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Is this the right formula to use implied volatility to gauge probability of a stock being within a certain range? | To get the probability of hitting a target price you need a little more math and an assumption about the expected return of your stock. First let's examine the parts of this expression. IV is the implied volatility of the option. That means it's the volatility of the underlying that is associated with the observed option price. As a practical matter, volatility is the standard deviation of returns, expressed in annualized terms. So if the monthly standard deviation is Y, then Y*SQRT(12) is the volatility. From the above you can see that IV*SQRT(DaysToExpire/356) de-annualizes the volatility to get back to a standard deviation. So you get an estimate of the expected standard deviation of the return between now and expiration. If you multiply this by the stock price, then you get what you have called X, which is the standard deviation of the dollars gained or lost between now and expiration. Denote the price change by A (so that the standard deviation of A is X). Note that we seek the expression for the probability of hitting a target level, Q, so mathematically we want 1 - Pr( A < Q - StockPrice) We do 1 minus the probability of being below this threshold because cumulative distribution functions always find the probability of being BELOW a threshold, not above. If you are using excel and assuming a mean of zero for returns, the probability of hitting or exceeding Q at expiration, then, is That's your answer for the probability of exceeding Q. Accuracy is in the eye of the beholder. You'd have to specify a criterion by which to judge it to know the answer. I'm sure more sophisticated methods exist that are more unbiased and have less error, but I think it's a fine first approximation. |
Optimize return of dividends based on payout per share | What you're referring to is the yield. The issue with these sorts of calculations is that the dividend isn't guaranteed until it's declared. It may have paid the quarterly dividend like clockwork for the last decade, that does not guarantee it will pay this quarter. Regarding question number 2. Yield is generally an after the fact calculation. Dividends are paid out of current or retained earnings. If the company becomes hot and the stock price doubles, but earnings are relatively similar, the dividend will not be doubled to maintain the prior yield; the yield will instead be halved because the dividend per share was made more expensive to attain due to the increased share price. As for the calculation, obviously your yield will likely vary from the yield published on services like Google and Yahoo finance. The variation is strictly based on the price you paid for the share. Dividend per share is a declared amount. Assuming a $10 share paying a quarterly dividend of $0.25 your yield is: Now figure that you paid $8.75 for the share. Now the way dividends are allocated to shareholders depends on dates published when the dividend is declared. The day you purchase the share, the day your transaction clears etc are all vital to being paid a particular dividend. Here's a link to the SEC with related information: https://www.sec.gov/answers/dividen.htm I suppose it goes without saying but, historical dividend payments should not be your sole evaluation criteria. Personally, I would be extremely wary of a company paying a 40% dividend ($1 quarterly dividend on a $10 stock), it's very possible that in your example bar corp is a more sound investment. Additionally, this has really nothing to do with P/E (price/earnings) ratios. |
What is the incentive for a bank to refinance a mortgage at a lower rate? | The reason is the same as with cell phones payment plans. As competition grows cell phone companies offer better payment plans for the same price or the same plans for lower price or both so that you stay with that cell operator. Banks also make better offers if the financial situation allows. Suppose several banks offer refinancing with better terms but prohibit refinancing loans from the same bank. Okay, you refinance from another bank and them maybe refinance the new loan again from the original bank - it's a new loan after the first refinance and prohibition no longer works. They just make you jump through more loops and it doesn't make sense neither for them nor for you |
Td Ameritrade Roth IRA question | Your broker, Ameritrade, offers a variety of Exchange Traded Funds (ETFs) that you can buy and sell with zero commission. An ETF is like a mutual fund, but you buy and sell shares the same way you buy and sell shares of stocks. From your point of view, the relevance of this is that you can buy and sell as many or as few shares as you like, even down to a single share. Note that to get the commission-free trades on the available ETFs you have to sign up for it in your account profile. Be sure to do that before you enter any buy orders. You'll want to start by looking at the Ameritrade's list of commission-free ETFs. Notice that they are divided into different categories: stocks, bonds, international, and commodities. Which categories you pick from will depend on your personal investing goals, time horizon, risk tolerance, and so on. There are lots of questions and answers on this site that talk about asset allocation. You should read them, as it is the most important decision you will make with your portfolio. The other thing you want to be aware of is the expense ratio for each fund. These expenses reduce the fund's return (they are included in the calculation of the net asset value of the shares), so lower is definitely better. Personally, I wouldn't even consider paying more than about 0.10% (commonly read "10 basis points" or "10 bp") for a broad-based domestic stock fund. For a sectoral fund you might put up with as much as 20 bp in expenses. Bond funds tend to be a little more expensive, so maybe allow as much as 25 bp, and likewise for international funds. I've never invested in commodity funds, so I'll let someone else opine on appropriate expense ratios for those. Once you've decided what funds you want (and have signed up for commission-free trades), all you have to do is enter the trade orders. The website where you manage your account has tutorials on how to do that. After that you should be all set. Good luck with your investing! |
Can my broker lock my cash account if I try to use the money from a stock sale during the three-day settlement period? | Here's how this works in the United States. There's no law regarding your behavior in this matter and you haven't broken any laws. But your broker-dealer has a law that they must follow. It's documented here: The issue is if you buy stock before your sell has settled (before you've received cash) then you're creating money where before none existed (even though it is just for a day or two). The government fears that this excess will cause undue speculation in the security markets. The SEC calls this practice freeriding, because you're spending money you have not yet received. In summary: your broker is not allowed to loan money to an account than is not set-up for loans; it must be a margin account. People with margin account are able to day-trade because they have the ability to use margin (borrow money). Margin Accounts are subject to Pattern Daytrading Rules. The Rules are set forth by FINRA (The Financial Industry Reporting Authority) and are here: |
Can a custodian refuse prior-year IRA/HSA deposit postmarked April 15? | I had a situation like this also. A client deposited an IRA check to his local P.O. prior to collection p/up, thinking this meant it would be postmarked April 15. It may have been picked up, but wasn't postmarked until the next day, and my firm refused to consider it as timely. I do remember discussing it w/my Retirement Services Dept. Maybe they made an exception for me and my client, but maybe not. I don't remember. Good luck. |
College student - I'm a 'dependent' and my parents won't apply for the Parent PLUS loan or cosign a private loan | I was in a similar (but not quite as bad situation) a couple years ago, and I had a stroke of luck that helped me, but your friend might be able to force a similar situation. My parents refused to take out the huge parent loan (understandably so), but my dad made enough money that I wasn't eligible for much aid. My stroke of luck came when they got divorced; I could refile my FAFSA with only one parent (using my mom with very little income), my aid shot through the roof and nearly covered my undergrad (this happened in California, I don't know if this works in other states). My advice for your friend would be to take the 6 units/part time job option, but do what she can to earn enough to pay her own rent/food/other bills. I think the requirement for filing as an independent is that you supply >50% of your own income. It won't kick in right away, but for next school year this would end up getting her a lot more money from the state/federal governments. For me it was enough to cover my school, food, rent, gas, car payment, and still have a little left over. (I don't know if this is still possible, and I know it doesn't work for graduate school, or if it applies to every state. It might be an option worth pursuing though) |
Why are there so many stock exchanges in the world? | Stock exchanges have been undergoing a period of consolidation for the past hundred years for the exact reasons you mentioned. The existence of digital trading, harmonized laws and regulations, and fewer relevant currencies have made it more practical for mergers and acquisitions between exchanges. Stock exchanges are most often times private companies that compete with other exchanges, so that also promotes the existence of many exchanges. |
What does it mean if “IPOs - normally are sold with an `underwriting discount` (a built in commission)” | When an IPO happens, the buyers pay some price (let's say $20 per share) and the seller (the company) receives a different price ($18.60). Who paid the commission? Well, the commission caused a spread between buyer and seller. It doesn't matter who technically pays the commission because it costs both parties. In an IPO, the company technically pays the commission, but they use buyers' money to do it and the buyer must pay more than he/she would if there was no commission. The same thing happens when you buy a home. Technically the seller pays both realtors' commissions but it came from money the buyer gave the seller and the commissions pushed up the price, so didn't the buyer pay the commission? They both did. The second paragraph suggests that if the investment bankers act as a simple broker, buying public securities instead of newly issued shares for their clients, then the commissions will be much lower. Obviously. I wonder if this is really the right interpretation, though, as no broker charges 4% to a large client for this service. I would need more context to be sure that's what's meant. The gyst is that IPOs generate a lot of money for the investment bankers who act as intermediaries. If you are participating in the transaction, that money is in some way coming out of your pocket, even if it doesn't show up as a "brokerage fee" on your statement. |
What should my finances look like at 18? | To buy a house, you need: At least 2 years tax returns (shows a steady income history; even if you're making 50k right now, you probably weren't when you were 16, and you might not be when you're 20; as they say, easy come, easy go). A 20% down payment. These days, that easily means writing a $50k check. You make $50k a year, great, but try this math: how long will it take you to save 100% of your annual salary? If you're saving 15% of your income (which puts you above many Americans), it'll still take 7 years. So no house for you for 7 years. While your attitude of "I've got the money, so why not" is certainly acceptable, the reality is that you don't have a lot of financial experience yet. There could easily be lean times ahead when you aren't making much (many people since 2008 have gone 18 months or more without any income at all). Save as much money as possible. Once you get $10k in a liquid savings account, speak to a CPA or an investment advisor at your local bank to set up tax deferred accounts such as an IRA. And don't wait to start investing; starting now versus waiting until you're 25 could mean a 100% difference in your net worth at any given time (that's not just a random number, either; an additional 7 years compounding time could literally mean another doubling of your worth). |
How to prevent myself from buying things I don't want | We all buy stuff from time to time that only satisfies us for a short time. I was able to locate a few expenses that fall under that category. I see a lot answers that focus on not getting these things. I'm going to tell you how to at least attempt to have your cake and eat it too. If you can get these things without paying for them, or by paying pennies on the dollar for them, you'll no longer want to buy them at full price. Begin by making a list of the items you can't stop thinking about. Go to your local library and look for relevant items that are on your list. If they are not yet available, request that the library purchase them, and reserve them for when the items come in. Yes, libraries are usually tax-supported, but to give back, if you can't afford to contribute to the Library immediately, you can still promote their fund-raising or book/media-drive efforts. If you don't mind buying things that may be second hand, thrift stores and garage or yard sales can have anything. The ones near you may have one or two items on your list of things you were looking for - for pennies on the dollar. Other items might be things you can share with friends. Borrow or swap things until you get bored of them. If you don't have a network of friends with shared interests, there may be a local freecycle or relevant meetup group you can join. The key here is to try to contribute more than you take (and you probably have things you don't need that you can start with trading), and don't keep careful score. The upshot is you'll not only save money but make friends while doing it. You can sometimes have your cake and eat it too. These recommendations can get you the short-term happiness you were looking for, without spending the money. And when the happiness is gone, you won't feel like you need to hang on to the item indefinitely - you can pass it on for others to enjoy. |
Do company-provided meals need to be claimed on my taxes? | It looks like the resource to deciding these is here Concerning the meals, the law seems a bit vague to me. You can exclude the value of meals you furnish to an employee from the employee's wages if they meet the following tests. This exclusion does not apply if you allow your employee to choose to receive additional pay instead of meals. If the whole point of google providing meals is to benefit Google as such people will not leave the googleplex when to obtain meals elsewhere causing increased productivity for Google, then this is covered as a business expense. (Even if it wasn't, Google would have to notify you that it was providing you a non-expensable benefit, i.e. compensation, by giving you a 1099 at the end of the year). Concerning the other benefits, the only way I could see those items not being taxable benefits is if one of the two applies. |
