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Does bull/bear market actually make a difference? | To short: Of course, you may always buy some index correlated ETF that eliminates the above. They use stock futures on the index, and you simply buy the "shorting ETF" in your non-margin account. However, they are surprisingly high cost, and despite the intended correlation, have significant drag. It's a much safer way to short the market (you have great choice in which market ETF) and eliminates the single stock risk. |
Why public companies care how their stock price fluctuates? [duplicate] | The folks who hold stock are the legal owners of the company. If a majority of stock holders become unhappy with the management of a company they can fire the executives and put in new management, or they can direct the company to close its doors and sell off its assets. As a crude approximation, the stock holders are happier when the stock price goes up and unhappier when it goes down. Therefore, executives are highly motivated to drive the stock price up. A frequent criticism of corporate governence is that management can be so motivated to drive the stock price up, that they will take actions that drive the stock price up in the current year, even if undercuts the company in the long term. |
How to start investing/thinking about money as a young person? | nan |
What should I be aware of as a young investor? | Risk and return always go hand by hand.* Risk is a measure of expected return volatility. The best investment at this stage is a good, easy to understand but thorough book on finance. *Applies to efficient markets only. |
Are 'per trade' fees charged on every order or just once per stock? | You will be hit every time, once every buy order and once every sell order. Commissions to the broker are paid every time they do something for you. This is true regardless if it is a security in which you are already invested. It is true regardless if you make or lose money. It is just as sure as death and taxes. |
Section 179 vs depreciation of laptop | The CPA's mention of $2,500 is probably referring to the recently increased de minimis safe harbor under the final tangible property regulations (used to be $500) without an applicable financial statement. The IRS will not challenge your choice of expense or capitalization on amounts on or below $2500 if you elect the de minimis safe harbor election on your return. However, you must follow whatever you're doing for your books. (So if you are capitalizing your laptops for book purposes, you would also need to capitalize for tax purposes). Section 179 allows you to expense property that you would have otherwise have had to capitalize and depreciate. Section 179 can be annoying, especially if your LLC is treated as a passthrough, because there are recapture provisions when you dispose of the asset too early. For the tax return preparer, it makes the return preparation much more simple if there are no fixed assets to account for in the first place, which is quite possible if you are expensive all items/invoices less than $2,500. |
What assets would be valuable in a post-apocalyptic scenario? | Assuming that the financial system broke down, not enough supply of essential commodities or food but there is political and administrative stability and no such chaos that threatens your life by physical attacks. The best investment would then be some paddy fields, land, some cows, chickens and enough clothing , a safe house to stay and a healthy life style that enables you to work for food and some virtue at heart and management skills to get people work for you on your resources so that they can survive with you (may be you earn some profit -that is up to your moral standards to decide, how much). It all begins to start again; a new Financial System has to be in place….! |
Cannot get a mortgage because I work through a recruiter | To a mortgage lender, it appears that you have a temporary contract (perhaps extending for nine more months) with a agency that supplies workers to companies that need temporary help. You have been placed currently with a company and are making good money, but that job might disappear soon and then you will have no income while your recruiter tries to find you another assignment. How will you make your mortgage payments then? The recruiter agency's contract with your current company probably has clauses to the effect that the company agrees to not offer you a permanent job unless it pays a head-hunter's fee to the recruiter agency. Your contract with the recruiter agency also likely has clauses to the effect that if the company where you have been placed offers you a permanent job, you must pay the recruiter company a fee (typically one or two months of salary) to the recruiter agency as compensation for releasing you from your current contract (unless the company hiring you pays the head-hunter's fee). This is why the company where you are working right now wants to wait until after your contract with the recruiter company ends before making you an offer of permanent employment. Be aware that sometimes such clauses extend out to three months after the ending date of your contract with the recruiter company. As far as the condo is concerned, unless there is a specific one that you absolutely must have because it has an ocean view or other desirable properties, you may well find that another condo in the same complex is available some months from now. If you are lucky, it may well have an acceptable ocean view. If you are even luckier, it may be the condo that you absolutely must have which has remained unsold all that time -- as you said, the economy is crappy -- and you will be able to buy it for a lower price from an owner getting desperate to make a sale. To answer your question: is there any way around this? My recommendation is to simply wait out the end of your recruiter agency contract and get a permanent job with the company where you have been placed. Then there are no issues. If not, get your company to make a written offer of a permanent job starting nine months from now and hope that this (together with your current employment) impresses your bank into lending you money. This might not work, though. In the early 1970s, one of my friends was offered a job at a large aerospace company which lost a major contract in the interim period between offer and joining. My friend showed up for work on the day he was supposed to start, and instead of being processed through HR etc, his job was terminated on the spot, he was paid one day's salary, and shown the door. Times were crappy then too. If this does not work, get your company to offer you a permanent job right away, pay off the recruiter company yourself, and then go to the bank. |
If I have $1000 to invest in penny stocks online, should I diversify risk and invest in many of them or should I invest in just in one? | These stocks have no value to them, are just waiting for paper work to liquefy and vanish. The other gamblers are bots waiting for some sucker to buy so they can sell right away. So maybe a fresh new penny stock that hasn't been botted yet gives some higher chance of success, but you probably need to be a bot to sell it quickly enough. All in all not that much different from buying regular stocks... |
Wash sale rule with dividend reinvestment | I was not able to find any authority for the opinion you suggest. Wash sale rules should, IMHO, apply. According to the regulations, you attribute the newly purchased shares to the oldest sold shares for the purposes of the calculation of the disallowed loss and cost basis. (c) Where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of. You can resort to the claim that you have not, in fact, entered into the contract within 30 days, but when you gave the instructions to reinvest dividends. I don't know if such a claim will hold, but to me it sounds reasonable. This is similar to the rules re short sales (in (g) there). In this case, wash sale rules will not apply (unless you instructed to reinvest dividends within the 30 days prior to the sale). But I'd ask a tax professional if such a claim would hold, talk to a EA/CPA licensed in your state. |
What to sell when your financial needs change, stocks or bonds? | The answer may be a compromise... if your goal is to make bonds a larger part of your portfolio, sell both stocks and bonds in a 4:1 ratio. or (3:1 or whatever works for you) Also, just as you dollar-cost-average purchases of securities, you can do the same thing on the way out. Plan your sales and spread them over a period of time, especially if you have mutual funds. |
What causes a stock to drop in price? | A rising tide lifts all ships Most (but not all) stocks trend along with the general market. Some trend right along with the market (and have a beta at, or very near, one) some follow the Market, but are less sensitive (having a beta of less than one). Some are hypersensitive (and would have a beta of greater than one). Beta defined So most of the day to day movement of a stock is because the general market is moving (in the same direction). Of course, exceptional news about the company would cause its price to move independent of the general market. But more often than not the price of a stock moves just because the rest of the market is moving. |
Should I file a change of address with the IRS? | The most important thing to do when moving is to change your address with the post office. This will forward most mail for a year, and even automatically send change of address notices to many businesses that send mail to you. If you do this, and the IRS needs to send you something over the next year, you'll get it. The IRS does have a procedure for changing your address, and you would want to do this if you are expecting something from the IRS and are unable to do a change of address with the post office for some reason. But if you do forward your mail and you aren't expecting a refund check, I don't think it is necessary. The IRS will get your new address when you file your return next year. |
Is giving my girlfriend money for her mortgage closing costs and down payment considered fraud? | Sheesh, are people kidding here? It's a gift. It's not fraud. Just keep in mind that, because it's a gift, you cannot get it "back" if you break up--you are giving it to her. If you happen to get married at some point in the future, you will then own part of the apartment, but that is a completely separate matter. Give her the money, don't expect it back. Ever. |
Multiple hard inquiry for a single loan from car dealer? | This is normal with the dealer's financing. To add more details to littleadv's answer, what happens is when you get the financing through the dealer, at first, they will try to do the loan on your behalf with local banks in your area. This is why you see several hard inquiries; one from each back. If none of these banks wants to take the loan, then dealer's financing entity will take the loan. This was my exact experience with Hyundai. In addition, don't get surprise if you start receiving letters saying that your loan was rejected. The dealer will send the loan requests simultaneously, and some of the banks might deny the loan. This also happened to me, and I have been owning my car for around a year. Still, make sure that the letters matches with the credit inquiries. |
Pros/cons of borrowing money using a mortgage loan and investing it in a low-fee index fund? | Risk is the problem, as others have pointed out. Your fixed mortgage interest rate is for a set period of time only. Let's say your 3% might be good for five years, because that's typical of fixed-rate mortages in Canada. So, what happens in five years if your investment has dropped 50% due to a prolonged bear market, and interest rates have since moved up from 3% to 8%? Your investment would be underwater, and you wouldn't have enough to pay off the loan and exit the failed strategy. Rather, you might just be stuck with renewing the mortage at a rate that makes the strategy far less attractive, being more likely to lose money in the long run than to earn any. Leverage, or borrowing to invest, amplifies your risk considerably. If you invest your own money in the market, you might lose what you started with, but if you borrow to invest, you might lose much more than you started with. There's also one very specific issue with the example investment you've proposed: You would be borrowing Canadian dollars but investing in an index fund of U.S.-based companies that trade in U.S. dollars. Even if the index has positive returns in U.S. dollar terms, you might end up losing money if the Canadian dollar strengthens vs. the U.S. dollar. It has happened before, multiple times. So, while this strategy has worked wonderfully in the past, it has also failed disastrously in the past. Unless you have a crystal ball, you need to be aware of the various risks and weigh them vs. the potential rewards. There is no free lunch. |
How can a company charge a closed credit card? | Wow, I had never heard of this before but I looked into it a bit and Mikey was spot on. It seems that if you don't pay attention to the fine print when making credit card purchases (as most of us tend to skip) many companies have stipulations that allow continued charges if they are recurring fees (monthly, yearly, etc.) even after you have cancelled the card. |
