first becomes publicly traded. Flipping, or quickly selling shares for a profit, can lead to significant gains for investors who have been allocated shares of the IPO at the offering price. However, underpricing an IPO results in lost potential capital for the issuer. One extreme example is theglobe.com IPO which helped fuel the IPO "mania" of the late 90's internet era. Underwritten by Bear Stearns on November 13, 1998, the IPO was priced at $9 per share. The share price quickly increased 1000% after the opening of trading, to a high of $97. Selling pressure from institutional flipping eventually drove the stock back down, and it closed the day at $63. Although the company did raise about $30 million from the offering it is estimated that with the level of demand for the offering and the volume of trading that took place the company might have left upwards of $200 million on the table. The danger of overpricing is also an important consideration. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting their commitments to sell shares. Even if they sell all of the issued shares, the stock may fall in value on the first day of trading. If so, the stock may lose its marketability and hence even more of its value. This could result in losses for investors, many of whom being the most favored clients of the underwriters. Perhaps the best known example of this is the Facebook IPO in 2012. Underwriters, therefore, take many factors into consideration when pricing an IPO, and attempt to reach an offering price that is low enough to stimulate interest in the stock, but high enough to raise an adequate amount of capital for the company. The process of determining an optimal price usually involves the underwriters ("syndicate") arranging share purchase commitments from leading institutional investors. Some researchers (e.g. Geoffrey C., and C. Swift, 2009) believe that the underpricing of IPOs is less a deliberate act on the part of issuers and/or underwriters, than the result of an over-reaction on the part of investors (Friesen & Swift, 2009). One potential method for determining underpricing is through the use of IPO Underpricing Algorithms. This may be useful for seeing the difference in that "theglobe.com" example where the offering price is $9/share yet the stock traded much higher than that initially. |
Has anyone compared an in-person Tax Advisor to software like Turbo Tax? | Generally speaking no person or program is really going to be able to help you lower your current tax burden, most tax decisions are done well before you reach the tax time. You either qualify for the deduction/credit or your don't. Where a good accountant will really be able to help you out is in planning that will limit your future tax burden. Particularly if you run a small business or are very wealthy you will probably want to consider using an accountant. I would always avoid the large scale tax prep places like HR Block they provide the same or lower quality service for a higher price than the software. I run a small business and do my own taxes using turbo tax, but my business isn't overly complex Sole prop, no employees, couple 1099's simple expenses (nothing to amortize) etc. |
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