Homeowners: How can you protect yourself from a financial worst-case scenario? | If you have doubts about the long term prospects at your employer or jobs in your area, you may want to keep the option of moving to find a new job open while you save up for a larger down payment on a house. While there are insurance products out there that claim to cover your mortgage, they often have loopholes which make them difficult to collect on. Insurance companies are in business to make money and premiums are high when it's likely that people will try to collect. Splitting those premiums into your mortgage and your own self-insured unemployment fund (i.e. an emergency fund in a money market bank account) will usually be a better deal. As always, make sure you have term life insurance for a family and long term disability insurance just in case something really bad happens in the near term. Buying a home is a better financial decision when you know you'll be in an area for at least 5 years. Saving until you have 20% down on place that you can afford to pay off in 15 years (even if you take a 30 year loan) will be a lot cheaper and less stressful. |
An online casino owes me money and wants to pay with a wire transfer. Is this safe? | I don't know which online casino we are talking about, but I would venture to say that online casinos, in general, are probably not the most trustworthy of businesses. Caution is certainly in order. That having been said, this isn't an e-mail from a stranger that contacted you out of the blue; you obviously trust them enough to have deposited some money with them, and it seems that they now owe you money. Let's assume for the moment that they are legitimate, and that they sincerely want to pay out your winnings. If they are to pay you via a wire transfer, they would need your account number and routing number. (This information is on every check that you write.) In addition, if this is an international transfer, they would also need your bank's SWIFT number, or possibly an IBAN code. It does seem odd that they would pay you a partial payment with a check, but the rest has to be done via a wire transfer. You could request that they send the remainder as a check, but I would imagine that if they refuse to send you a check, there is nothing you can do about it. If you decide to go ahead with the wire transfer, you could open up a new savings account with your bank first. Then you could provide the account number for this new account, and if they are intending to clean out your account, there will be nothing in it. (For extra protection, when you set up the account, you could ask the bank if they can set up a savings account that will accept incoming wire deposits, but no outgoing electronic withdrawals.) Either way, when you deposit the check you have and you receive this wire transfer, don't spend this money for a while. Just let it sit in your account (you could transfer it to your main account, if you like), and wait a few weeks. That way, if there is a problem with these payments and your bank insists on the money back, you will not be in trouble. If they send you more than they owe you and ask for some of it back, it will be a clear indication of a scam. Don't send them any money back. After a few weeks, you should be in the clear. Good luck. By the way, online gambling is a terrible idea. The fact that you don't trust the casino to pay out should tell you a lot about this industry. After you receive these winnings (or even if you don't), the best advice I can give you is to stop gambling. |
HELOC vs. Parental Student Loans vs. Second Mortgage? | I'd like to propose a 4th option: Let your kid(s) take out their own student loans, and then you can make payments directly to help them pay them down. Some advantages to this method: Note the many similarities to the HELOC, which would probably be my second choice. |
What to do with an expensive, upside-down car loan? | You could do a voluntary repossession. While a repossession never looks good on your credit a voluntary repossession is slightly better. A good friend of mine had a situation like this about 11 years ago. She was in an accident didn't have replacement coverage insurance and was left with a large chunk of debt on a wrecked vehicle that she then rolled into a new car. In the end it came down to the simple fact that she could not afford a car loan on a vehicle that never was worth as much as she owed. Since the car was worth less than the loan she really couldn't sell it to fix the problem. She called and arranged a voluntary repossession. She stopped making payments, and parked the car till they came and picked it up. (Took about 4 months and 20 phone calls from her for them to come get it.) In the mean time, I purchased her a much older used but decent car for a couple thousand and she paid me back over the next year. The total she paid me back was less than the money she would have paid in the 4 months it took them to come get the car. In fact by the time they picked up the car she had paid back over half on the car I bought her. Yes the repossession did stay on her credit for seven years but during that time she was approved for a mortgage, cellphone plans, and credit cards etc. Therefore I don't know that it did that much damage to her credit. When her car was sold at auction by the repo company it sold for much less than the loan amount. Technically she was on the hook for the remaining amount. The outstanding balance on the loan was then sold several times to several different collection agencies. Over the years since then she has gotten letters every now and then demanding she pay the amount off, she ignores these. Most of these letters even included very favorable terms (full forgiveness for 20% of the amount) At this point the statute time has run out on the debt so there is no recourse for anyone to collect from her. The statute time limit varies from state to state. Some states it is as long as 10 years in others it is as short as 3 years. What this means is that counting from the date of the repossession, incurrance of debt, last payment, or agreement to pay whichever is later if the statute period has elapsed and the lender/collector has not filed a suit against you by the end of the period then they have effectively abandoned the debt and cannot collect. Find out what that period of time is in your state. If you can avoid the collection agencies till that period runs out you are scott free. You just have to make sure that you do not ever send them any money, or agree to pay them anything as this resets the calendar. If you do not want to wait for the calendar to run out if you wait long enough you will probably be offered favorable terms to pay only a fraction of the remaining amount, you just have to wait it out. Note, I normally would not endorse anyone not paying off their debts. However sometimes it is necessary and it is for this type of situation that we have things like this and bankruptcy. |
Can I apply prior years' capital losses against my employee stock option exercise? | As I recall, the gain for ISOs is considered ordinary income, and capital losses can only negate up to $3000 of this each year. If you exercised and held the stock, you have ordinary income to the exercise price, and cap gain above that, if you hold the stock for two years. EDIT - as noted below, this answer works for USians who found this question, but not for the OP who is Canadian, or at least asked a question at it relates to Canada's tax code. |
Can I lose more on Forex than I deposit? | It's the same as with equities. If you're just buying foreign currencies to hold, you can't lose more than you invest. But if you're buying derivatives (e.g. forward contracts or spread bets), or borrowing to buy on margin, you can certainly lose more than you invest. |
Net loss not distributed by mutual funds to their shareholders? | When you invest (say $1000) in (say 100 shares) of a mutual fund at $10 per share, and the price of the shares changes, you do not have a capital gain or loss, and you do not have to declare anything to the IRS or make any entry on any line on Form 1040 or tell anyone else about it either. You can brag about it at parties if the share price has gone up, or weep bitter tears into your cocktail if the price has gone down, but the IRS not only does not care, but it will not let you deduct the paper loss or pay taxes on the paper gain. What you put down on Form 1040 Schedules B and D is precisely what the mutual fund will tell you on Form 1099-DIV (and Form 1099-B), no more, no less. If you did not report any of these amounts on your previous tax returns, you need to file amended tax returns, both Federal as well as State, A stock mutual fund invests in stocks and the fund manager may buy and sell some stocks during the course of the year. If he makes a profit, that money will be distributed to the share holders of the mutual fund. That money can be re-invested in more shares of the same mutual fund or taken as cash (and possibly invested in some other fund). This capital gain distribution is reported to you on Form 1099-DIV and you have to report sit on your tax return even if you re-invested in more share of the same mutual fund, and the amount of the distribution is taxable income to you. Similarly, if the stocks owned by the mutual fund pay dividends, those will be passed on to you as a dividend distribution and all the above still applies. You can choose to reinvest, etc, the amount will be reported to you on Form 1099-DIV, and you need to report it to the IRS and include it in your taxable income. If the mutual fund manager loses money in the buying and selling he will not tell you that he lost money but it will be visible as a reduction in the price of the shares. The loss will not be reported to you on Form 1099-DIV and you cannot do anything about it. Especially important, you cannot declare to the IRS that you have a loss and you cannot deduct the loss on your income tax returns that year. When you finally sell your shares in the mutual fund, you will have a gain or loss that you can pay taxes on or deduct. Say the mutual fund paid a dividend of $33 one year and you re-invested the money into the mutual fund, buying 3 shares at the then cost of $11 per share. You declare the $33 on your tax return that year and pay taxes on it. Two years later, you sell all 103 shares that you own for $10.50 per share. Your total investment was $1000 + $33 = $1033. You get $1081.50 from the fund, and you will owe taxes on $1081.50 - $1033 = $48.50. You have a profit of $50 on the 100 shares originally bought and a loss of $1.50 on the 3 shares bought for $11: the net result is a gain of $48.50. You do not pay taxes on $81.50 as the profit from your original $1000 investment; you pay taxes only on $48.50 (remember that you already paid taxes on the $33). The mutual fund will report on Form 1099-B that you sold 103 shares for $1081.50 and that you bought the 103 shares for an average price of $1033/103 = $10.029 per share. The difference is taxable income to you. If you sell the 103 shares for $9 per share (say), then you get $927 out of an investment of $1033 for a capital loss of $106. This will be reported to you on Form 1099-B and you will enter the amounts on Schedule D of Form 1040 as a capital loss. What you actually pay taxes on is the net capital gain, if any, after combining all your capital gains and losses for the year. If the net is a loss, you can deduct up to $3000 in a year, and carry the rest forward to later years to offset capital gains in later years. But, your unrealized capital gains or losses (those that occur because the mutual fund share price goes up and down like a yoyo while you grin or grit your teeth and hang on to your shares) are not reported or deducted or taxed anywhere. It is more complicated when you don't sell all the shares you own in the mutual fund or if you sell shares within one year of buying them, but let's stick to simple cases. |
How do I evaluate reasonability of home improvement projects? | If you're looking for some formula, I don't think one exists. People talk about this all the time and give conflicting advice. If there was a proven-accurate formula, they wouldn't be debating it. There are basically 3 reasons to do a home improvement project: (a) Correct a problem so that you prevent on-going damage to your home. For example, have a leaking roof patched or replaced, or exterminate termites. Such a job is worthwhile if the cost of fixing the problem is less than the cost of future damage. In the case of my termite and leaking roof examples, this is almost always worth doing. Lesser maintenance problems might be more debatable. Similarly, some improvements may reduce expenses. Like replacing an old furnace with a newer model may cut your heating bills. Here the question is: how long does it take to repay the investment, compared to other things you might invest your money in. Just to make up numbers: Suppose you find that a new furnace will save you $500 per year. If the new furnace costs $2000, then it will take 4 years to pay for itself. I'd consider that a good investment. If that same $2000 furnace will only cut your heating bills by $100 per year, then it will take 20 years to pay for itself. You'd probably be better off putting the $2000 into the stock market and using the gains to help pay your heating bill. (b) Increase the resale value of your home. If you are paying someone else to do the work, the harsh reality here is: Almost no job will increase the resale value by more than the cost of getting the job done. I've seen many articles over the years citing studies on this. I think most conclude that kitchen remodeling comes closet to paying for itself, and bathrooms come next. New windows are also up there. I don't have studies to prove this, but my guesses would be: Replacing something that is basically nice with a different style will rarely pay for itself. Like, replacing oak cabinets with cherry cabinets. Replacing something that is in terrible shape with something decent is more likely to pay back than replacing something decent with something beautiful. Like if you have an old iron bathtub that's rusting and falling apart, replacing it may pay off. If you have a 5-year-old bathtub that's in good shape but is not premium, top of the line, replacing it with a premium bathtub will probably do very little for resale value. If you can do a lot of the work yourself, the story changes. Many home improvement jobs don't require a lot of materials, but do require a lot of work. If you do the labor, you can often get the job done very cheaply, and it's likely that the increase in resale value will be more than what you spend. For example, most of my house has hardwood floors. Lots of people like pretty hardwood floors. I just restained the floors in two rooms. It cost me, I don't know, maybe $20 or $30 for stain and some brushes. I'm sure if I tried to sell the house tomorrow I'd get my twenty bucks back in higher sale value. Realtors often advise sellers to paint. Again, if you do it yourself, the cost of paint may be a hundred dollars, and it can increase the sale price of the house by thousands. Of course if you do the work yourself, you have to consider the value of your time. (c) To make your home more pleasant to live in. This is totally subjective. You have to make the decision on the same basis that you decide whether anything that is not essential to survival is worth buying. To some people, a bottle of fancy imported wine is worth thousands, even millions, of dollars. Others can't tell the difference between a $10,000 wine and a $15 wine. The thing to ask yourself is, How important is this home improvement to me, compared to other things I could do with the money? Like, suppose you're considering spending $20,000 remodeling your kitchen. What else could you do with $20,000? You could buy a car, go on an elaborate vacation, eat out several times a week for years, retire a little earlier, etc. No one can tell you how much something is worth to you. Any given home improvement may involve a combination of these factors. Like say you're considering that $20,000 kitchen remodeling. Say you somehow find out that this will increase the resale value by $15,000. If the only reason you were considering it was to increase resale value, then it's not worth it -- you'd lose $5,000. But if you also want the nicer kitchen, then it is fair to say, Okay, it will cost me $20,000, but ultimately I'll get $15,000 of that back. So in the long run it will only cost me $5,000. Is having a nicer kitchen worth $5,000 to me? Note, by the way, that resale value only matters if and when you sell the house. If you expect to stay in this house for 20 years, any improvements done are VERY long-term investments. If you live in it until you die, the resale value may matter to your heirs. |