Pay off mortgage or invest in high value saving account | Basically, the easiest way to do this is to chart out the "what-ifs". Applying the amortization formula (see here) using the numbers you supplied and a little guesswork, I calculated an interest rate of 3.75% (which is good) and that you've already made 17 semi-monthly payments (8 and a half months' worth) of $680.04, out of a 30-year, 720-payment loan term. These are the numbers I will use. Let's now suppose that tomorrow, you found $100 extra every two weeks in your budget, and decided to put it toward your mortgage starting with the next payment. That makes the semi-monthly payments $780 each. You would pay off the mortgage in 23 years (making 557 more payments instead of 703 more). Your total payments will be $434,460, down from $478.040, so your interest costs on the loan were reduced by $43,580 (but, my mistake, we can't count this amount as money in the bank; it's included in the next amount of money to come in). Now, after the mortgage is paid off, you have $780 semi-monthly for the remaining 73 months of your original 30-year loan (a total of $113,880) which you can now do something else with. If you stuffed it in your mattress, you'd earn 0% and so that's the worst-case scenario. For anything else to be worth it, you must be getting a rate of return such that $100 payments, 24 times a year for a total of 703 payments must equal $113,880. We use the future value annuity formula (here): v = p*((i+1)n-1)/i, plugging in v ($113880, our FV goal), $100 for P (the monthly payment) and 703 for n (total number of payments. We're looking for i, the interest rate. We're making 24 payments per year, so the value of i we find will be 1/24 of the stated annual interest rate of any account you put it into. We find that in order to make the same amount of money on an annuity that you save by paying off the loan, the interest rate on the account must average 3.07%. However, you're probably not going to stuff the savings from the mortgage in your mattress and sleep on it for 6 years. What if you invest it, in the same security you're considering now? That would be 146 payments of $780 into an interest-bearing account, plus the interest savings. Now, the interest rate on the security must be greater, because you're not only saving money on the mortgage, you're making money on the savings. Assuming the annuity APR stays the same now vs later, we find that the APR on the annuity must equal, surprise, 3.75% in order to end up with the same amount of money. Why is that? Well, the interest growing on your $100 semi-monthly exactly offsets the interest you would save on the mortgage by reducing the principal by $100. Both the loan balance you would remove and the annuity balance you increase would accrue the same interest over the same time if they had the same rate. The main difference, to you, is that by paying into the annuity now, you have cash now; by paying into the mortgage now, you don't have money now, but you have WAY more money later. The actual real time-values of the money, however, are the same; the future value of $200/mo for 30 years is equal to $0/mo for 24 years and then $1560/mo for 6 years, but the real money paid in over 30 years is $72,000 vs $112,320. That kind of math is why analysts encourage people to start retirement saving early. One more thing. If you live in the United States, the interest charges on your mortgage are tax-deductible. So, that $43,580 you saved by paying down the mortgage? Take 25% of it and throw it away as taxes (assuming you're in the most common wage-earner tax bracket). That's $10895 in potential tax savings that you don't get over the life of the loan. If you penalize the "pay-off-early" track by subtracting those extra taxes, you find that the break-even APR on the annuity account is about 3.095%. |
Why is Google's current nasdaq market cap almost twice the current share price * the No. of shares outstanding? | For each class A share (GOOGL) there's a class C share (GOOG), hence the missing half in your calculation. The almost comes from the slightly higher market price of the class A shares (due to them having voting powers) over class C (which have no voting powers). There's also class B share which is owned by the founders (Larry, Sergei, Eric and perhaps some to Stanford University and others) and differs from class A by the voting power. These are not publicly traded. |
Why do car rental companies prefer/require credit over debit cards? | A hotel can accept the debit card because each night they can withdraw the money. If you don't have sufficient funds they can instantly lock you out of your room. They an also limit your ability to access room service, and other extra expensive options. The rental car can't do that once you have the car. Plus they never know if you will bring the car back with damages, toll charges, and an empty tank of gas. |
Buying an option in the money, at the money, or out of the money | I look for buying a call option only at the money, but first understand the background above: Let's suppose X stock is being traded by $10.00 and it's January The call option is being traded by $0.20 with strike $11.00 for February. (I always look for 2% prize or more) I buy 100 stocks by $10.00 each and sell the option, earning $0.20 for each X stock. I will have to deliver my stocks by $11.00 (strike value agreed). No problem for me here, I took the prize plus the gain of $1.00. (continuing from item 3) I still can sell the option for the next month with strike equal or higher than that I bought. For instance, I can sell a call option of strike $10.00 and it might be worth to deliver stocks by $10.00 and take the prize. (continuing from item 3) Probably, it won't be possible to sell a call option with strike at the price that I paid for the stock, but that's not a problem. At the end of the option life (in February), the strike was $11.00 but the stock's price is $8.00. I got the $0.20 as prize and my stocks are free for trade again. I'll sell the call option for March with strike $9.00 (taking around 2% of prize). Well, I don't want to sell my stocks by $9.00 and make loss, right? But I'm selling the call option anyway. Then I wait till the price of the stock gets near the strike value (almost ATM) and I "re-buy" the option sold (Example: [StockX]C9 where C means month = March) and sell again the call option with higher strike to April (Example [StockX]D10, where D means month = April) PS.: At item 9 there should be no loss between the action of "re-buy" and sell to roll-out to the next month. When re-buying it with the stock's price near the strike, option value for March (C9) will be lower than when selling it to April (D10). This isn't any rule to be followed, this is just a conservative (I think they call it hedge) way to handle options and stocks. Few free to make money according to your goals and your style. The perfect rule is the one that meet your expectation, don't take the generalized rules too serious. |
How to dollar-cost-average with a large amount of money in a savings account? | I up voted JoeTaxpayer but i would like add a couple of things. Dollar Cost averaging over a 5 day period is in no way practical. If you get a 1% swing in that time that would be quite a lot. Personally I think 5 years is way to long. When markets go down they go down fast. I would suggest 1 to 2 years investing quarterly. I would hate seeing you miss out on market gains for a 5 year period on the last of your money. The whole point of Dollar Cost averaging instead of market timing is the mantra "Its about time in the market not timing the market" So if you have money on the sidelines for years you are missing out on your time in the market. |
Why sometimes payable date is BEFORE the ex-dividend date? | Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July. |
What is the lifespan of a series of currency? | Currency lives no more then 50 years. US currency did not expire in last 100 years, but it was reinstated few times, last one was 2009. Note that currency is not just what you hold in your hand. Currency is system of relations of money supply (currency is not money but we forced to use standard terminology), banking rules and government policy. Currency exists as long as government wants it to. In 2009 for example, US government decided it needs new currency and just printed whole new money supply. So US dollar is now counting as "partially fresh new currency". It was reinstated. Not expired. But today's dollar is totally different from 90s and 00s. Will it be accepted after 200 years? Yes (probably). But most likely at that time there will be totally new US dollars. And new Euros, new Pounds and so on. Currency is method of transfer. You can have that physical coins you have, but as economic agent it will die very quickly. It is not only related to inflation, in fact, inflation is the least of your worries. If you count all currencies in the world which ever existed, most of them 99.99% are completely dead by now (with governments which supported it). Not even single one currency which lived more then 100 years. US dollar was reinstated in 1860, 1907, 1930, 1973, 1987, 2009 and in fact it is not single currency but dozen which were allowed to be used "for compatibility reasons". |
collateralized mortgage obligations | Say there are 5 people took loan of $100000 each. Those 5 people work in different jobs and have different capacity to payoff loan. Someone earning $40000 a year has higher risk to default on their payment then someone making $250000 a year. As Bank wants to sell this CDO to investor but how would investor know what the risk factor for this CDO is. This is where rating agency comes in picture. They apparently look at the underlying asset and assign rating to this CDO say AAA, B, AA etc which give investor idea of underlying risk. Problem here is rating agency gets paid by Bank to rate their CDO. So if a rating agency starts rating their CDO to higher risk Bank will go to next agency round the corner to get better rating and agency will lose commission. You can see the problem here. Now if people start struggling to pay loan, bank will not get money and it cannot pay CDO holders. If house that was worth $100000 when CDO was created is devalued to say $50000 today the underlying asset is not worth as much when CDO was sold. That is what happened when market crashed in 2008 and GFC hit. |
Why do some people say a house “not an investment”? | There's an old saying: "Never invest in anything that eats or needs maintenance." This doesn't mean that a house or a racehorse or private ownership of your own company is not an investment. It just points out that constant effort is needed on your part, or on the part of somebody you pay, just to keep it from losing value. Common stock, gold, and money in the bank are three things you can buy and leave alone. They may gain or lose market value, but not because of neglect on your part. Buying a house is a complex decision. There are many benefits and many risks. Other investments have benefits and risks too. |
How to measure how the Australian dollar is faring independent of the US dollar | If you're interested in slower scale changes, one option is to use indexes that value a common commodity in different currencies such as the Big Mac Index. If a Big Mac costs more in AUD but stays the same in USD, then AUD have gone up. |
What are some of the key identifiers/characters of an undervalued stock? | You can't. If there was a reliable way to identify an undervalued stock, then people would immediately buy it, its price would rise and it wouldn't be undervalued any more. |
Highest market cap for a company from historical data | Adjustments can be for splits as well as for dividends. From Investopedia.com: Historical prices stored on some public websites, such as Yahoo! Finance, also adjust the past prices of the stock downward by the dividend amount. Thus, that could also be a possible factor in looking at the old prices. |