Trying to figure out my student loans | The 5% to 6.5% loan rates are a bit high. You'll probably want to pay those off first, and make it one of your priorities as soon as you have a 6-month savings fund. This should probably take precedence over savings for retirement, unless you're giving up a 401(k) match. Pay extra on the highest-interest loan until it's all paid off, then switch to the next one down, and accelerate the payoff as much as you can. If you're looking at a loan at 6% and a payoff date in 8 years or so (2020), am extra dollar paid now will save you ~$0.60. Not a bad return in general, and an excellent return for something that's zero-risk. The other loans, at 2-3%, are different. An extra dollar paid now on a 2% loan will save you $0.17 over 8 years. That's a pretty mediocre return. If you have a good, stable job and good job prospects, and a decent family support network, and few commitments like children and mortgages, and a low cost of living... generally, the things that help you have a high tolerance for risk... then you should consider investing your money in the stock market instead of paying off these loans any earlier than you need to. (Broad index funds and the like, not individual stocks). |
How does my broker (optionsXpress) calculate probabilities that the stock will hit a certain price? | Their algorithm may be different (and proprietary), but how I would to it is to assume that daily changes in the stock are distributed normally (meaning the probability distribution is a "bell curve" - the green area in your chart). I would then calculate the average and standard deviation (volatility) of historical returns to determine the center and width of the bell curve (calibrating it to expected returns and implied volaility based on option prices), then use standard formulas for lognormal distributions to calculate the probability of the price exceeding the strike price. So there are many assumptions involved, and in the end it's just a probability, so there's no way to know if it's right or wrong - either the stock will cross the strike or it won't. |
Why do people buy new cars they can not afford? | I would answer your question very simply: marketing works. "If you don't have a new F-150, you are not a real man." for men, and "If you don't have a new Honda Pilot your kids are in danger." for woman. One observation that reinforces this are the amount of new(er) Buicks on the road. Five years ago, they were pretty rare, now there are many. Their marketing strategy of "We don't suck so much anymore", seems to have worked. I don't get it. Last year, Consumer Reports reported that 84.5% of new cars are financed with an average payment of $457 over 65 months. I like your analysis, but lets say instead of following this path, Brad and Jenn, put $250 a month away in a cookie jar (to cover repairs and car replacement), and $664 (457*2-250) in a mutual fund. After doing this for 30 years, they will have 1.5 million. Driving a new car is precluding many from being wealthy. It is hard to jump aboard the "income inequality" bandwagon when you see with brand new iphones and cars. |
Can paying down a mortgage be considered an “investment”? | From what I've read, paying down your mortgage -- above and beyond what you'd normally pay -- is indeed an investment but a very poor form of investment. In other words, you could take that extra money you'd apply towards your mortgage and put it in something that has a much higher rate of return than a house. As an extreme example, consider: if I took $6k extra I would have paid toward my mortgage in a single year, and bought a nice performing stock, I could see returns of 2x or 3x. Now, that implies I know which stock to pick, etcetera.. I found a "mortgage or investment" calculator which could be of use as well: http://www.planningtips.com/cgi-bin/prepay_v_invest.pl (scroll to bottom to see the summary and whether or not prepay or invest wins for the numbers you plugged in) |
Should I cancel an existing credit card so I can open another that has rewards? | Hits to your credit rating for canceling one of the newer cards will be a small hit for a few months. You do have some options. I also believe that a person with good credit should have multiple cards: I like having a cash back card for the majority of our transactions. Unfortunately that card isn't accepted everywhere, so I have two other cards with broad market coverage to make sure we always have an option if the vendor doesn't take the main card. Also having multiple cards makes sure that if there is an issue with one card you are never caught without a card. One time the main card was rejected by a gas station because my wife just used the same account to buy gas across town. When we got home their was a fraud alert message on our phone. |
Where can I find recent information about which major shareholders changed their positions in a given stock? | For the united States forms must be submitted electronically with the Securities and Exchange Commission , they also must be posted to company websites. |
If I have some old gold jewellery, is it worth it to sell it for its melt value? | Get your jewelery appraised. (Don't let whoever does the appraisal be the same person whom you would sell it to.) Logically jewelery must be worthy more than the raw gold that makes it up because somebody took the time to design patterns and do specialty craft to the metal. |
What is the best way to learn investing techniques? | All the things you suggest are good, but I think like everything else the key is practice. Study some topics, then try them out. There are many many sites out there that have free or cheap virtual trading. |
How risky is it to keep my emergency fund in stocks? | I know this is heresy but if you have funds for significantly more than 6 months of expenses (let's say 12 months), how risky would it be to put it all into stock index funds? Quite risky as if you do need to dip into it, how fast could you get the cash? Also, do you realize the tax implications when you do sell the shares should you have an emergency? In the worst-case scenario, let's say you have a financial emergency at the same time the stock market crashes and loses half its value. You could still liquidate the rest and have sufficient funds for 6 months. Am I underestimating the risks of this strategy? That's not worst case scenario though. Worst case scenario would be another 9/11 where the markets are closed for nearly a week and you need the money but can't get the funds converted to cash in the bank that you can use. This is in addition to the potential wait for a settlement in the case of using ETFs if you choose to go that way. In the case of money market funds, CDs and other near cash equivalents these can be accessed relatively easily which is part of the point. A staggered approach where some cash is kept in house, some in accounts that can easily accessed and some in other investments may make sense though the breakdown would differ depending on how much risk people are willing to take. If it truly is an emergency fund then the odds of needing it should be very slim, so why live with near zero return on that money? Something to consider is what is called an emergency here? For some people a sudden $1,000 bill to fix their car that just broke down is an emergency. For others, there could be emergency trips to visit family that may have gotten into accidents or gotten a diagnosis that they may pass away soon. Consider what do you want to call an emergency here as chances are you may not be considering all that people would think is an emergency. There is the question of what other sources of money do you have to cover should issues arise. |
How can I deal with a spouse who compulsively spends? | Based on the conversations in the comments, I believe a pragmatic solution would be the best immediate course of action, while still working on the long term addiction issues. The first step is to get your husband to agree to give you all of his credit cards and let you manage the money for a set period of time, say 3 months, to see how it goes. (In my experience people are more likely to agree to being uncomfortable for a finite period of time, rather than indefinitely.) Step 2 is to provide him a means for making purchases on his own, but with a limited budget. Here are some examples: Perhaps a combination of the above options would work best. Another thing to consider is to set up alerts with your bank so that you are notified of certain purchases (or all) that are made by your husband. This varies by bank, but nowadays most will allow you to receive text/email immediately when the purchase happens, and can be set to certain amounts or categories. There is a definite psychological difference between, "If I buy this, my spouse will find out at the end of the month and berate me." and "If I buy this, my spouse is going to run in here in 30 seconds and berate me." The latter might actually be a deterrent on its own, and you may likely have the opportunity to undo the purchase if you wish to. As a side note, it's important to realize that the above suggestions are still allowing for some limited amount of enabling and temptation to occur. If the addiction is such that it is hazardous to one's health (for example drugs or alcohol addiction), then I don't believe this would be the best course of action. These suggestions are based on my impression that the biggest concern at the moment is financial, and I believe these ideas help to mitigate that. Good luck. |
Alternative means of salary for my employees | There are several local currency initiatives in the US list here. Most are attempts to normalize a value as a living wage, or encourage local consumption networks. If you are in the catchment region of one of these, see if you can get a grant or loan to get started (if you are willing to buy into the philosophy of the group such as a $10 minimum wage) m |
Can one use Google Finance to backtest (i.e. simulate trades in the past)? | Yes, add the stocks/mutual funds that you want and then you would just need to add all the transactions that you theoretically would have made. Performing the look up on the price at each date that you would have sold or bought is quite tedious as well as adding each transaction. |
Should I buy a house because Mortgage rates are low | Reasons for no: In your first sentence you say something interesting: rates low - prices high. Actually those 2 are reversely correlated, imagine if rates would be 5% higher-very few people could buy at current prices so prices would drop. Also you need to keep in mind the rate of inflation that was much higher during some periods in the US history(for example over 10% in the 1980) so you can not make comparisons just based on the nominal interest rate. Putting all your eggs in one basket. If you think real estate is a good investment buy some REITs for 10k, do not spend 20% of your future income for 20 years. Maintenance - people who rent usually underestimate this or do not even count it when making rent vs mortgage comparisons. Reasons for yes: Lifestyle decision - you don't want to be kicked out of your house, you want to remodel... Speculation - I would recommend against this strongly, but housing prices go up and down, if they will go up you can make a lot of money. To answer one of questions directly: 1. My guess is that FED will try to keep rates well bellow 10% (even much lower, since government can not service debts if interest rates go much higher), but nobody can say if they will succeed. |
Why do companies have a fiscal year different from the calendar year? | I know some companies or entities have large incomes or expenses at certain times of the year, and like to close their books after these large events. For example where I work, the primary seasonal income comes after summer, so our fiscal year ends at the last days of October. This gives the accountants enough time to collect all the funds, reconcile whatever they have to, pay off whatever they have to and get working on a budget for the next year sooner than a calendar year would. There also might be tax reasons. To get all of your income at the beginning of your fiscal year, even if that is in the middle of the calendar year would allow a company to plan large deductible investments with more certainty. I am not to sure of the tax reasons. |
Iraqi Dinars. Bad Investment, or Worst Investment? | Currency, like gold and other commodities, isn't really much of an investment at all. It doesn't actually generate any return. Its value might fluctuate at a different rate than that of the US dollar or Euro, but that's about it. It might have a place as a very small slice of a basket of global currencies, but most US / European households don't actually need that sort of basket; it's really more of a risk-management strategy than an investment strategy and it doesn't really reflect the risks faced by an ordinary family in the US (or Europe or similar). Investments shouldn't generally be particularly "exciting". Generally, "exciting" opportunities mean that you're speculating on the market, not really investing in it. If you have a few thousand dollars you don't need and don't mind losing, you can make some good money speculating some of the time, but you can also just lose it all too. (Maybe there's a little room for excitement if you find amazing deals on ordinary investments at the very bottom of a stock market crash when decent, solid companies are on sale much cheaper than they ordinarily are.) |
CFD market makers: How is the price coupled to the underlying security? | CFD providers typically offer CFDs to investors using either the direct market access (DMA) model or the market maker (MM) model. Direct Market Access The DMA model gives you access to trade the Underlying instrument on the relevant Exchange from which the CFD is then derived. All CFD Transactions under the DMA model have corresponding trades in the Underlying instrument. Under the DMA model, providers typically charge their clients Commission based on the notional contract value of the CFD. Market Maker The MM model uses the price of the Underlying instrument to derive the price of the CFD that is offered. Trading under the MM model does not necessarily mean that your CFD will be reflected by a corresponding trade in the Underlying instrument. Under the MM model each CFD Transaction creates a direct financial exposure for the provider, which may or may not be hedged in the Underlying instrument. Where the financial exposure is not hedged, the market risk may increase for the market maker. The MM model enables the provider to offer CFDs against synthetic assets, even if there is little Liquidity in the Underlying instrument, which can result in a wider range of products on offer than with the DMA model. Volatility and Illiquidity in the Underlying instrument can affect the pricing of MM CFDs. The MM model can charge its clients Commission based on the notional contract value or it can incorporate costs and fees in the dealing Spread, which represents the difference in price at which the issuer is prepared to Buy and Sell the CFD. What Do I use and why? I have traded with both DMA and MM models and prefer the MM. The big advantage with MM is that they will provide a market even when the underlying is very illiquid and only might have a few trades each day. Regarding the spread of the MM to the spread of the underlying, I have found the MM to be practically in line with the underlying spread about 95% of the time. The other 5% it may have been slightly wider than the spread of the underlying by usually 1c or 2c. Most MMs aim to give you the best spread they can because they want to keep your business. If they gave too wide a spread (compared to the underlying) it wouldn't be long before they had no customers. |
Determining amount of inflation between two dates | You want percent change between the two numbers listed under whatever heading you'll be using in the CPI. As an example, you'd probably want to use the All Items heading listed here on Page 4 of the August 2016 CPI tables as 240.853, and from August 2015 was listed as 238.316. Percent change is So 1.06% inflation from August 2015 to August 2016. |
How can the ROE on a stock be more than 100%? | An operating margin will not compare with ROE. If a company has even a small margin on a large turnover and has a comparative lower shareholder equity, it ROE will be much higher. One ratio alone can not analyse a company. You need a full set of ratios and figures. |
How can I stop wasting food? | Make a menu of 15 (or more) things you like to eat. Write a grocery list for what it takes. Divide that list into perishable and non-perishable. Put those items into a calendar and try to stick to it. Depending on the amount of storage space you have, once a week fulfill your perishable list. Use coupons and shop the sales to keep your prices down. On your way home, stop at the grocery store and buy only the perishables you will need that night for cooking. I personally chose recipes that didn't always need fresh stuff (like canned tomatoes being good enough.) You spend more on the nightly stuff, but you make up some savings with the long term shopping. Just count on going to the store for 10 minutes a night a part of your cooking routine. I used to just look at the wall, but with an app like Evernote this would be pretty easy. |
Buying shares in a company after you quit | Insider trading is when you buy or sell an investment based on material, non-public information that gives you an unfair advantage over the rest of traders in that market. Working for a company is one way that you might have such information, but whether it is insider trading is not contingent on you working there. You could use that information a long time after leaving the company. You don't even need to have worked there. If a friend/relative gave you non-public information because THEY work there, it is still insider trading. |
Can I use a different HSA than PayFlex that came with aetna? | There are some cases I'm aware of where a large employer will offer alternative HSA vendors, but this is not the norm as far as I'm aware, and would only be an option if your employer has already negotiated for this with your insurer. It's likely that this specific vendor is built in for the particular HSA product your employer has elected from Aetna. If this really ticks you off on principle, you can check if they offer a stable value fund. If so, you can essentially treat this money as part of your emergency fund, and somewhat reduce your own emergency fund and invest that money however you see fit. |
How can rebuilding a city/large area be considered an economic boost? | It will have some positives, and some negatives. The hardest hit will be the insurance agencies, as well as banks. Manufacturing will also take a short term hit. When insurance payments come out, then there will be a boom in construction, consumer goods, industrial goods, etc. Companies will upgrade their equipment whereas before they might have let it run for another 10-20 years or longer. After all, if you are going to buy something, you aren't going to get it used, you'll get something more modern. Of course, Japan already was one of the most modern countries in the world, so they likely won't see as many gains as other countries, but this would hold more true in a less technologically advanced society. Long term, 10-20 years down the line, when everything is rebuilt, it might have a slight positive increase in productivity, but this will be somewhat offset because Japan already is such a technological powerhouse, and on the cutting edge in many technologies. But I agree, it's quite foolish to say that it'll improve the economy of Japan, some clarification should be done to clear that one up... |
How can I generate $250/month every month from $4000 that I have? | If you are looking to begin living off the money now, then Dheer's answer is correct - it is not possible. However, if you are looking to grow that money (and potentially additional money added at later dates), then you could make this work. 250 a month corresponds to 3000 per year. A first approximation is that you will need a diversified portfolio of 20-25x that amount (60k-75k) to get the required return. This approximation is based on the rule of thumb for how much life insurance to buy. Therefore you need to determine how to grow the 4k you currently have into 60-75k. These numbers, however, are not adjusted for inflation. In the US I would like put the long term inflation adjust diversified market return at 4% per year (your money doubles about every 18 years). So your best approach if you have time is a diversified portfolio with rebalancing and adding additional money each year. |
I cosigned for a friend who is not paying the payment | Sue the friend. When you win, garnish his wages. It does not have to be by so much that it makes him quit his job, but get 75.00 per pay period to come to you. This may require the use of a private investigator but, if you want to make this "friend" face consequences, this is your only option. Otherwise, let it go and keep paying his bill. |
What is the different between one company's two OTCMKTS symbols? | I have not looked in details but apparently the company has (at least) a dual listing in Hong Kong (its main listing, ticker 700) and in the US (ticker TCTZF). It also has an ADR (TCEHY), the underlying of which is the HK line. The two US listings essentially trade at the same price and will provide very similar returns but a major difference is that TCTZF pays dividends in HKD whereas TCEHY pays its dividends in USD. The latter may be more convenient depending on the account you use to trade the stock. The ADR line is also more liquid. |
Are non-residents or foreigners permitted to buy or own shares of UK companies? | Yes, However if you live in the USA a lot of companies will refuse to sent you any report and will not let you take part in “right issues” as they don’t wish to come under USA investment law. |
How can small children contribute to the “family economy”? | If you're trying to teach them the value of money and quantifying the dollar difference between prices, one very effective way to do this is by using bar charts. For instance, if a toy is $5, and movie they really want to see is $10, and a vacation they want to go on costs $2000, it can be a useful tool to help explain how the relative costs work. |
As an investing novice, what to do with my money? | I'd keep the risk inside the well-funded retirement accounts. Outside those accounts, I'd save to have a proper emergency fund, not based on today's expenses, but on expenses post house. The rest, I'd save toward the downpayment. 20% down, with a reserve for the spending that comes with a home purchase. It's my opinion that 3-5 years isn't enough to put this money at risk. |
Should I sell a 2nd home, or rent it out? | Option A - you sell the house and then use the money to pay off a portion of your second mortgage. The return on that investment is 5.5% a year, or $1925 net. Option B - you rent it out, that will bring you $5220 (435 x 12), more than 2.5 times option A. That's not counting any money going towards the principal of the loan. Given that you'll be using a property management company, you can be fairly certain that there won't be any unexpected expenses (credit check, security deposit should take care of that) Option C - you invest the money somewhere else. You'll have to get 15% return in order to beat option B. I don't think that's sustainable. You should talk to a CPA about the tax implications, but I'm fairly certain that you'll do better tax wise to rent it out, since you can use depreciation to lower your tax bill. Finally, where do you think real estate prices will be in 4 years? If you think they'll increase that's another reason to hold onto the property and rent it. Finally finally, if you plan to rent it out long term (over 4 years), it will be a good idea to refinance and lock the current interest rate. |
2 houses 450k each or one 800k? | Because it appears you have in the neighborhood of 30 years remianing on your mortgage for the first house, If you can sell it you will likely be better off in the end. While renting has the potential for greater income it is a business. And like any business there are risks, expenses, and work required to make it successful. There will be times where you can not find a renter immediately and will be responsible for making both payments, maintaining both houses, the insurance(which for an owner is higher for a rental property than a domicile), and paying the applicable taxes. You need to look at your best and worst case numbers. If your best case numbers leave you in the hole 300/month then that is not the sort of business you want to run. Your investment should build your savings and retirement funds not deplete them. Further you are more likely to fall between your best and worst case scenerios. So you need to be able to thrive at that level. If something in the middle is going to take you into bankruptcy then sell the property. If you are not willing to put the time into your business that it will need (My rental home took about 10-30 hours a month despite renters being responsible for basic upkeep and maintenance. Finally your plan B: A home with 800k value will have higher costs and higer expenses and maintenance. If the 800k home is the home you and your family needs then by all means go for it. But if it can do just as well in the 450k Home then go there. Pay the home off early by making the payments you would be making for the 800k home. In this way you pay less in total cost of the home and set your self up for the greatest chance of success. Once that home is paid off the break even point for renting goes way down as well. So the rental option could be in the future. I would just aviod it now if possible. |
Which Roth IRA is the best for a 21 year old who has about $1500? | Your question seems like you don't understand what a Roth IRA is. A Roth IRA isn't an investment, per se. It is just a type of account that receives special tax treatment. Just like a checking and savings account are different at a bank, a ROTH IRA account is just flagged as such by a brokerage. It isn't an investment type, and there aren't really different ROTH IRA accounts. You can invest in just about anything inside that account so that is what you need to evaluate. One Roth IRA account is as good as any other.As to what to invest your money in inside a ROTH, that is a huge question and off-topic per the rules against specific investing advice. |
How do dividend reinvestment purchases work? | The Brokerage firm will purchase shares for the dividend paid in a omnibus account for the security of the issuer and then they will distribute fractional shares among all their clients that chose Div Reinvest. They will only have to buy 1 extra share to account for the fractional portion of what they allocate. The structure of the market does not permit trading of fractional shares. There is generally not any impact to the market place for Div Reinvest with the exception of certain securities that pay large dividends that are not liquid. sometimes this occurs in preferred securities where a large amount of Div reinvestment could create a large market order that has market impact. Most brokers place market orders for the opening on the day following the payment of the dividend. When you sell the fractional portion same process as full shares are sold into the market and the fractional if traded between you and the brokers omnibus account. if it creates a full share for the broker (omnibus has .6 shares and you sell him .5 they would likely flip that out to the street with the full share portion of your order. This would not have impact to outstanding shares and all cost are operational and with the broker handling the Div reinvestment service. |