Is a car loan bad debt? | Here is another way to look at it. Does this debt enable you to buy more car than you can really afford, or more car than you need? If so, it's bad debt. Let's say you don't have the price of a new car, but you can buy a used car with the cash you have. You will have to repair the car occasionally, but this is generally a lot less than the payments on a new car. The value of your time may make sitting around waiting while your car is repaired very expensive (if, like me, you can earn money in fine grained amounts anywhere between 0 and 80 hours a week, and you don't get paid when you're at the mechanic's) in which case it's possible to argue that buying the new car saves you money overall. Debt incurred to save money overall can be good: compare your interest payments to the money you save. If you're ahead, great - and the fun or joy or showoff potential of your new car is simply gravy. Now let's say you can afford a $10,000 car cash - there are new cars out there at this price - but you want a $30,000 car and you can afford the payments on it. If there was no such thing as borrowing you wouldn't be able to get the larger/flashier car, and some people suggest that this is bad debt because it is helping you to waste your money. You may be getting some benefit (such as being able to get to a job that's not served by public transit, or being able to buy a cheaper house that is further from your job, or saving time every day) from the first $10,000 of expense, but the remaining $20,000 is purely for fun or for showing off and shouldn't be spent. Certainly not by getting into debt. Well, that's a philosophical position, and it's one that may well lead to a secure retirement. Think about that and you may decide not to borrow and to buy the cheaper car. Finally, let's say the cash you have on hand is enough to pay for the car you want, and you're just trying to decide whether you should take their cheap loan or not. Generally, if you don't take the cheap loan you can push the price down. So before you decide that you can earn more interest elsewhere than you're paying here, make sure you're not paying $500 more for the car than you need to. Since your loan is from a bank rather than the car dealership, this may not apply. In addition to the money your cash could earn, consider also liquidity. If you need to repair something on your house, or deal with other emergency expenditures, and your money is all locked up in your car, you may have to borrow at a much higher rate (as much as 20% if you go to credit cards and can't get it paid off the same month) which will wipe out all this careful math about how you should just buy the car and not pay that 1.5% interest. More important than whether you borrow or not is not buying too much car. If the loan is letting you talk yourself into the more expensive car, I'd say it's a bad thing. Otherwise, it probably isn't. |
How to represent “out of pocket” purchases in general ledger journal entry? | Journal entry into Books of company: 100 dr. expense a/c 1 200 dr. expense a/c 2 300 dr. expanse a/c 3 // cr. your name 600 Each expense actually could be a total if you don´t want to itemise, to save time if you totaled them on a paper. The paper is essentually an invoice. And the recipts are the primary documents. Entry into Your journal: dr. Company name // cr. cash or bank You want the company to settle at any time the balce is totaled for your name in the company books and the company name in your books. They should be equal and the payment reverses it. Or, just partially pay. Company journal: dr. your name // cr. cash or bank your journal: dr. cash or bank // cr. company name Look up "personal accounts" for the reasoning. Here is some thing on personal accounts. https://books.google.com/books?id=LhPMCgAAQBAJ&pg=PT4&dq=%22personal+account%22+double+entry&hl=es-419&sa=X&redir_esc=y#v=onepage&q=%22personal%20account%22%20double%20entry&f=false |
Why is the stock market closed on the weekend? | The stock markets are closed on week-ends and public holidays because the Banks are closed. The Banking is a must to settle the payment obligations. So you may buy and sell as much as you wish, but unless money changes hands, nothing has really happened. Now as to why Banking itself is closed on week-ends and public holidays, well a different question :) Keeping the system 24 hrs up and running does not actually push volumes, but definately push expenses for brokers, Banks etc. There definately is some convinience to buyers and sellers. |
How can I find out who the major short sellers are in a stock? | There is no way to know anything about who has shorted stuff or how concentrated the positions are in a few investors. Short positions are not even reported in 13(F) institutional filings. I'll take the bonus points, though, and point you to the US Equity Short Interest data source at quandl. |
collateralized mortgage obligations | I think the definition of overcollateralization on investopedia will answer this question for you. Namely this part: For example, in the case of a mortgage backed security, the principal amount of an issue may be $100 million while the principal value of the mortgages underlying the issue may be equal to $120 million. The bond is packed with more mortgages than the face value indicates. It's effectively sold at a discount to underlying value. |
Moonlighting as a software developer: employee or independent contractor w/ LLC? | I've been in a similar situation before. While contracting, sometimes the recruiting agency would allow me to choose between being a W2 employee or invoicing them via Corp-2-Corp. I already had a company set up (S-Corp) but the considerations are similar. Typically the C2C rate was higher than the W2 rate, to account for the extra 7.65% FICA taxes and insurance. But there were a few times where the rate offered was identical, and I still choose C2C because it enabled me to deduct many of my business expenses that I wouldn't have otherwise been able to deduct. In my case the deductions turned out to be greater than the FICA savings. Your case is slightly different than mine though in that I already had the company set up so my company related costs were "sunk" as far as my decision was concerned. For you though, the yearly costs associated with running the business must be factored in. For example, suppose the following: Due to these expenses you need to make up $3413 in tax deductions due to the LLC. If your effective tax rate on the extra income is 30%, then your break even point is approximately $8K in deductions (.3*(x+3413)=3413 => x = $7963) So with those made up numbers, if you have at least $8K in legitimate additional business expenses then it would make sense to form an LLC. Otherwise you'd be better off as a W2. Other considerations: |
How can I calculate how much an option would be worth after X days if the underlying stock changed by +/- $Y? | You'd need to know the delta and the theta of the option. You can either calculate them yourself using a model like Black-Scholes (assuming you have a market price and can imply a volatility, and know the other factors that go into the model) or, you can see if your broker quotes "greeks" as well (mine does). The delta is the sensitivity (rate of change in value) to the underlying stock price, and the theta is the sensitivity to time passing (usually expressed in $/day). So if your option has a delta of .5 and a theta of -.04, when one day passes and the underlying stock goes up $3, the option will gain roughly $1.50 due to the underlying stock price and lose $0.04 due to time passing. |
How should my brother and I structure our real estate purchase? | We’re buying the home right over $200,000 so that means he will only need to put down (as a ‘gift’) roughly $7000. I'm with the others, don't call this a gift unless it is a gift. I'd have him check with the bank that previously refused him a mortgage if putting both of you on a mortgage would allay their concerns. Your cash flow would be paying the mortgage payment and if you failed to do so, then they could fall back on his. That may make more sense to them, even if they would deny each of you a loan on your own. This works for them because either of you is responsible for the whole loan. It works for him because he was already willing to be responsible for the whole loan. And your alternative plan makes you responsible for the whole loan, so this is just as good for you. At what percentage would you suggest splitting ownership and future expenses? Typically a cash/financing partnership would be 50/50, but since it’s only a 3.5% down-payment instead of 20% is that still fair? Surprisingly enough, a 3.5% down-payment that accumulates is about half the equity of a 20% down-payment. So your suggestion of a 25%-75% split makes sense if 20% would give a 50%-50% split. I expected it to be considerably lower. The way that I calculated it was to have his share increase by his equity share of the "rent" which I set to the principal plus interest payment for a thirty year loan. With a 20% down-payment, this would give him 84% equity. With 3.5%, about 40% equity. I'm not sure why 84% equity should be the equivalent of a 50% share, but it may be a side effect of other expenses. Perhaps taking property taxes out would reduce the equity share. Note that if you increase the down-payment to 20%, your mortgage payment will drop substantially. The difference in interest between 3.5% and 20% equity is a couple hundred dollars. Also, you'll be able to eliminate any PMI payment at 20%. It could be argued that if he pays a third of the monthly mortgage payment, that that would give him the same 50% equity stake on a 3.5% down-payment as he would get with a 20% down-payment. The problem there is that then he is effectively subsidizing your monthly payment. If he were to stop doing that for some reason, you'd have what is effectively a 50% increase in your rent. It would be safer for you to handle the monthly payment while he handles the down-payment. If you couldn't pay the mortgage, it sounds like he is in a position to buy out your equity, rent the property, and take over the mortgage payment. If he stopped being able to pay his third of the mortgage, it's not evident that you'd be able to pick up the slack from him much less buy him out. And it's unlikely that you'd find someone else willing to replace him under those terms. But your brother could construct things such that in the face of tragedy, you'd inherit his equity in the house. If you're making the entire mortgage payment, that's a stable situation. He's not at risk because he could take over the mortgage if necessary. You're not at risk because you inherit his equity share and can afford the monthly payment. So even in the face of tragedy, things can go on. And that's important, as otherwise you could lose your equity in the house. |
Electric car lease or buy? | I would like to add that from my own research, a pro to leasing over buying a new vehicle would be that with the lease the entire 7,500 federal incentive is applied directly to the lease, or so they say. If you buy a new car you get a 7,500 federal tax incentive also but if you dont have 7,500 bucks in taxes this wont be as much value. It doesn't sense to me to buy used since you dont get the tax incentive and also if you're in california the 2,500 rebate only applies to buying new or leasing 30 month or longer. |
Stock stopped trading, what does this mean? | You have not lost value. It is just that the shares you owned, are now not tradable on US stock exchanges. You still have the value of your shares protected. In cases like de-listing of a stock, typically a trust (may be managed by a bank) is setup to help customers liquidate their stocks. You should try to search the relevant SEC filings for de-listing of this stock to get more details on whom to contact. |
Are solar cell panels and wind mills worth the money? | Solar water heaters are definitely worth the money (if you live in sunny states like South-South-West or Hawaii, at least). In some countries (like Greece, Cyprus and Israel, to name a few) most people use hot water from the solar heaters almost exclusively. I pay $30-$40 a month to PG&E for the privilege. Unfortunately, in the US these heaters are much more expensive than they are in the more advanced European countries, so all the savings go to drain because of the vast price difference ($300 for a gas heater vs $2000 for a solar heater). |
what is a mortgage gift exchange? | The issue is that the lender used two peoples income, debts, and credit history to loan both of you money to purchase a house. The only way to get a person off the loan, is to get a new loan via refinancing. The new loan will then be based on the income, debt, and credit history of one person. There is no paperwork you can sign, or the ex-spouse can sign, that will force the original lender to remove somebody from the loan. There is one way that a exchange of money between the two of you could work: The ex-spouse will have to sign paperwork to prove that it is not a loan that you will have to payback. I picked the number 20K for a reason. If the amount of the payment is above 14K they will have to document for the IRS that this is a gift, and the amount above 14K will be counted as part of their estate when they die. If the amount of the payment is less than 14K they don't even have to tell the IRS. If the ex-souse has remarried or you have remarried the multiple payments can be constructed to exceed the 14K limit. |
What is the opposite of Economic Bubble? | The opposite of an economic bubble is a bubble burst :p! Jokes aside though, an economic bubble occurs when the economy is in bull market mode and asset prices are growing very fast. It's usually measured by ratio's like price to earnings and the levels of various market indices. So, the opposite would be when valuations are falling very fast or are very low, and price to earnings ratios are low. This condition is usually a recession. A recession is a market slowdown, generally after a bubble bursts, and severe recessions can become depressions if they last long enough (Great Depression, 1930s). A bubble is not necessarily negative - stock prices usually rise a lot so paper wealth is greatly magnified. If you can get out in time, you're golden. Similarly, a recession isn't bad for everyone. Some investors keep large amounts of cash waiting for recessions so they can "buy low, sell high". For most people, however, recessions are negative because unemployment increases and some people get fired, and the economy slows down. Asset prices have fallen so their investments are worth less than they used to be (on paper), and people mainly have to bide it out until the market starts growing again. |