Where can one find intraday prices for mutual funds? | This idea does not make sense for most mutual funds. The net asset value, or NAV, is the current market value of a fund's holdings, minus the fund's liabilities, that is usually expressed as a per-share amount. For most funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. http://en.wikipedia.org/wiki/Mutual_fund I am not certain, but I believe that OppenheimerFunds does not report intraday prices. I would call them up and ask. |
does one have to keep stock until the dividend payment date to get the dividend? (Record Date vs Payment Date) [duplicate] | You only have to hold the shares at the opening of the ex-dividend date to get the dividends. So you can actually sell the shares on ex-dividend date and still get the dividends. Ex-dividend date occurs before the record date and payment date, so you will get the dividend even if you sold before the record date. |
Which first time Stocks and Shares ISA for UK, frequent trader UK markets? | I wouldn't only consider the entry/exit cost per trade. That's a good comparison page by the way. I would also consider the following. This depends if you are planning on using your online broker to provide all the information for you to trade. I have lower expectations of my online broker, not meant to be harsh on the online brokers, but I expect brokers to assist me in buying/selling, not in selecting. Edit: to add to the answer following a comment. Here are three pieces of software to assist in stock selection |
Tax implications of diversification | If so, are there ways to reduce the amount of taxes owed? Given that it's currently December, I suppose I could sell half of what I want now, and the other half in January and it would split the tax burden over 2 years instead, but beyond that, are there any strategies for tax reduction in this scenario? One possibility is to also sell stocks that have gone down since you bought them. Of course, you would only do this if you have changed your mind about the stock's prospects since you bought it -- that is, it has gone down and you no longer think it will go up enough to be worth holding it. When you sell stocks, any losses you take can offset any gains, so if you sell one stock for a gain of $10,000 and another for a loss of $5,000, you will only be taxed on your net gain of $5,000. Even if you think your down stock could go back up, you could sell it to realize the loss, and then buy it back later at the lower price (as long as you're not worried it will go up in the meantime). However, you need to wait at least 30 days before rebuying the stock to avoid wash sale rules. This practice is known as tax loss harvesting. |
High-risk investing is better for the young? Why? | The reason that you are advised to take more risk while you are young is because the risk is often correlated to a short investment horizon. Young people have 40-50 years to let their savings grow if they get started early enough. If you need the money in 5-15 years (near the end of your earning years), there is much more risk of a dip that will not correct itself before you need the money than if you don't need the money for 25-40 years (someone whose career is on the rise). The main focus for the young should be growth. Hedging your investments with gold might be a good strategy for someone who is worried about the volatility of other investments, but I would imagine that gold will only reduce your returns compared to small-cap stocks, for example. If you are looking for more risk, you can leverage some of your money and buy call options to increase the gains with upward market moves. |
What risks are there acting as a broker between PayPal and electronic bank transfers? | There are several red flags here. can they get my bank account info in any way from me transferring money to them? Probably yes. Almost all bank transactions are auditable, and intentionally cause a money track. This track can be followed from both sides. If they can use your bank account as if they were you, that is a bit deeper than what you are asking, but yes they (and the polish cops) can find you through that transfer. I did look up the company and didn't find any scam or complaints concerning them. Not finding scams or complains is good, but what did you find? Did you find good reviews, the company website, its register, etc, etc? How far back does the website goes (try the wayback machine) Making a cardboard front company is very easy, and if they are into identity theft the company is under some guy in guam that never heard of poland or paypal. As @Andrew said above, it is probably a scam. I'd add that this scam leverages on the how easier is to get a PayPal refund compared to a regular bank transfer. It is almost impossible to get the money back on an international transaction. Usually reverting a bank transfer requires the agreement in writing of the receiver and of both banks. As for paypal, just a dispute from the other user: You are responsible for all Reversals, Chargebacks, fees, fines, penalties and other liability incurred by PayPal, a PayPal User, or a third party caused by your use of the Services and/or arising from your breach of this Agreement. You agree to reimburse PayPal, a User, or a third party for any and all such liability. (source) Also, you might be violating the TOS: Allow your use of the Service to present to PayPal a risk of non-compliance with PayPal’s anti-money laundering, counter terrorist financing and similar regulatory obligations (including, without limitation, where we cannot verify your identity or you fail to complete the steps to lift your sending, receiving or withdrawal limit in accordance with sections 3.3, 4.1 and 6.3 or where you expose PayPal to the risk of any regulatory fines by European, US or other authorities for processing your transactions); (emphasis mine, source) So even if the PayPal transfer is not disputed, how can you be sure you are not laundering money? Are you being paid well enough to assume that risk? |
Advice on strategy for when to sell | Consider trailing stop losses maybe 5% below your profit target, if you want a simplistic answer. |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | That "something" you are signing means you are liable for the mortgage payments - yes, all of them - if he can't or won't pay at any point. The limit on what the bank will lend him based on his salary is there for a reason - they don't expect him to be able to keep up repayments if they lend him more (or more precisely, there's a big risk that he won't). Don't forget that even if he swears up and down to you that he can afford them, interest rates can rise; this is a 25 or 30 year commitment you would be making. Interest rates are at a historic low and the only way from here is up; in my living memory rates have been 12% or even 15%. As a very rough rule of thumb, for every £100k borrowed, every additional 1% on the interest rates costs an additional £100 on your monthly payment. Also, the "Transitional Arrangement" is not without its own fees and the bank won't let him simply take you off the mortgage unless they are convinced he can keep up the repayments on his own, which they clearly aren't. Also thanks to @Kat for the additional good point that being on the hook for your friend's mortgage will prevent you from being able to get a mortgage yourself while the liability still exists, or at least severely limit your options. No matter how many times you protest "but I'm not paying any money for that!" - it won't help. Another point: there are various schemes available to help first time buyers. By signing up for this, you would exclude yourself from any of those schemes in the future. |
Why do new car loans, used car loans, and refinanced loans have different rates and terms? | There are normally three key factors that define different kinds of loans, these factors affect the risk that the lender takes on and so the interest rate. The interest rate on any loan is linked to market interest rates; the lender shouldn't be able to receive a higher rate of interest for lending the money at no risk, and the level of risk that the lender believes the borrower to have. The three features of a particular loan are: These reduce the risk of complete or total non-payment (default) of the principal or any missed interest payments. Taken in order: Amortising Here some of the monthly payment pays a proportion of the underlying principal of the loan. This reduces the amount outstanding and so reduces the capacity for default on the full principal as part of the principal has already been paid. Security In a secured loan there is an asset such as a car, house, boat, gold, shares etc. that has a value on resale that is held against the loan. The lender may repossess the security if the borrower defaults and recover their money that way. This also acts as a "stick" using the loss of property to convince the borrower that it is better to keep paying the interest. The future value of the security will be taken into account when deciding how much this reduces the interest rate. Guarantor A guarantor to a loan guarantees that the borrower will repay the loan and interest in full and, if the borrower does not fulfil that obligation, the lender is able to seek legal redress from the guarantor for the borrower's debts. Each of these reduce the risk of the loan as detailed and so reduce the interest rate. The interest rate, then, is made up of three parts; the market interest rate (m) plus the interest rate premium for the borrower's own credit worthiness (c) minus the value of the features of the loan that help to reduce risk (l). The interest rate of the loan (r) is categorised as: r = m + c - l. Credit ratings themselves are an inexact science and even when two lenders are looking at the same credit score for the same person they will give a different interest rate premium. This is mostly for business reasons, and the shape of their loan book, that are too tedious to go through here. All in all the different types of loan give flexibility at the cost of a different interest rate. If you don't want the chance of your car being repossessed you don't take a secured loan, if you have a family member who can help and doesn't mind taking on your risk take a guaranteed loan. |
How does giving to charity work? | If I donate $10,000 to charity then I can deduct that $10,000 from my income and not pay income taxes on it. So if I make $50,000 a year then I will only pay income taxes on $40,000 instead of $50,000 since I donated $10,000 to charity. This is what is meant when charity contributions are said to be tax deductible. Don't feel like you have to donate to charity. You owe no one anything. You do more for others by working (assuming you work in the private sector). If you know of someone personally that is in need of aid then you could give them some help directly. I find this more effective then blindly dumping money in a bureaucratic, inefficient charity. I also find there are very few people in need of charity. Personally, I think charity donations are a way for people to feel good about themselves. They rarely care if their donations are effective. |
Friend was brainwashed by MLM-/ponzi investment scam. What can I do? | I believe the only thing you haven't mentioned to him is the possibility that his activity is criminally fraudulent. I would sit him down, and say something substantially similar to the following: We've talked about your investment before, and I know you believe it's fine. I just want to make sure you understand that this is very likely fraudulent activity. I know you believe in it, but you've said you don't understand how or why it works. The problem with that is that if it is a fraud you can't protect yourself from criminal prosecution because you didn't understand what you were doing. The prosecutor will ask you if you asked others to give you or the organization money, and then they will convict you based on trying to defraud others. It doesn't matter whether you did it on purpose, or just because you believed the people you are investing in. So I very strongly advise you to understand exactly what the system is, and how it works, and then make sure with a lawyer that it's legal. If it is, then hey, you've learned something valuable. But if it's not, then you will save yourself a whole lot of trouble and anguish down the road if you step away before someone you attract to the investment decides to talk to their accountant or lawyer. A civil lawsuit may be bad, but if you're criminally prosecuted it will be so much worse. Now that I've said my piece, I won't talk to you about it anymore or bother you about it. I wish you luck, and hope that things work out fine. I wouldn't talk to the police or suggest that I'd do anything of that nature, without proof then there's no real way to start an investigation anyway, and unfortunately scams like this are incredibly hard to investigate, so the police often spend little to no time on them without a high level insider giving up evidence and associates. Chances are good nothing would happen to your friend - one day the organization will disappear and he won't recover any more money - but there's a distinct possibility that when that happens, the people below him will come for him, and he won't be able to look further up the chain for help. Perhaps the threat of illegal activity will be enough to prevent him from defrauding others, but if not I think at least you can let it go, and know that you've done everything for him that might work. |
Switching Roth IRA ( from American Funds to Vanguard) | You can have as many IRA accounts as you want (whether Roth or Traditional), so you can have a Roth IRA with American Funds and another Roth IRA with Vanguard if you like. One disadvantage of having too many IRA accounts with small balances in each is that most custodians (including Vanguard) charge an annual fee for maintaining IRA accounts with small balances but waive the fee if the balance is large. So it is best to keep your Roth IRA in just one or two funds with just one or two custodians until such time as investment returns plus additional contributions made over the years makes the balances large enough to diversify further. Remember also that you cannot contribute the maximum to each IRA; the sum total of all your IRA contributions (doesn't matter whether to Roth or to Traditional IRAs) for any year must satisfy the limit for that year. You can move money from one IRA of yours to another IRA (of the same type) of yours without any tax issues to worry about. Such movements (called rollovers or transfers) are not contributions and do not count towards the annual contribution limit. The easiest way to do move money from one IRA account to another IRA account is by a trustee-to-trustee transfer where the money goes directly from one custodian (American Funds in this case) to the other custodian (Vanguard in this case). The easiest way of accomplishing this is to call Vanguard or go online on their website, tell them that you are wanting to establish a Roth IRA with them, and that you want to fund it by transferring money held in a Roth IRA with American Funds. Give Vanguard the account number of your existing American Funds IRA, tell them how much you want to transfer over -- $1000 or $20,000 or the entire balance as the case may be -- and tell Vanguard to go get the money. In a few days' time, the money will appear in your new Vanguard Roth IRA and the American Funds Roth IRA will have a smaller balance, possibly a zero balance, or might even be closed if you told Vanguard to collect the entire balance. DO NOT approach American Funds and tell them that you want to transfer money to a new Roth IRA with Vanguard: they will bitch and moan and drag their heels about doing so because they are unhappy to lose your business, and will probably screw up the transfer. Talk to Vanguard only. They are eager to get their hands on your IRA money and will gladly take care of the whole thing for you at no charge to you. DO NOT cash in any stock shares, or mutual fund shares, or whatever is in your Roth IRA in preparation for "cashing out of the old account". There is a method where you take a "rollover distribution" from your American Funds Roth IRA and then deposit the money into your new Vanguard Roth IRA within 60 days, but I recommend most strongly against using this because too many people manage to screw it up. It is 60 days, not two months; the clock starts from the day American Funds cuts your check, not when you get the check, and it is stopped when the money gets deposited into your new account, not the day you mailed the check to Vanguard or the day that Vanguard received it, and so on. In short, DO NOT try this at home: stick to a trustee-to-trustee transfer and avoid the hassles. |
I cosigned for a friend who is not paying the payment | If the bank is calling your employer, the federal Fair Debt Collection Practices Act (FDCPA) limits where and when debt collectors can contact consumer debtors. In many cases, debt collectors that contact debtors at work are violating the FDCPA. http://www.nolo.com/legal-encyclopedia/a-debt-collector-calling-me-work-is-allowed.html |
What is today's price of 15 000 Euro given 15 years ago? | There's often a legal basis to answer this question. For instance, Austria (guessing from your profile) currently uses a 4% Statutory interest rate. You'll need to dig up not just the actual but also the historical rates. Note that you'll want the non-commercial interest rate - some countries differentiate between loans to businesses and loans to individuals. |
Which set of earnings is used to work out the P/E of a stock | @jlowin's answer has a very good discussion of the types of PE ratio so I will just answer a very specific question from within your question: And who makes these estimates? Is it the market commentators or the company saying "we'd expected to make this much"? Future earnings estimates are made by professional analysts and analytical teams in the market based on a number of factors. If these analysts are within an investment company the investment company will use a frequently updated value of this estimate as the basis for their PE ratio. Some of these numbers for large or liquid firms may essentially be generated every time they want to look at the PE ratio, possibly many times a day. In my experience they take little notice of what the company says they expect to make as those are numbers that the board wants the market to see. Instead analysts use a mixture of economic data and forecasting, surveys of sentiment towards the company and its industry, and various related current events to build up an ongoing model of the company's finances. How sophisticated the model is is dependent upon how big the analytics team is and how much time resource they can devote to the company. For bigger firms with good investor relations teams and high liquidity or small, fast growing firms this can be a huge undertaking as they can see large rewards in putting the extra work in. The At least one analytics team at a large investment bank that I worked closely with even went as far as sending analysts out onto the streets some days to "get a feeling for" some companies' and industries' growth potential. Each analytics team or analyst only seems to make public its estimates a few times a year in spite of their being calculated internally as an ongoing process. The reason why they do this is simple; this analysis is worth a lot to their trading teams, asset managers and paying clients than the PR of releasing the data. Although these projections are "good at time of release" their value diminishes as time goes on, particularly if the firm launches new initiatives etc.. This is why weighting analyst forecasts based on this time variable makes for a better average. Most private individual investors use an average or time weighted average (on time since release) of these analyst estimates as the basis for their forward PE. |
Do mutual fund companies deliberately “censor” their portfolios/funds? | Do mutual funds edit/censor underperforming investments to make their returns look better, and if so, is there any way one can figure out if they are doing it? No, that's not what the quote says. What the quote says is that the funds routinely drop investments that do not bring the expected return, which is true. That's their job, that is what is called "active management". Obviously, if you're measuring the fund by their success/failure to beat the market, to beat the market the funds must consistently select over-performers. No-one claims that they only select over-performers, but they select enough of them (or not...) for the average returns to be appealing (or not...) for the investors. |
View asset/holdings breakdown within fund | The full holdings will be listed in the annual report of the fund, obviously the holdings would only be completely accurate as of the date of the reporting. This is the most recent annual report for FMAGX. I got it from my Schwab research section under "All Fund Documents" but I'm sure you can find it other ways. When I use google to search for "fmagx annual report" this link was the first result. |
What is the difference between a bad/bounced check and insufficient funds? | There is no difference they are both insufficient in 1 form or another.Bad slang for any check the bank won't cash, for any reason, Ie. insf. unreadable amount, acct or routing number, the acct.has been closed, or you didn't write the check(fraud). Bounced is slang for bank returned check unpaid.I wrote a bad check but it didn't bounce.The check is still insufficient but the bank didn't return it. $500.00 is the felony threshold in okla. less than $500.00 is a misdemeanor. but insf. fees ranging from ($25.00 to $50.00 vendor returned check fee + amount of check) x (bank insf fees of $25 to $50)is an effective deterent. |
What are “trailing 12-month total returns”? | Total Return is the percent change in value (including andy dividends) of an instrument. The "trailing 12-month" means that your starting point is the value 12 months ago. So the formula is: where V is the value of the instrument on the reference date, V0 is the value of the instrument 12 months prior to the reference date, and D is the amount of dividends paid between the two dates. |
How are shares used, and what are they, physically? | Shares used to be paper documents, but these days they are more commonly held electronically instead, although this partly depends on what country you're in. But it doesn't make any significant practical difference. Regardless of their physical form, a share simply signifies that you own a certain proportion of a company, and are thus entitled to receive any dividends that may be paid to the shareholders. To sell your shares, you need a broker -- there are scores of online ones who will sell them for a modest fee. Your tax forms are entirely dependent on the jurisdiction(s) that tax you, and since you've not told us where you are, no one can answer that. |
Should I use a bank or a credit union for my savings account? | In practical terms, these days, a credit union IS a small "savings and loan" bank -- the kind of bank that used to exist before bankers started making money on everything but writing loans. They aren't always going to offer higher interest and/or cheaper loans than the bank-banks, but they're almost always going to be more pleasant to deal with since they consider the depositors and borrowers their stockholders, not just customers. There are minor legal differences (different insurance fund, for example), and you aren't necessarily eligible to open an account at a randomly-chosen credit union (depending on how they've defined the community they're serving), but they will rarely affect you as an account holder. The main downside of credit unions is that, like other small local banks, they will only have a few branches, usually within a limited geographic area. However, I've been using a credit union 200 miles away (and across two state lines on that route, one if I take a large detour) for decades now, and I've found that between bank-by-mail, bank-by-internet, ATM machines, and the "branch exchange" program (which lets you use branches of participating credit unions as if they were branches of your own) I really haven't felt a need to get to the branch. I did find that, due to network limitations of $50K/CU/day, drawing $200,000 worth of bank checks on a single day (when I purchased the house) required running around to four separate branch-exchange credit unions. But that's a weird situation where I was having trouble beating the actual numbers out of the real estate agents until a few days before the sale. And they may have relaxed those limitations since... though if I had to do it again, I'd consider taking a scenic drive to hit an actual branch of my own credit union. If you have the opportunity to join a credit union, I recommend doing so. Even if you don't wind up using it for your "main" accounts, they're likely to be people you want to talk to when you're shopping for a loan. |
Is it a bad idea to buy a motorcycle with a lien on it? | In the case of a vehicle with a lien, there is a specific place on the title to have a lien holder listed, and the holder of the lien will also hold the title until the lien is cleared. Usually this means you have to pay off the loan when you purchase the vehicle. If that loan is held by a bank, meet the seller at the bank and pay the loan directly with them and have them send the title directly to you when the loan is paid. This usually involves writing up a bill of sale to give to the bank when paying the loan. The only thing you're trying to avoid here is paying cash to the seller--who then keeps the cash without paying the lien holder--who then keeps the title and repossesses the motorcycle. Don't pay the seller if they don't have the title ready to sign over to you. |
Do I only have to pay income tax on capital gains? | On the revenue only. This amount of 10$ will be considered as interest and fully taxable. It will not be a capital gain. But why would you decide to declare it as an income? 100$ is insignificant. If you lend small amount to friends it cannot be considered a lending business. |
Historical company performance data | For free, 5 years is somewhat available, and 10 years is available to a limited extent on money.msn.com. Some are calculated for you. Gurufocus is also a treasure trove of value statistics that do in fact reach back 10 years. From the Gurufocus site, the historical P/E can be calculated by dividing their figure for "Earnings per Share" by the share price at the time. It looks like their EPS figure is split adjusted, so you'll have to use the split adjusted share price. "Free cash", defined in the comments as money held at the end of the year, can be found on the balance sheet as "Cash, Cash Equivalents, Marketable Securities"; however, the more common term is "free cash flow", and its growth rate can be found at the top of the gurufocus financials page. |
Why is stock dilution legal? | If that company issues another 100 shares, shouldn't 10 of those new 100 shares be mine? Those 100 shares are an asset of the company, and you own 10% of them. When investors buy those new shares, you again own a share of the proceeds, just as you own a share of all the company's assets. A company only issues new share to raise money - it is a borrowing from investors, and in that way can be seen as an alternative to taking on loans. Both share issuing and a loan bring new capital and debt into a company. The difference is that shares don't need to be repaid. |
Which technical analysis indicators are considered leading stock market indicators? | Relative Strength Indicators are also trailing indicators. They are based on the number of recent upticks or downticks in an investment's price. (The size of a tick is quantized, and related to the investment's price.) By the time enough upticks have accumulated to generate a buy signal, the investment has already increased in price significantly. Similarly, by the time enough downticks have accumulated a to generate a sell signal, the investment has already dropped in price significantly. The theory of Relative Strength Indicators is based on the hope that moves found by these indicators are likely to continue after the signal is generated. But even if this is the case, someone who relies on these indicators will miss out on the first part of the move. Dorsey-Wright offers investment research based on the theory of Relative Strength Indicators. They offer investment vehicles based on this research. They also work with local investment advisors to develop custom back-tested strategies. They have published a white-paper, with references to others' research. |
Question on buying selling and buying again | Firstly 795 is not even. Secondly - generally you would pay tax on the sale of the 122 shares, whether you buy them back or not, even one minute later, has nothing to do with it. The only reason this would not create a capital gains event is if your country (which you haven't specified) has some odd rules or laws about this that I, and most others, have never heard of before. |
Is a “total stock market” index fund diverse enough alone? | and seems to do better than the S&P 500 too. No, that's not true. In fact, this fund is somewhere between S&P500 and the NASDAQ Composite indexes wrt to performance. From my experience (I have it too), it seems to fall almost in the middle between SPY and QQQ in daily moves. So it does provide diversification, but you're basically diversifying between various indexes. The cost is the higher expense ratios (compare VTI to VOO). |
What part of buying a house would make my net worth go down? | Buying a house can definitely make your net worth go down because there are expenses involved (interest expense, closing costs, taxes, maintenance, etc.). So unless the house appreciates in value enough to offset these things, you will see a drop in your net worth from buying a house. More specifically it can have a negative impact on your net worth, since changes in your net worth are the cumulative result of all your inflows and outflows of money. |