Increase or decrease amount to be withheld each pay period? | If you know that your tax situation is not easily handled by the standard withholding table then you can use that line to ask for additional funds be withheld. You could also ask for less money to be withheld. Why would somebody do this? They had a small side business that made them extra income, and wanted to withhold extra money from their full time job to cover the extra income. They might have been awarded a big bonus and it caused too much in taxes to be withheld so they wanted to not have as much taxes from their regular pay check. Given the fact that you are young, in your first real job, and almost the entire tax year ahead of you, it is likely that the standard tax tables will be close enough. So leave the line blank or put zero. |
I cosigned for a friend who is not paying the payment | I am not sure how anyone is answering this unless they know what the loan was for. For instance if it is for a house you can put a lien on the house. If it is for the car in most states you can take over ownership of it. Point being is that you need to go after the asset. If there is no asset you need to go after you "friend". Again we need more specifics to determine the best course of action which could range from you suing and garnishing wages from your friend to going to small claims court. Part of this process is also getting a hold of the lending institution. By letting them know what is going on they may be able to help you - they are good at tracking people down for free. Also the lender may be able to give you options. For example if it is for a car a bank may help you clear this out if you get the car back plus penalty. If a car is not in the red on the loan and it is in good condition the bank turns a profit on the default. If they can recover it for free they will be willing to work with you. I worked in repo when younger and on more than a few occasions we had the cosigner helping. It went down like this... Co-signer gets pissed like you and calls bank, bank works out a plan and tells cosigner to default, cosigner defaults, banks gives cosigner rights to repo vehicle, cosigner helps or actually repos vehicle, bank gets car back, bank inspects car, bank asks cosigner for X amount (sometimes nothing but not usually), cosigner pays X, bank does not hit cosigners credit, bank releases loan and sells car. I am writing this like it is easy but it really requires that asset is still in good condition, that cosigner can get to the asset, and that the "friend" still is around and trusts cosigner. I have seen more than a few cosigners promise to deliver and come up short and couple conspiring with the "friend". I basically think most of the advice you have gotten so far is crap and you haven't provided enough info to give perfect advice. Seeking a lawyer is a joke. Going after a fleeing party could eat up 40-50 billable hours. It isn't like you are suing a business or something. The lawyer could cost as much as repaying the loan - and most lawyers will act like it is a snap of their fingers until they have bled you dry - just really unsound advice. For the most part I would suggest talking to the bank and defaulting but again need 100% of the details. The other part is cosigning the loan. Why the hell would you cosign a loan for a friend? Most parents won't cosign a loan for their own kids. And if you are cosigning a loan, you write up a simple contract and make the non-payment penalties extremely costly for your friend. I have seen simple contracts that include 30% interests rates that were upheld by courts. |
Do property taxes get deducted 100% from the Annual Tax Return or only a fraction of them? | In 2012, the standard deduction is $5950 for a single person. Let's assume you are very charitable, and by coincidence you donate exactly $5950 to charity. Everything that falls under itemized deductions would then be deductible. So, if your property tax is $6000, in your example - Other adjustments come into play, including an exemption of $3850, I am just showing the effect of the property tax. The bottom line is that deductions come off income, not off your tax bill. The saving from a deduction is $$ x your tax bracket. |
Pros and Cons of Interest Only Loans | Pros: Cons: Before the housing bubble the conventional wisdom was to buy as much home as you could afford, thereby borrowing as much you can afford. Because variable rates lead to lower mortgages, they were preferred by many as you could buy more house. This of course lead to many people losing their home and many thousands of dollars. A bubble is not necessary to trigger a chain of events that can lead to loss of a home. If an interest only borrower is late on a payment, this often triggers a rate increase. Couple that with some other things that can happen negatively, and you are up $hit's creek. IMO it is not wise. |
Is being a landlord a good idea? Is there a lot of risk? | Based on what you've said I think buying a rental is risky for you. It looks like you heard that renting a house is profitable and Zillow supported that idea. Vague advice + a website designed for selling + large amounts of money = risky at the very least. That doesn't mean that rental property is super risky it just means that you haven't invested any time into learning the risks and how you can manage them. Once you learn that your risk reduces dramatically. In general though I feel that rental property has a good risk/reward ratio. If you're willing to put in the time and energy to learn the business then I'd encourage you to buy property. If you're not willing to do that then rentals will always be a crap shoot. One thing about investing in rental property is you have the ability to have more impact on your investment than you do dropping money in the stock market which is good and bad. |
Some stock's prices don't fluctuate widely - Is it an advantages? | Apart from making money from the price difference, some stocks also give dividends, or bonus issues. For long term investors whom are looking for steady income, they may be more interested with the dividend pay-out instead of the capital-appreciation. |
Economics Books | i'm absolutely a newcomer in economics and i wish to understand how things work around finance. This is a pretty loaded question. To understand finance, you need the basics of economics. In almost every economics school in the country, you first study microeconomics and then economics. So, we'll start with micro. One of, if not the, most popular books is "Principles of Microeconomics" by Mankiw. This book covers the fundamentals of micro econ (opportunity, supply, demand, consumer choice, production, costs, basic game theory, and allocation of resources) in a clear and effective manner. It's designed for the novice and very easy to read. Like Mankiw's other book, "Principles of Macroeconomics" is also top notch. There is some overlap in key areas (i.e. opportunity cost, supply, demand, indifference curves, elasticity, taxation) because they are fundamental to economics and the overlap will always be there, but from there the book goes into key macro concepts like GDP, CPI, Employment, Monetary and Fiscal policy, and Inflation. An excellent intro primer indeed. Now that you have the fundamentals down, it's time to learn about finance. The best resource, in my opinion, is "Financial Markets" by Robert Shiller on Open Yale Courses. I've personally taken Prof. Shiller's class last semester, and the man is brilliant. The lectures cover every single aspect of finance and can turn the complete novice into a fairly experienced finance student. The first lecture also covers all the math required so you don't get lost at any point. Be warned, however, that the course is very deep. We used Fabozzi's textbook "Foundations of Financial Markets and Institutions," which is over 600 pages deep and we were required to know essentially all of it. Watch the videos and follow the readings and you'll be a finance whiz soon! Financial Markets on Open Yale And that's your roadmap to what you want. There are other economics books and it's true that the first few chapters of both Mankiw books are largely the same, but that's because any economics course always covers the basics first. If you want to look at other books, Krugman has written some good books as well. Be sure to read reviews because some books are meant for 2nd/3rd year econ students, so you don't want to get a too advanced book. At the novice level, we're interested in understanding the basic concepts so we can master Fabozzi. As for finance books - Fabozzi teaches you all the fundamentals of financial markets so you've got a powerful foundation. From there you can expand to more niche books such as books on investing or on monetary policy or whatever you want. Best of luck! |
Why buying an inverse ETF does not give same results as shorting the ETF | Suppose that the ETF is currently at a price of $100. Suppose that the next day it moves up 10% (to a price of $110) and the following day it moves down 5% (to a price of $104.5). Over these two days the ETF has had a net gain of 4.5% from its original price. The inverse ETF reverses the daily gains/losses of the base ETF. Suppose for simplicity that the inverse ETF also starts out at a price of $100. So on the first day it goes down 10% (to $90) and on the second day it goes up 5% (to $94.5). Thus over the two days the inverse ETF has had a net loss of 5.5%. The specific dollar amounts do not matter here. The result is that the ETF winds up at 110%*95% = 104.5% of its original price and the inverse ETF is at 90%*105% = 94.5% of its original price. A similar example is given here. As suggested by your quote, this is due to compounding. A gain of X% followed by a loss of Y% (compounded on the gain) is not in general the same as a loss of X% followed by a gain of Y% (compounded on the loss). Or, more simply put, if something loses 10% of its value and then gains 10% of its new value, it will not return to its original value, because the 10% it gained was 10% of its decreased value, so it's not enough to bring it all the way back up. Likewise if it gains 10% and then loses 10%, it will go slightly below its original value (since it lost 10% of its newly increased value). |
How to pay with cash when car shopping? | The very first time I bought a new car I wrote out a personal check for $5000 (this was a looong time ago!). And got a call from the sales person that he had called the bank and was told that I did not have that much money in my checking account! I explained that I had just that day transferred money from savings to checking. The sales person accepted that and there was never a problem after that. |
MasterCard won't disclose who leaked my credit card details | As indicated in comments, this is common practice in the US as well as EU. For example, in this Fox Business article, a user had basically the same experience: their card was replaced but without the specific merchant being disclosed. When the reporter contacted Visa, they were told: "We also believe that the public interest is best served by quickly notifying financial institutions with the information necessary to protect themselves and their cardholders from fraud losses. Even a slight delay in notification to financial institutions could be costly,” the spokesperson said in an e-mail statement. “Visa works with the breached entity to collect the necessary information and provides payment card issuers with the affected account numbers so they can take steps to protect consumers through independent fraud monitoring, and if needed, reissuing cards. The most critical information needed is the affected accounts, which Visa works to provide as quickly as possible.” What they're not saying, of course, is that it's in Visa's best interests that merchants let Visa know right away when a leak occurs, without having to think about whether it's going to screw that merchant over in the press. If the merchant has to consider PR, they may not let the networks know in as timely of a fashion - they may at least wait until they've verified the issue in more detail, or even wait until they've found who to pin it on so they don't get blamed. But beyond that, the point is that it's easier for the network (Visa/Mastercard/etc.) to have a system that's just a list of card numbers to submit to the bank for re-issuing; nobody there really cares which merchant was at fault, they just want to re-issue the cards quickly. Letting you know who's at fault is separate. There's little reason for the issuing bank to ever know; you should find out from the merchant themselves or from the network (and in my experience, usually the former). Eventually you may well find out - the article suggest that: [T]he situation is common, but there is some good news: consumers do in many cases find out the source of the breach. But of course doesn't go into detail about numbers. |