Why can Robin Hood offer trading without commissions? | All discount brokers offer a commission structure that is based on the average kind of order that their target audience will make. Different brokers advertise to different target audiences. They could all have a lot lower commissions than they do. The maximum commission price for the order ticket is set at $99 by the industry securities regulators. When discount brokers came along and started offering $2 - $9.99 trades, it was simply because these new companies could be competitive in a place where incumbents were overcharging. The same exists with Robinhood. The market landscape and costs have changed over the last decade with regulation NMS, and other brokerage firms never needed to update drastically because they could continue making a lot on commissions with nobody questioning it. The conclusion being that other brokers can also charge a lot less, despite their other overhead costs. Robinhood, like other brokerage firms (and anyone else trading directly with the exchanges), are paid by the exchanges for adding liquidity. Not only are many trades placed with no commission for the broker, they actually earn money for placing the trade. If Robinhood was doing you any favors, they would be paying you. But nobody questions free commissions so they don't. Robinhood, like other brokerage firms, sells your trading data to the highest bidder. This is called "payment for order flow", these subscribers see your order on the internet in route to the exhange, and before your order gets to the exchange, the subscriber sends a different order to the exchange so they either get filled before you do (analogous to front running, but different enough to not be illegal) or they alter the price of the thing you wanted to buy or sell so that you have to get a worse price. These subscribers have faster computers and faster internet access than other market participants, so are able to do this so quickly. They are also burning a lot of venture capital like all startups. You shouldn't place too much faith in the idea they are making [enough] money. They also have plans to earn interest off of balances in a variety of ways and offer more options at a price (like margin accounts). |
Does a market maker sell (buy) at a bid or ask price? | The everyday investor buys at the ask and sells at the bid but the market maker does the opposite This is misleading; it has nothing to do with being either an investor or a market maker. It is dependent on the type of order that is submitted. When a market trades at the ask, this means that a buy market order has interacted with a sell limit order at the limit price. When a market trades at the bid, this means that a sell market order has interacted with a buy limit order at the limit price. An ordinary investor can do exactly the same as a market maker and submit limit orders. Furthermore, they can sit on both sides of the bid and ask exactly as a market maker does. In the days before high frequency trading this was quite common (an example being Daytek, whose traders were notorious for stepping in front of the designated market maker's bid/ask on the Island ECN). An order executes ONLY when both bid and ask meet. (bid = ask) This is completely incorrect. A transaction occurs when an active (marketable) order is matched with a passive (limit book) order. If the passive order is a sell limit then the trade has occurred at the ask, and if it is a buy limit the trade has occurred at the bid. The active orders are not bids and asks. The only exception to this would be if the bid and ask have become crossed. When a seller steps in, he does so with an ask that's lower than the stock's current ask Almost correct; he does so with an order that's lower than the stock's current ask. If it's a marketable order it will fill the front queued best bid, and if it's a limit order his becomes the new ask price. A trade does not need to occur at this price for it to become the ask. This is wrong, market makers are the opposite party to you so the prices are the other way around for them. This is wrong. There is no distinction between the market maker and yourself or any other member of the public (beside the fact that designated market makers on some exchanges are obliged to post both a bid and ask at all times). You can open an account with any broker and do exactly the same as a market maker does (although with nothing like the speed that a high frequency market-making firm can, hence likely making you uncompetitive in this arena). The prices a market maker sees and the types of orders that they are able to use to realize them are exactly the same as for any other trader. |
What are the differences in taxes rules for specialty ETFs such as GLD (Gold ETF) and general ETFs? | Gold ETFs are treated different than stock ETFs, as a collectable. This makes long-term investing in gold ETFs (for one year or longer) subject to a relatively large capital gains tax (maximum rate of 28%, rather than the 15% rate that is applicable to most other long-term capital gains). Read The Gold Showdown: ETFs Vs. Futures for more details. |
CEO entitlement from share ownership? | In its basic form, a corporation is a type of 'privileged democracy'. Instead of every citizen having a vote, votes are allocated on the basis of share ownership. In the most basic form, each share you own gives you 1 vote. In most public companies, very few shareholders vote [because their vote is statistically meaningless, and they have no particular insight into what they want in their Board]. This means that often the Board is voted in by a "plurality" [ie: 10%-50%] of shareholders who are actually large institutions (like investment firms or pension funds which own many shares of the company). Now, what do shareholders actually "vote on"? You vote to elect individuals to be members of the Board of Directors ("BoD"). The BoD is basically an overarching committee that theoretically steers the company in whatever way they feel best represents the shareholders (because if they do not represent the shareholders, they will get voted out at the next shareholder meeting). The Board members are typically senior individuals with experience in either that industry or a relevant one (ie: someone who was a top lawyer may sit on the BoD and be a member of some type of 'legal issues committee'). These positions typically pay some amount of money, but often they are seen as a form of high prestige for someone nearing / after retirement. It is not typically a full time job. It will typically pay far, far less than the role of CEO at the same company. The BoD meets periodically, to discuss issues regarding the health of the company. Their responsibility is to act in the interests of the shareholders, but they themselves do not necessarily own shares in the company. Often the BoD is broken up into several committees, such as an investment committee [which reviews and approves large scale projects], a finance committee [which reviews and approves large financial decisions, such as how to get funding], an audit committee [which reviews the results of financial statements alongside the external accountants who audit them], etc. But arguably the main role of the BoD is to hire the Chief Executive Officer and possibly other high level individuals [typically referred to as the C-Suite executives, ie Chief Financial Officer, Chief Operating Officer, etc.] The CEO is the Big Cheese, who then typically has authority to rule everyone below him/her. Typically there are things that the Big Cheese cannot do without approval from the board, like start huge investment projects requiring a lot of spending. So the Shareholders own the company [and are therefore entitled to receive all the dividends from profits the company earns] and elects members of the Board of Directors, the BoD oversees the company on the Shareholders' behalf, and the CEO acts based on the wishes of the BoD which hires him/her. So how do you get to be a member of the Board, or the CEO? You become a superstar in your industry, and go through a similar process as getting any other job. You network, you make contacts, you apply, you defend yourself in interviews. The shareholders will elect a Board who acts in their interests. And the Board will hire a CEO that they feel can carry out those interests. If you hold a majority of the shares in a company, you could elect enough Board members that you could control the BoD, and you could then be guaranteed to be hired as the CEO. If you own, say, 10% of the shares you will likely be able to elect a few people to the Board, but maybe not enough to be hired by the Board as the CEO. Short of owning a huge amount of a company, therefore, share ownership will not get you any closer to being the CEO. |
When can you use existing real estate as collateral to buy more? | Generally, when you own something - you can give it as a collateral for a secured loan. That's how car loans work and that's how mortgages work. Your "equity" in the asset is the current fair value of the asset minus all your obligations secured by it. So if you own a property free and clear, you have 100% of its fair market value as your equity. When you mortgage your property, banks will usually use some percentage loan-to-value to ensure they're not giving you more than your equity now or in a foreseeable future. Depending on the type and length of the loan, the LTV percentage varies between 65% and 95%. Before the market crash in 2008 you could even get more than 100% LTV, but not anymore. For investment the LTV will typically be lower than for primary residence, and the rates higher. I don't want to confuse you with down-payments and deposits as it doesn't matter (unless you're in Australia, apparently). So, as an example, assume you have an apartment you rent out, which you own free and clear. Lets assume its current FMV is $100K. You go to a bank and mortgage the apartment for a loan (get a loan secured by that apartment) at 65% LTV (typical for condos for investment). You got yourself $65K to buy another unit free and clear. You now have 2 apartments with FMV $165K, your equity $100K and your liability $65K. Mortgaging the new unit at the same 65% LTV will yield you another $42K loan - you may buy a third unit with this money. Your equity remains constant when you take the loan and invest it in the new purchase, but the FMV of your assets grows, as does the liability secured by them. But while the mortgage has fixed interest rate (usually, not always), the assets appreciate at different rates. Now, lets be optimistic and assume, for the sake of simplicity of the example, that in 2 years, your $100K condo is worth $200K. Voila, you can take another $65K loan on it. The cycle goes on. That's how your grandfather did it. |
Can a company stop paying dividends? | Dividends are supposed to be paid from company profits (in the current or previous financial years), there are nuances around what profits mean from country to country, but the link is the UK definition from the HMRC. Profits from previous financial years are commonly called retained earnings. There are a few items around this |
Excessive Credit Check from Comcast | In general, it is unusual for a credit check to occur when you are terminating a contract, since you are no longer requesting credit. If the credit check was a "hard pull" it will stay on your credit report for 2 years, but will only have an impact on your credit score for up to 12 months. If the check is a "soft pull" it has no impact on your credit score. Since you're past the 12 months boundary anyway, I wouldn't worry about it. That being said, please feel free to continue your investigation and report back if you can get Comcast to admit they performed the 2nd credit check. I'm sure we'd all be interested to hear their explanation for it. |
If a stock doesn't pay dividends, then why is the stock worth anything? | This is an excellent question, one that I've pondered before as well. Here's how I've reconciled it in my mind. Why should we agree that a stock is worth anything? After all, if I purchase a share of said company, I own some small percentage of all of its assets, like land, capital equipment, accounts receivable, cash and securities holdings, etc., as others have pointed out. Notionally, that seems like it should be "worth" something. However, that doesn't give me the right to lay claim to them at will, as I'm just a (very small) minority shareholder. The old adage says that "something is only worth what someone is willing to pay you for it." That share of stock doesn't actually give me any liquid control over the company's assets, so why should someone else be willing to pay me something for it? As you noted, one reason why a stock might be attractive to someone else is as a (potentially tax-advantaged) revenue stream via dividends. Especially in this low-interest-rate environment, this might well exceed that which I might obtain in the bond market. The payment of income to the investor is one way that a stock might have some "inherent value" that is attractive to investors. As you asked, though, what if the stock doesn't pay dividends? As a small shareholder, what's in it for me? Without any dividend payments, there's no regular method of receiving my invested capital back, so why should I, or anyone else, be willing to purchase the stock to begin with? I can think of a couple reasons: Expectation of a future dividend. You may believe that at some point in the future, the company will begin to pay a dividend to investors. Dividends are paid as a percentage of a company's total profits, so it may make sense to purchase the stock now, while there is no dividend, banking on growth during the no-dividend period that will result in even higher capital returns later. This kind of skirts your question: a non-dividend-paying stock might be worth something because it might turn into a dividend-paying stock in the future. Expectation of a future acquisition. This addresses the original premise of my argument above. If I can't, as a small shareholder, directly access the assets of the company, why should I attribute any value to that small piece of ownership? Because some other entity might be willing to pay me for it in the future. In the event of an acquisition, I will receive either cash or another company's shares in compensation, which often results in a capital gain for me as a shareholder. If I obtain a capital gain via cash as part of the deal, then this proves my point: the original, non-dividend-paying stock was worth something because some other entity decided to acquire the company, paying me more cash than I paid for my shares. They are willing to pay this price for the company because they can then reap its profits in the future. If I obtain a capital gain via stock in as part of the deal, then the process restarts in some sense. Maybe the new stock pays dividends. Otherwise, perhaps the new company will do something to make its stock worth more in the future, based on the same future expectations. The fact that ownership in a stock can hold such positive future expectations makes them "worth something" at any given time; if you purchase a stock and then want to sell it later, someone else is willing to purchase it from you so they can obtain the right to experience a positive capital return in the future. While stock valuation schemes will vary, both dividends and acquisition prices are related to a company's profits: This provides a connection between a company's profitability, expectations of future growth, and its stock price today, whether it currently pays dividends or not. |