Is it possible to make money by getting a mortgage? | I think this is possible under very special conditions. The important part of the description here is probably retired and rich. The answers so far apply to people with "normal" incomes - both in the sense of "not rich" and in the sense of "earned income." If you sit at the top tax bracket and get most of your income through things like dividends, then you might be able to win multiple ways with the strategy described. First you get the tax deduction on the mortgage interest, which everyone has properly noted is not by itself a winning game - You spend more than you save. BUT... There are other factors, especially for the rich and those whose income is mostly passive: I'm not motivated enough on the hypothetical situation to come up with a detailed example, but I think it's possible that this could work out. In any case, the current answers using "normal sized" incomes and middle tax brackets don't necessarily give the insight that you might hope if the tax payer really is unusually wealthy and retired. |
What kind news or information would make the price of a stock go up? | There is a highly related question which is much easier to answer: what normally value-increasing news about a company would cause that company to fall in value in the public stock market? By answering that, we can answer your question by proxy. The answer to that question being: anything that makes investors believe that the company won't be able to maintain the level of profit. For example, let's say a company announces a 300% profit growth compared to the previous year. This should push the stock upwards; maybe not by 300%, but certainly by quite a bit. Let's also say that this company is in the business of designing, manufacturing and selling some highly useful gadget that lots of people want to buy. Now suppose that the company managed such an profit increase by one of: In scenario 1 (firing the engineering department), it is highly unlikely that the company will be able to come up with, manufacture and sell a Next Generation Gadget. Hence, while profit is up now, it is highly likely to go down in the months and years coming up. Because stock market investors are more interested in future profits than in past profits, this should push the value of the company down. In scenario 2 (selling off the machinery), the company may very well be able to come up with a Next Generation Gadget, and if they can manufacture it, they might very well be able to sell it. However, no matter how you slice it, the short-term costs for manufacturing either their current generation Gadget, or the Next Generation Gadget, are bound to go up because the company will either need to rent machinery, or buy new machinery. Neither is good for future profits, so the value of the company again should go down in response. In scenario 3 (their product getting a large boost), the company still has all the things that allowed them to come up with, produce and sell Gadgets. They also have every opportunity to come up with, manufacture and sell Next Generation Gadgets, which implies that future profits, while far from guaranteed, are likely. In this case, the probability remains high that the company can actually maintain a higher level of profit. Hence, the value of the company should rise. Now apply this to a slightly more realistic scenario, and you can see why the value of a company can fall even if the company announces, for example, record profits. Hence, you are looking for news which indicate a present and sustained raised ability to turn a profit. This is the type of news that should drive any stock up in price, all else being equal. Obviously, buyer beware, your mileage may vary, all else is never equal, nothing ever hits the average, you are fighting people who do this type of analysis for a living and have every tool known available to them, etc etc. But that's the general idea. |
How can I determine if my rate of return is “good” for the market I am in? | First add the inflation, then minus your expenses for the year. If you are better than that, you have done "good". For example: - 1.)You have $10,000 in 2014. 2.) You need $1,000 for your expenses in 2014, so you are left with $9000. 3.) Assuming the inflation rate is at 3 percent, the $10,000 that you initially had is worth $10,300 in 2015. 4.) Now, if you can get anything over 10,300 with the $9,000 that you have you are in a better position than you were last year i.e(10300-9000)/9000 - i.e 14.44%. So anything over 14.44 percent is good. Depending on where you live, living costs and inflation may vary, so please do the calculation accordingly since this is just an example. Cheers |
Will I be paid dividends if I own shares? | What is a dividend? Essentially, for every share of a dividend stock that you own, you are paid a portion of the company’s earnings. You get paid simply for owning the stock! For example, let’s say Company X pays an annualized dividend of 20 cents per share. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of 20 cents (or 5 cents) for each share you own. This may not seem like a lot, but when you have built your portfolio up to thousands of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years. The key is to reinvest those dividends! Source: http://www.dividend.com/dividend-investing-101/what-are-dividend-stocks/ What is an ex dividend date Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date is usually set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. Source: https://www.sec.gov/answers/dividen.htm That said, as long as you purchased the stock before 6/4/17 you are entitled to the next dividend. If not, you'll get the following one after that. |
Beginning investment | Your question is very broad. Whole books can and have been written on this topic. The right place to start is for you and your wife to sit down together and figure out your goals. Where do you want to be in 5 years, 25 years, 50 years? To quote Yogi Berra "If you don't know where you are going, you'll end up someplace else." Let's go backwards. 50 Years I'm guessing the answer is "retired, living comfortably and not having to worry about money". You say you work an unskilled government job. Does that job have a pension program? How about other retirement savings options? Will the pension be enough or do you need to start putting money into the other retirement savings options? Career wise, do you want to be working as in unskilled government jobs until you retire, or do you want to retire from something else? If so, how do you get there? Your goals here will affect both your 25 year plan and your 5 year plan. Finally, as you plan for death, which will happen eventually. What do you want to leave for your children? Likely the pension will not be transferred to your children, so if you want to leave them something, you need to start planning ahead. 25 Years At this stage in your life, you are likely talking, college for the children and possibly your wife back at work (could happen much earlier than this, e.g., when the kids are all in school). What do you want for your children in college? Do you want them to have the opportunity to go without having to take on debt? What savings options are there for your children's college? Also, likely with all your children out of the house at college, what do you and your wife want to do? Travel? Give to charity? Own your own home? 5 Years You mention having children and your wife staying at home with them. Can your family live on just your income? Can you do that and still achieve your 50 and 25 year goals? If not, further education or training on your part may be needed. Are you in debt? Would you like to be out of debt in the next 5-10 years? I know I've raised more questions than answers. This is due mostly to the nature of the question you've asked. It is very personal, and I don't know you. What I find most useful is to look at where I want to be in the near, mid and long term and then start to build a plan for how I get there. If you have older friends or family who are where you want to be when you reach their age, talk to them. Ask them how they got there. Also, there are tons of resources out there to help you. I won't suggest any specific books, but look around at the local library or look online. Read reviews of personal finance books. Read many and see how they can give you the advice you need to reach your specific goals. Good luck! |
Choosing the limit when making a limit order? | Wouldn't this be part of your investing strategy to know what price is considered a "good" price for the stock? If you are going to invest in company ABC, shouldn't you have some idea of whether the stock price of $30, $60, or $100 is the bargain price you want? I'd consider this part of the due diligence if you are picking individual stocks. Mutual funds can be a bit different in automatically doing fractional shares and not quite as easy to analyze as a company's financials in a sense. I'm more concerned with the fact that you don't seem to have a good idea of what the price is that you are willing to buy the stock so that you take advantage of the volatility of the market. ETFs would be similar to mutual funds in some ways though I'd probably consider the question that may be worth considering here is how much do you want to optimize the price you pay versus adding $x to your position each time. I'd probably consider estimating a ballpark and then setting the limit price somewhere within that. I wouldn't necessarily set it to the maximum price you'd be willing to pay unless you are trying to ride a "hot" ETF using some kind of momentum strategy. The downside of a momentum strategy is that it can take a while to work out the kinks and I don't use one though I do remember a columnist from MSN Money that did that kind of trading regularly. |
Options vs Stocks which is more profitable | The first thing that I learned the hard way (by trying my hand at actual options trading) is that liquidity matters. So few people are interested in trading the same options that I am that it is easy to get stuck holding profitable contracts into expiration unless I offer to sell them for a lot less than they are worth. I also learned that options are a kind of insurance,and no one makes money (in the long run) buying insurance. So you can use options to hedge and thereby prevent losses, but you also blunt your gains. Edit: IMO,options (in the long run) only make money for the brokers as you pay a commission both on the buy and on the sell. With my broker the commission on options is higher than the commission on stocks (or ETFs). |
How to compare the value of a Masters to the cost? | I wasn't 100% on which columns of the scale you were referring to, but think I captured the correct ones in this comparison, using the scale for BA and MA (MA scale starting 2 years later, with decreased income reflected for first two years), applying a 1% cost of living increase each year to the scale or to prior year after the scale maxes out and assuming you borrow 40k and repay years 3-10, then the difference and cumulative difference between each scenario: So it would be about 16 years to start coming out ahead, but this doesn't account for the tax deduction of student loan interest. Some things in favor of borrowing for a MA, there are loan forgiveness programs for teachers, you might only make 5-years of minimum payments before having the remainder forgiven if you qualify for one of those programs. Not sure how retirement works for teachers in WA, but in some states you can get close to your maximum salary each year in retirement. Additionally, you can deduct student loan interest without itemizing your tax return, so that helps with the cost of the debt. Edit: I used a simple student loan calculator, if you financed the full 40k at 6% you'd be looking at $444 monthly payments for 10 years, or $5,328/year (not calculating the tax deduction for loan interest). |
Is it better for a public company to increase its dividends, or institute a share buyback? | I would prefer a dividend paying company, rather than share appreciation. And I would prefer that the dividends increase over time. |
Best way to start investing, for a young person just starting their career? | Not 100% related, but the #1 thing you need to avoid is CREDIT CARD DEBT. Trust me on this one. I'm 31, and finally got out of credit card debt about eight months ago. For just about my entire 20s, I racked up credit card debt and saved zero. Invested zero. It pains me to realize that I basically wasted ten years of possible interest, and instead bought a lot of dumb things and paid 25% interest on it. So yes, put money into your 401k and an IRA. Max them out. |
Is it possible to borrow money to accrue interest, and then use that interest to pay back the borrower + fees? | There are many flaws with your idea. Say I want to borrow $225,000.00 to accrue interest on a 1.20% APY account. I promise ... that I cannot withdraw nor touch the account by legal contract. If you break the contract and lose the money, the lender is out the money. They can take you to court and will win, but if you don't have the money, then they don't get paid. (You can't squeeze water out of a rock even if a judge orders you to.) By sharing the interest with me on a loan, they keep a percentage that they'd normally get... If you're "investing" the money at 1.2%, and the lender gets some amount less than that, then they are getting much less than they "normally" get. Lenders typically get somewhere from 5-15% on loans. The money can also be used to fund a stock/trading account. Regardless of whether I profit, I pay interest on the loan and split the profit shares 24/7. How can the lender lose with legal enforcing? Again, if you lose the money, no amount of legal enforcing can force you to pay money that you don't have. Even if you go to jail for fraud the lender still doesn't get paid. Simply, no bank would ever agree to this. |