How to protect yourself from fraud when selling on eBay UK | Just ship using a reputable courier (definitely not Yodel or Hermes!) that requires and obtains a surname and signature which you can view on their website (Citylink, Parcel Force to name a couple). Then remember to submit the tracking details when you mark the item as shipped on eBay. If the buyer is still brazen enough to claim the item never arrived, Paypal (in my experience) don't even entertain their claim. If however they claim the item arrived damaged/not as described, it could be trickier to defend. I'd recommend thoroughly documenting your item with photographs and recording the serial number, just in case you need to provide the details to Paypal. Again, in my experience, this has been enough to protect me from any fraudulent claims. To answer your second question, I don't believe eBay permits you to specify 'No Paypal', but if they did then yes, bank transfer is 100% safe (short of someone using stolen money to pay for the item, in which case you'd be guilty of money laundering thanks to the UK's wonderful laws on such things...) |
Pay for a cheap car or take out a loan? | Buying a car is a very big financial decision. There are three major factors to decide which car to buy: Pick two because you can't have all three. You can either have a reliable car that has cheap running costs but will be expensive to buy or a cheap car that is unreliable. If you are mechanically minded then reliability might not be that important to you. However, if you must get to work on time every day then owning a car that breaks down once every six months might be something you wish to avoid. There are a lot of hidden costs that should be thought about very carefully when considering purchasing a car: In my country, annual car registration costs are around $650. I budget around $1000 for maintenance each year (a major + minor service and some extra repair work). When I factor in an amount for depreciation, that brings the running costs of the car to somewhere between $1500 and $2000 per annum before I've driven it anywhere. Generally I will fill up my car for $50 around once a month (I don't drive too often) which makes my total cost of ownership somewhere around $2500 per annum. When I was driving my car to work daily, the petrol costs were much higher at around $50 per week, which made my TCO somewhere around $4500 p.a. And this is on an extremely reliable, fuel efficient 2006 model car which cost me $18k to purchase. I have no debt on this car. But the car itself is a liability. Any car will be a liability. I understand that petrol prices are ridiculously low in the US and probably registration is lower as well. In this case you will need to adjust your figures and do the maths to work out what your annual cost of ownership will be. There are three alternatives to car ownership to consider which may save you money: Public transportation and car pooling are highly recommended from a financial perspective, though you may not have access to either in your situation. Moving closer to work may also be an option, though for many jobs this may increase your cost of living. If you decide that you do need a car and decide that $2000 is not going to get you the car you feel you need ($2000 usually does not get you much), you will need to decide how to finance the car. You will want to avoid most dealer-based finance deals. Be very wary of any dealer offering interest free finance as they usually have some pretty nasty conditions. Getting a loan from your parents or another family member is usually the best option. Otherwise consider getting a personal loan, which will have a lower interest rate than a credit card or dealer finance. Another option could be to get a credit card on an interest-free promotional deal which you could pay down before the interest kicks in. Be warned though, these deals usually require you to pay off your whole balance before the due date or they will back-charge interest on the whole amount. In short, these are the decisions that you will need to make: |
Should I keep most of my banking, credit, and investment accounts at the same bank? | http://www.fdic.gov/deposit/deposits/index.html FDIC currently insures up to $250,000. (I would have put that as a comment to Jeffery but it says it was locked.) You don't want to put all your eggs in one basket. If you shop around, and keep shopping all the time you can keep your accounts in a single place so long as that single place provides the best deal. Don't have any loyalty to your banking institutions because they don't have any loyalty to you. Also, having lots of accounts means you are familiar with lots of institutions, so you are likely better at shopping around. Things I consider. For fewer institutions: For more institutions: |
How to account for Capital Gains (Losses) in double-entry accounting? | First, the balance sheet is where assets, liabilities, & equity live. Balance Sheet Identity: Assets = Liabilities (+ Equity) The income statement is where income and expenses live. General Income Statement Identity: Income = Revenue - Expenses If you want to model yourself correctly (like a business), change your "income" account to "revenue". Recognized & Realized If you haven't yet closed the position, your gain/loss is "recognized". If you have closed the position, it's "realized". Recognized Capital Gains(Losses) Assuming no change in margin requirements: Margin interest should increase margin liabilities thus decrease equity and can be booked as an expense on the income statement. Margin requirements for shorts should not be booked under liabilities unless if you also book a contra-asset balancing out the equity. Ask a new question for details on this. Realized Capital Gains(Losses) Balance Sheet Identity Concepts One of the most fundamental things to remember when it comes to the balance sheet identity is that "equity" is derived. If your assets increase/decrease while liabilities remain constant, your equity increases/decreases. Double Entry Accounting The most fundamental concept of double entry accounting is that debits always equal credits. Here's the beauty: if things don't add up, make a new debit/credit account to account for the imbalance. This way, the imbalance is always accounted for and can help you chase it down later, the more specific the account label the better. |
Are tax deductions voluntary? | I did a little research and found this article from 2006 by a Villanova law professor, titled "No Thanks, Uncle Sam, You Can Keep Your Tax Break". The final paragraph of the article says: Under these circumstances, it is reasonable to conclude that a taxpayer is not required to claim a allowable deduction unless a statutory provision so requires, or a binding judicial precedent so specifies. It would be unwise, of course, to forego a deduction that the IRS considers mandatory such as those claimed by self-employed individuals with respect to their self-employment, whether for purposes of the self-employment tax or the earned income tax credit. Until the statute is changed or some other binding authority is issued, there is no reason taxpayers who wish to forego deductions, such as the dependency exemption deduction, should hesitate in doing so. (The self-employment tax issues in the quote cited by CQM are explicitly discussed in the article as one of a few special kinds of deduction which are mandatory.) This is not a binding statement: it's not law or even official IRS policy. You could never use it as a defense in the event that this professor turned out to be wrong and the IRS decided to go after you anyway. However, it is a clear statement from a credible, qualified source. |
Should I be worried that I won't be given a receipt if I pay with cash? | There are number of reasons why someone doesn't want to give you a receipt for cash payment. Anything ranging from not wanting to pay taxes, to being able to deny you gave them money for service in the event you're not happy with the service and ask for money back. You won't get in trouble for giving him cash, however you should be worried because any "reputable" person providing any type of service/product will provide a receipt regardless of payment type. |
I'm self-employed with my own LLC. How should I pay myself, given my situation? | You're conflating LLC with Corporation. They're different animals. LLC does not have "S" or "C" designations, those are just for corporations. I think what you're thinking about is electing pass through status with the IRS. This is the easiest way to go. The company can pay you at irregular intervals in irregular amounts. The IRS doesn't care about these payments. The company will show profit or loss at the end of the year (those payments to you aren't expenses and don't reduce your profit). You report this on your schedule C and pay tax on that amount. (Your state tax authority will have its own rules about how this works.) Alternatively you can elect to have the LLC taxed as a corporation. I don't know of a good reason why someone in your situation would do this, but I'm not an accountant so there may be reasons out there. My recommendation is to get an accountant to prepare your taxes. At least once -- if your situation is the same next year you can use the previous year's forms to figure out what you need to fill in. The investment of a couple hundred dollars is worthwhile. On the question of buying a home in the next couple of years... yes, it does affect things. (Pass through status? Probably doesn't affect much.) If all of your income is coming from self-employment, be prepared for hassles when you are shopping for a mortgage. You can ask around, maybe you have a friendly loan officer at your credit union who knows your history. But in general they will want to see at least two years of self-employment tax returns. You can plan for this in advance: talk to a couple of loan officers now to see what the requirements will be. That way you can plan to be ready when the time comes. |
Ask FBI permission to withdraw large sums from your checking or savings? | An international Outlook (in this case Sweden in European Union). According to laws and regulations large cash transactions are considered conspicuous. The law makers might have reasoned is that cash transactions can be used in as example: - financing terrorism - avoiding taxes - buying or selling illegal goods such as drugs or stolen items - general illegal transactions such as paying bribes Starting there, all banks (at least in Europe) are required to report all suspicious transactions to the relevant authorities (in Sweden it is Finanspolisen, roughly the Financial Police). This is regardless of how the transactions are performed, in cash or otherwise. In order to monitor this all banks in Sweden are required to "know the customers", as example where does money come from and go to in general. In addition special software monitors all transactions and flags suspicious patterns for further investigation and possibly notification of the police. So, at least in Sweden: there is no need to get permission from the FBI to withdraw cash. You will however be required to describe the usage of the Money and your description will be kept and possibly sent to the Financial police. The purpose is not to hinder legitimate transactions, but to Catch illegal activities. |
Should I buy a home or rent in my situation? | First, you are not a loser nor an idiot! You have avoided many debt mistakes and have a stable income. This move will be good for you and your family and an opportunity to continue to build your life together. The fact you are even thinking about this and asking questions shows that you are responsible. To your rent/buy question, Ben Miller has a great summary in his answer. I have nothing more to add except that you already know you cannot buy. That question is not really your main problem. You need some financial goals and then you need a plan to achieve those goals. As you become more educated about finances, it can be like drinking from a fire hose. Trying to analyze too much information can paralyze you and make you 'freak out' that you are messing everything up! Try this. Think about where you want to be in 5 years or so. Write down with your fiance some of those dreams and goals. Maybe things like finish college degree(s), buy a house, pay off student loans, wedding, have more kids, etc... As you prioritize these things, you will see that some are short-term goals and some are long-term. Then you lay out a step by step plan to get there. By focusing on each step at a time, you see more success and are more motivated. As you see movement towards your goals, you will be willing to sacrifice more to get there. You will be willing to rent a cheaper place with less room to make more headway on these things. This will be a several year plan, which is why it is so important to define your goals at the beginning. This will give you motivation and the mental toughness to follow through when it is difficult. |
Is it better to wait for a market downturn to do a Roth conversion? | On average, the market will be down 1 year out of 4. 26 of the last 100 years on the S&P were negative. The Roth conversion offers a unique opportunity to convert early in the year, and decide at tax time next year whether you are happy with the result. Of course, if your fund or stock is up, you are likely better off, paying the $1250 tax on the $5000 conversion that's now worth $6000 or more. If it's down, you can recharacterize. The volatility of the market helps makes this process more attractive. If my converted shares dropped quite a bit, the recharacterization is far more desirable than a small drop or no drop at all. Of course we don't wish for that drop, any more than we wish for our house to burn down to make our insurance pay off. To be clear, you'll benefit from a conversion she the market goes up. The downturn only lets you reverse the bad move. |
Safe method of paying for a Gym Membership? | I once was reviewing one of those contracts with plenty of bad clauses in it, sitting across from the salesman whose commission depending on me signing it. I started crossing out all the bad clauses, initialed them and said I would sign it if he'd initial the changes as well. Oh, and there was one clause that said something like "THIS CONTRACT MAY NOT BE MODIFIED WITHOUT THE EXPRESS WRITTEN CONSENT OF THE EXECUTIVE VICE PRESIDENT..." Of course, I crossed it out as well. I signed, he signed. Everyone was happy. Fortunately I never had to deal with any of the issues, but what's the worse they could do? |
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