Understanding the symbols next to the Ticker | BATS here means your data feed is coming from BATS only. You're not seeing up to date prices from NASDAQ, NYSE or any other of the ECNs. For a liquid equity like AAPL, BATS prices are typically up to date but for a less liquid listing, you wouldn't always see the NBBO. To get live feeds from every ECN, you have to pay. BATS is offering this information freely and that's why you're seeing it now. AAPL is listed on NASDAQ but you can trade pretty much everything on BATS, just like on other ECNs and exchanges. |
For very high-net worth individuals, does it make sense to not have insurance? | I think the key to this question is your last sentence, because it's applicable to everyone, high net-worth or not: How would one determine whether they are better off without insurance? In general, insurance is a net good when the coverage would prevent a 'catastrophic' event. If a catastrophic event doesn't happen, oh well, you wasted money on insurance. If it does happen, you just saved yourself from bankruptcy. These are two separate outcomes, so taking the 'average' cost of a catastrophic event (and weighing that against the more expensive insurance premiums) is not practical. This is a way of reducing risk, not of maximizing returns. Let the insurance company take the risk - they benefit from having a pool of people paying premiums, and you benefit because your own life has less financial risk. Now for something like cheap home electronics, insurance is a bad idea. This is because you now have a 'pool' of potential risks, and your own life experience could be close to the 'average' expected result. Meaning you'll pay more for insurance than you would just replacing broken things. This answer is another good resource on the topic. So to your question, at what point in terms of net-worth does someone's house become equivalent to you and your toaster? Remember that if you have home fire insurance, you are protecting the value of your house, because that loss would be catastrophic to you. But a high net-worth individual would also likely find the loss of their house catastrophic. Unless they are billionaires with multiple 10M+ mansions, then it is quite likely that regardless of wealth, a significant portion of their worth is tied up in their home. Even 10% of your net worth would be a substantial amount. As an example, would someone worth $1M have only a 100k home? Would someone worth $10M have only a $1M Home? Depends on where they live, and how extravagantly. Similarly, if you were worth $10M, you might not need extra insurance on your Toyota Camry, but you might want it if you drive a $1M Ferrari! Not to mention that things like auto insurance may cover you for liability, which could extend beyond the value of your car, into medical and disability costs for anyone in an accident. In fact, being high net-worth may make you more vulnerable to lawsuits, making this insurance even more important. In addition, high net-worth individuals have insurance that you or I have no need of. Things like kidnapping insurance; business operation insurance, life insurance used to secure bank loans. So yes, even high net-worth individuals may fear catastrophic events, and if they have so much money - why wouldn't they pay to reduce that risk? Insurance provides a service to them the same as to everyone else, it's just that the items they consider too 'cheap' too insure are more expensive than a toaster. Edit to counter concerns in some other answers, which say that insurance is "always a bad idea": Imagine you are in a kafka-esque episode of "Let's Make a Deal". Monty Hall shows you two parallel universes, each with 100 doors. You must choose your universe, then choose a door. The first universe is where you bought insurance, and behind every door is a penalty of $200. The second universe is where you didn't buy insurance, and behind 99 doors is nothing, with one random door containing a penalty of $10,000. On average, playing the game 99,999 times, you will come out ahead 2:1 by not buying insurance. But you play the game only maybe 3 times in your life. So which universe do you choose? Now, you might say "pfft - I can cover the cost of a 10k penalty if it happens". But this is exactly the point - insurance (unless already required by law) is a net good when it covers catastrophic losses. If you are wealthy enough to cover a particular loss, you typically shouldn't buy that insurance. That's why no one should insure their toaster. This is not a question of "average returns", it is a question of "risk reduction". |
Snowball debt or pay off a large amount? | I agree with the Dave Ramsey method as well. If you don't have $1k in the bank already, do that. Total up the smaller debts and the best buy card. if they are $4k all together, then pay them off. Don't get caught up in keeping the smaller one around because they are at zero percent. If they exceed $4k, then payoff the interest bomb best buy card, then pay off the smaller ones, starting with the smaller balance. That is the only tweak I will make here. Dropping any amount into the Citi balance is pointless because it only reduces the amount, not the total number of hands reaching into your bank account. |
Is there any kind of unsecured stock loan? | In the U.S. it is typical that a stock brokerage account can be set up to buy stock with up to half the cost being borrowed from the broker. This is called a margin account. The stock purchased must remain in the account until sold (or the loan is paid off), as it serves as built-in collateral for the loan. If the market price for the stock goes down too much, you will be required to add money, or the stock will be sold to cover the loan. See this question for some more information. |
Why buy insurance? | The definition of insurance is the transfer of risk. Thus, you're paying for transferring of a risk (of an item/property) to the insurer (carrier), so that they bear the financial burden of a loss/accident and not you. You could always self-insure, but a lot of times, insurance is cheaper, since due to the "Law of Large Numbers" the insurer can just charge a premium that is small percentage in comparison to the cost of self-insuring. |
Is it ever a good idea to close credit cards? | In my own case, my credit score went up drastically after I closed cards. It did go down a bit (like 10 points) in the short term. Within 6 months, however, I did see significant gains. This would include closing the American Express card that I had for like 10 years. According much of what I read, you should never close a AMEX card. I did and it did not hurt me. What helps all this is that my utilization is zero. |
How do I build wealth? | As others have stated, CEO's often make more than 200K, and when they do, they're compensated with stock options and other lucrative bonuses and deals that allow them to build wealth above and beyond the face value of their salary. However, remember that having wealth makes it easier to build further wealth. As Victor pointed out, having wealth allows you to increase your wealth in different kinds of investments. Also, it gives you access to more human capital, e.g. wealth management services at firms like Northern Trust, a greater ability to diversify into investments like hedge funds, more abilities to invest abroad through foreign trusts, etc. Also, you have to realize that wealthier people often pay a lower percentage in taxes than people who earn a salary. In the US, long-term capital gains are taxed at a much lower rate than income, so wealthy individuals who earn much of their money from long-term investments won't pay nearly as high a rate. In my case, my current salary places me at the top of the 25% tax bracket (in the US), but if I earned all of my income through long-term capital gains instead of salary, I would only pay around 15-20% in taxes. Plus, I could afford numerous tax accounting firms to help me find ways to pay fewer taxes. It's not altruism that causes CEOs like Steve Jobs and Mark Zuckerberg to take a $1 salary. This isn't directly related to CEOs, and I'm not leveling accusations of corruption against high net worth individuals, but I remember spending a few months in a small town in a country known for its corruption. The mayor had recently purchased a home worth the equivalent of several million dollars, on his annual civil servant salary of approximately $20K. One of the students asked him how he managed to afford such a sizable property, and he replied "I live very frugally." This is probably a relatively rare case (I'm sure it depends on the country), but nevertheless, it illustrates another way that some people build wealth. |
How risky are penny stocks? | Penny stocks are only appealing to the brokers who sell the penny stocks and the companies selling "penny stock signals!". Generally penny stocks provide abysmal returns to the average investor (you or me). In "The Missing Risk Premium", Falkenstein does a quick overview on average returns to penny stock investors citing the following paper "Do Investors Overpay for Stocks with Lottery-Like Payoffs? An Examination of the Returns on OTC Stocks". Over the 2000 to 2009 time period, average investors lost nearly half their investment. A comparable investment in the S&P over this period would have been flat see here. There is a good table in the book/paper showing that the average annual return for stocks priced at either a penny or ten cents range from -10 percent (for medium volume) to -30% to -40% for low or high volume. A different paper, "Too Good to Ignore? A Primer on Listed Penny Stocks" that cites the one above finds that listed, as opposed to OTC "Pink Sheet" penny stocks", have better returns, but provide no premium for the additional risk and low liquidity. The best advice here is that there is no "quick win" in penny stocks. These act more like lottery tickets and are not appropriate for the average investor. Stear clear! |
Car dealer saying that they cannot see any credit information for my co-applicant. Could this be a scam? | Its not a scam. The car dealership does not care how you pay for the car, just that you pay. If you come to them for a loan they will try and service you. If you come with cash, they will sell you a car and not try to talk you into financing. If you come with a check from another bank, they will happily accept it. I would try to work with Equifax or a local credit union to figure out what is going on. Somehow she probably had her credit frozen. Here are some really good things to mitigate this situation: Oh and make sure you do #1 and forget about financing cars ever again. I mean if you want to build wealth. |
Where to start with personal finance? | I've recommended this book a few times on this site, and I'm going to do it again. Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner Most of the personal finance advice books and blogs I have found focus too much on investing, or are more about "lifestyle" than finances, and left me unimpressed. I like this book because it covers most of the major personal finance topics (budgets, rainy-day fund, insurance, retirement, and non-retirement investment). I have not found another book that covers the topics as concisely as this one. It is no-nonsense, very light reading. Even if you are not a book person, you can finish it in a weekend. It is really geared for the young person starting their career. Not the most current book (pre real-estate boom), but the advice is still sound. Keep in mind that is is starting point, not the ultimate answer to all financial questions. |
How to interpret a big ask size? | Yes, but it must be remembered that these conditions only last for instants, and that's why only HFTs can take advantage of this. During 2/28/14's selloff from the invasion of Ukraine, many times, there were moments where there was overwhelming liquidity on the bid relative to the ask, but the price continued to drop. |
When a stock price goes down, does the money just disappears into thin air? | At any given time there are buy orders and there are sell orders. Typically there is a little bit of space between the lowest sell order and the highest buy order, this is known as the bid/ask spread. As an example say person A will sell for $10.10 but person B will only buy at $10.00. If you have a billion shares outstanding just the space between the bid and ask prices represents $100,000,000 of market cap. Now imagine that the CEO is in the news related to some embezzlement investigation. A number of buyers cancel their orders. Now the highest buy order is $7. There isn't money involved, that's just the highest offer to buy at the time; but that's a drop from $10 to $7. That's a change in market cap of $3,000,000,000. Some seller thinks the stock will continue to fall, and some buyer thinks the stock has reached a fair enterprise value at $7 billion ($7 per share). Whether or not the seller lost money depends on where the seller bought the stock. Maybe they bought when it was an IPO for $1. Even at $7 they made $6 per share. Value is changing, not money. Though it would be fun, there's no money bonfire at the NYSE. |
How can a credit card company make any money off me? I have a no-fee card and pay my balance on time | Maybe they don't make much, but they make some for sure. In addition to what duffbeer703 says, they also have a warm body at the end of the line and will sell your contact info (or at least access to your eyeballs) to marketers. They stuff advertisements into your bill for example. If nothing else, you are brand value for them as they can convince merchants (who get charged monthly) that X billion people carry their card and that merchant would be missing out on sales by not accepting their product. If you have a rewards card that pays you for using it, the merchant has higher corresponding fees. |
ISA - intra year profits and switching process | You're overthinking it. The ISA limit applies to the amount you invest into the ISA. In your example, £10,000. Whether that then fluctuates with performance is irrelevant. Even if you realise aprofit or a loss, nobody is watching it. You merely count the amount you originally contributed into the ISA wrapper. When they add up to £15,000; that's the limit reached. (And by the way, remember that only money going into the ISA is counted. It doesn't matter if you -let's say - put £15k in, then remove 10k. You've reached the limit. You don't again have the chance to put £10k 'back in'. |
Would you withdraw your money from your bank if you thought it was going under? | I have two different thoughts on this subject. |
What is the difference between a stop order and a stop limit order? | An attempt at a simple answer for the normal investor: A normal investor buys stock then later sells that stock. (This is known as "going long", as opposed to "going short"). For the normal investor, a stop order (of either kind) is only used when selling. A stop-loss sell order (or stop sell) is used to sell your stock when it has fallen too much in price, and you don't want to suffer more losses. If the stock is at $50, you could enter a stop sell at $40, which means if the stock ever falls to $40 or lower, your stock will be sold at whatever price is available (e.g. $35). A stop-loss limit sell order (or stop limit sell) is the same, except you are also saying "but don't sell for less than my limit price". So you can enter a stop limit sell at $40 with a limit of $39, meaning that if the stock falls to $40, you will then have a limit order in effect to sell the stock at $39 or higher. Thus your stock will never be sold at $35 or any value below $39, but of course, if the stock falls fast from $40 to $35, your limit sell at $39 will not be done and you will be left still owning the stock (worth at that moment $35, say). |
What are the alternatives to compound interest for a Muslim? | Because so many businesses make some money through some form of compound interest, like a business that saves its earnings in a business account that pays interest, it heavily depends on how strict you interpret this law. Some Muslims I know interpret it to mean directly and indirectly, while for some it's just direct interest earned. What I would suggest is either a direct investment in agriculture or a share in agriculture, where you are directly paid from your share in the investment and not through money that comes from a bank account earning interest. If you do a direct investment in agriculture, like owning livestock, you will be paid money in the form of food, which compounds through reproduction and can sell the offspring to others and collect the money. Year to date, agriculture is crushing the S&P 500 and many places around the world are facing shortages in food, like sugar and corn. If you don't have enough money for a direct investment, you can try the share route where you own a share of a direct investment. Rather than go through stock exchanges, where many of these companies make money indirectly through interest also, you can negotiate directly with farmers, ranchers, livestock owners, etc. Some of these individuals are looking to diversify their money, so they may be willing to let you own a fraction of what they produce and pay you directly. All of this comes with risk, of course. Livestock and plants die for a variety of reasons, but none of it will be interest from lending whether to individuals or through a bank. In addition, if we experience very high inflation in the future, livestock and plants do very well in this environment. |
Why is Net Asset Value (NAV) only reported by funds, but not stocks? | The (assets - liabilities)/#shares of a company is its book value, and that number is included in their reports. It's easy for a fund to release the net asset value on a daily basis because all of its assets (stocks, bonds, and cash) are given values every day by the market. It's also necessary to have a real time value for a fund as it will be bought and sold every day. A company can't really do the same thing as it will have much more diverse assets - real estate, cars, inventory, goodwill, etc. The real time value of those assets doesn't have the same meaning as a fund; those assets are used to earn cash, while a fund's business is only to maximize its net asset value. |
How do exchanges match limit orders? | The total limit book is a composite of all the orders on all of the exchanges. While it's uncommon for a limit order posted beyond the NBBO to fill outside of the NBBO, it does occur. For example, the best ask may be on exchange X, but for some reason the smart order routing algorithm may select exchange Y if it judges the net trade to be less costly, malfunctions, etc, and HFTs will immediately arbitrage the order between two exchanges, or the best order on exchange X disappears causing the order to fill above the NBBO. The system isn't perfect because there are multiple exchanges, but that eventuality is extremely rare with equities since nearly every exchange will have orders posted at the NBBO because exchange equity fee and rebate schedules are extremely competitive, nearly identical. It is however more common with options since less exchanges as a percentage of the total will have orders posted at the NBBO because of very wide exchange rebate and fee schedules. How a single exchange handles a new order that crosses an existing limit order is already addressed here: How do exchanges match limit orders? |
How can I avoid international wire fees or currency transfer fees? | Be aware that ATM withdrawals often generate hidden fees, which are not obviously declared. Many banks operate e.g. with a currency exchange fee, giving you an exchange rate some 1-2% lower than actually applicable. If you withdraw larger amounts, such a currency exchange fee easily adds up to what you would have paid for a wire transfer, where you would get a better exchange rate. Although it's probably much hassle for you to change banks, another option may be to find a bank which operates both in France and the US. Banks with different national branches often offer cheap and fast wire transfers between same-bank accounts in different countries. E.g. Citibank used to offer such services, but I am not sure if they still serve private customers in France. |
Long term investing alternative to mutual funds | You are not limited in these 3 choices. You can also invest in ETFs, which are similar to mutual funds, but traded like stocks. Usually (at least in Canada), MERs for ETFs are smaller than for mutual funds. |
Why don't banks give access to all your transaction activity? | If you need access to your data beyond the online availability, you download the transactions and manage the archive yourself. Six months to eighteen months is generally enough time for most people to manage their own archived data. Big banks have the power to store and retrieve all the data online. Unfortunately, the older records are not frequently accessed. Why have these records online when they will be rarely accessed? Backing up data will take longer. Queries to retrieve data will take longer. Everything will take longer just so you can have records that 99% of customers will never access. |
Does keeping 'long-term' safety net in bonds make sense? | The answer to your question depends very much on your definition of "long-term". Because let's make something clear: an investment horizon of three to six months is not long term. And you need to consider the length of time from when an "emergency" develops until you will need to tap into the money. Emergencies almost by definition are unplanned. When talking about investment risk, the real word that should be used is volatility. Stocks aren't inherently riskier than bonds issued by the same company. They are likely to be a more volatile instrument, however. This means that while stocks can easily gain 15-20 percent or more in a year if you are lucky (as a holder), they can also easily lose just as much (which is good if you are looking to buy, unless the loss is precipitated by significantly weaker fundamentals such as earning lookout). Most of the time stocks rebound and regain lost valuation, but this can take some time. If you have to sell during that period, then you lose money. The purpose of an emergency fund is generally to be liquid, easily accessible without penalties, stable in value, and provide a cushion against potentially large, unplanned expenses. If you live on your own, have good insurance, rent your home, don't have any major household (or other) items that might break and require immediate replacement or repair, then just looking at your emergency fund in terms of months of normal outlay makes sense. If you own your home, have dependents, lack insurance and have major possessions which you need, then you need to factor those risks into deciding how large an emergency fund you might need, and perhaps consider not just normal outlays but also some exceptional situations. What if the refrigerator and water heater breaks down at the same time that something breaks a few windows, for example? What if you also need to make an emergency trip near the same time because a relative becomes seriously ill? Notice that the purpose of the emergency fund is specifically not to generate significant interest or dividend income. Since it needs to be stable in value (not depreciate) and liquid, an emergency fund will tend towards lower-risk and thus lower-yield investments, the extreme being cash or the for many more practical option of a savings account. Account forms geared toward retirement savings tend to not be particularly liquid. Sure, you can usually swap out one investment vehicle for another, but you can't easily withdraw your money without significant penalties if at all. Bonds are generally more stable in value than stocks, which is a good thing for a longer-term portion of an emergency fund. Just make sure that you are able to withdraw the money with short notice without significant penalties, and pick bonds issued by stable companies (or a fund of investment-grade bonds). However, in the present investment climate, this means that you are looking at returns not significantly better than those of a high-yield savings account while taking on a certain amount of additional risk. Bonds today can easily have a place if you have to pick some form of investment vehicle, but if you have the option of keeping the cash in a high-yield savings account, that might actually be a better option. Any stock market investments should be seen as investments rather than a safety net. Hopefully they will grow over time, but it is perfectly possible that they will lose value. If what triggers your financial emergency is anything more than local, it is certainly possible to have that same trigger cause a decline in the stock market. Money that you need for regular expenses, even unplanned ones, should not be in investments. Thus, you first decide how large an emergency fund you need based on your particular situation. Then, you build up that amount of money in a savings vehicle rather than an investment vehicle. Once you have the emergency fund in savings, then by all means continue to put the same amount of money into investments instead. Just make sure to, if you tap into the emergency fund, replenish it as quickly as possible. |
Can somebody explain “leveraged debt investment positions” and “exposures” in this context for me, please? | Exposure is the amount of money that you are at risk of losing on a given position (i.e. on a UST 10 year bond), portfolio of positions, strategy (selling covered calls for example), or counterparty, usually represented as a percentage of your total assets. Interbank exposure is the exposure of banks to other banks either through owning debt or stock, or by having open positions with the other banks as counterparties. Leveraging occurs when the value of your position is more than the value of what you are trading in. One example of this is borrowing money (i.e. creating debt for yourself) to buy bonds. The amount of your own funds that you are using to pay for the position is "leveraged" by the debt so that you are risking more than 100% of your capital if, for example, the bond became worthless). Another example would be buying futures "on margin" where you only put up the margin value of the trade and not the full cost. The problem with these leveraged positions is what happens if a credit event (default etc.) happens. Since a large amount of the leverage is being "passed on" as banks are issuing debt to buy other banks' debt who are issuing debt to buy debt there is a risk that a single failure could cause an unravelling of these leveraged positions and, since the prices of the bonds will be falling resulting in these leveraged positions losing money, it will cause a cascade of losses and defaults. If a leveraged position becomes worth less than the amount of real (rather than borrowed or margined) money that was put up to take the position then it is almost inevitable that the firm in that position will default on the requirements for the leverage. When that firm defaults it sparks all of the firms who own that debt to go through the same problems that it did, hence the contagion. |
I spend too much money. How can I get on the path to a frugal lifestyle? | As others have said getting on a written budget before each month starts is the most important part. Also, I'm a big fan of cash budgets as well. They aren't for everyone and they take a little getting used to, but once you get used to them you'll never want to go back. In a cash budget you take whatever you have budgeted for the month for each category and withdraw the amount needed from the bank. These go into an envelope for each category, i.e. food, clothes, entertainment, etc. If a 3 weeks into the month you run out of money in that envelope you are done spending money in that category. For example, if it's the food envelope and you run out it's time for you to start eating leftovers and whatever you've got in the pantry. You lose out on advantages like points gained on credit cards and whatnot but statistically people that spend cash spend much less overall and you get some enforced self control that you otherwise might not have. |
Using financial news releases to trade stocks? | No matter how a company releases relevant information about their business, SOMEBODY will be the first to see it. I mean, of all the people looking, someone has to be the first. I presume that professional stock brokers have their eyes on these things closely and know exactly who publishes where and when to expect new information. In real life, many brokers are going to be seeing this information within seconds of each other. I suppose if one sees it half a second before everybody else, knows what he's looking for and has already decided what he's going to do based on this information, he might get a buy or sell order in before anybody else. Odds are that if you're not a professional broker, you don't know when to expect new information to be posted, and you probably have a job or a family or like to eat and sleep now and then, so you can't be watching somebody's web site constantly, so you'll be lagging hours or days behind the full-time professionals. |
The best credit card for people who pay their balance off every month | The answer for this question varies from person to person. However most cards give lousy rewards percentage-wise. Take a look at where your money is being spent each month (say with a tool like mint.com), and seek out a card that rewards you in categories where you already spend a lot of money. Many people here have suggested cards with high gas rebates, and that's great if you drive more than anything else. However, the important thing is to pick what benefits you most. |
GNUCash: How to count up equity? | I would take each of these items and any others and consider how you would count it as an expense in the other direction. If you have an account for parking expenses or general transportation funds, credit that account for a refund on your parking. If you have an account for expenses on technology purchases, you would credit that account if you sell a piece of equipment as you replace it with an upgrade. If you lost money (perhaps in a jacket) how would you account for the cash that is lost? Whatever account would would subtract from put a credit for cash found. |
Indie Software Developers - How do I handle taxes? | I think the best advice you're going to get on the subject is: If you made $250k in half a year, you definitely have enough to hire an accountant! Get professional help on the subject, and they'll make sure you don't end up getting in any legal trouble. |
Frustrated Landlord | If you're sinking 1k/year into it, and the value is rising by $100k in 15 years, or $6k/year, you have a fine investment. Ignore the wife, she just wants something even better. |
Are bonds really a recession proof investment? | Bonds by themselves aren't recession proof. No investment is, and when a major crash (c.f. 2008) occurs, all investments will be to some extent at risk. However, bonds add a level of diversification to your investment portfolio that can make it much more stable even during downturns. Bonds do not move identically to the stock market, and so many times investing in bonds will be more profitable when the stock market is slumping. Investing some of your investment funds in bonds is safer, because that diversification allows you to have some earnings from that portion of your investment when the market is going down. It also allows you to do something called rebalancing. This is when you have target allocation proportions for your portfolio; say 60% stock 40% bond. Then, periodically look at your actual portfolio proportions. Say the market is way up - then your actual proportions might be 70% stock 30% bond. You sell 10 percentage points of stocks, and buy 10 percentage points of bonds. This over time will be a successful strategy, because it tends to buy low and sell high. In addition to the value of diversification, some bonds will tend to be more stable (but earn less), in particular blue chip corporate bonds and government bonds from stable countries. If you're willing to only earn a few percent annually on a portion of your portfolio, that part will likely not fall much during downturns - and in fact may grow as money flees to safer investments - which in turn is good for you. If you're particularly worried about your portfolio's value in the short term, such as if you're looking at retiring soon, a decent proportion should be in this kind of safer bond to ensure it doesn't lose too much value. But of course this will slow your earnings, so if you're still far from retirement, you're better off leaving things in growth stocks and accepting the risk; odds are no matter who's in charge, there will be another crash or two of some size before you retire if you're in your 30s now. But when it's not crashing, the market earns you a pretty good return, and so it's worth the risk. |
Why is the highest quintile the only quintile whose wealth exceeds its income? | I think you came up with a worthy Masters/PhD research project, it is a great question. This is in Australia so it is difficult for me to have complete perspective. However, I can speak about the US of A. To your first point relatively few people inherit their wealth. According to a brief web search about 38% of billionaires, and 20% of millionaires inherited their wealth. The rest are self-made. Again, in the US, income mobility is very common. Some act like high level earners are just born that way, but studies have shown that a great deal of income mobility exists. I personally know people that have grown up without indoor plumbing, and extremely poor but now earn in the top 5% of wage earners. Quid's points are valid. For example a Starbucks, new I-Phone, and a brake job on your car are somewhat catastrophic if your income is 50K/year, hurts if your income is 100K, and an inconvenience if you make 250K/year. These situations are normal and happen regularly. The first person may have to take a pay day loan to pay for these items, the second credit card interest, the third probably has the money in the bank. All of this exaggerates the effect of an "emergency" on one's net worth. To me there is also a chicken-and-egg effect in wealth building and income. How does one build wealth? By investing wisely, planning ahead, budgeting, delaying gratification, finding opportunities, etc... Now if you take those same skills to your workplace isn't it likely you will receive more responsibility, promotions and raises? I believe so. And this too exaggerates the effect on one's net worth. If investing helps you to earn more, then you will have more to invest. To me one of the untold stories of this graph is not just investing, but first building a stable financial base. Having a sufficient emergency fund, having enough and the right kind of insurance, keeping loans to a minimum. Without doing those things first investments might need to be withdrawn, often at an inopportune time, for emergency purposes. Thanks for asking this! |
Efficient International money transfer | Typical wire transfers are not with 4-5%; but it all depends on the bank that does the transfer. You can chose to send ('wire') the money in source currency or in US $; the former, the target bank in the US does the conversion (so pick one that adds no or little spread); the latter, the sending bank does the conversion (so ask about their fees/spreads). I have multiple times transferred money across the ocean (though not from Japan), and never paid more than 0.3% + ~40 $ flat. It should be possible to get te same range. Note that if you look around for current offers, you might be easily able to even make some money on it - some US banks are eager for new money, and offer 200+$ bonus if you open an account and bring (significant =15k$+) new money to them. |
Is it possible to sell a stock at a higher value than the market price? | Yes You could write a covered call and the stock gets called away at the price + premium. You could convince someone to buy it regardless of the market price. |
Calculating pay off for credit card with multiple APRs | The first thing you need to do is look at your terms and conditions of your credit card, or ask your bank, how they will apply the payments. As Dilip notes in his answer, in the US, they will likely apply the minimum payment to the lower rate balance, and then must apply the rest above the minimum to the higher rate balance. In other countries, this will vary by law and custom. Do not assume it will pay off the higher balance, or proportionally, without asking. Let's take the following example. You owe $6000. $5000 is at 13.5% (normal purchase rate) and $1000 is at 22% (cash advance rate). If your bank applies payments to both balances proportionally, then a payment of $600 will reduce your purchase balance by $500 and your cash advance balance by $100. The average APR, then, is simply sum of the product of the APR times balance. So here, (.135*5000 + .225*1000)/6000 = 15%. This is called a weighted average. If the bank applies the payment differently - such as to the lower rate first, or some specified part to the lower rate and the rest to the higher rate - then this will be misleading if you enter it into a calculator, because your average APR will rise over time as you pay off the purchase balance but don't pay off the cash advance balance, or may decrease if the opposite happens. The weighted average is probably reasonably close in the circumstance that you describe, even if you have rules applying the balance differently, so long as they don't 100% pay down the lower rate - so it may be the simplest option for you in terms of rough calculations (where it's not critical to be correct, just close). One approach using the online calculators that might be better, is to treat these like two separate loans/cards. Many calculators exist for multiple balances. Then you can allocate funds differently to the two 'cards'. This would allow you to see how long you will need until you've paid off the higher balance, for example, although it probably won't perfectly match things - unless you find a site that has this specific option available you probably will have to either live with a small error in your calculations or do the math by hand. |
What headaches will I have switching from Quicken to GnuCash? | It's been a long time since I've used MS Money and/or Quickbooks (never Quicken), but I've used GnuCash over the past year or so. It works, but it does suffer from some usability problems. Some of the UI is clunky. Data entry sequences are a little harder than they should be. Reports could be a little prettier. But overall it does work, and it's the best I've found on linux. (I would definitely appreciate pointers to something better.) |
Is there a way to buy raw oil today and sell it in 1 year time? | There are many ways of investing either directly or indirectly in oil: all of these options are ways to invest in an expected change in the price of oil at various degrees of directness and risk profiles. Investing in derivative or derivative-like products such as futures and CFDs is very risky and requires a good degree of sophisticated knowledge to manage. |
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