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Is there difference in risk between physical or synthetic replication of an index by an ETF? | First, make sure you understand the objective of an ETF. In some cases, they may use leverage to get a multiple of the index's return that is different than 1. Some may be ultra funds that go for double the return or double the inverse of the return and thus will try to apply the appropriate leverage to achieve that return. Those that use physical replication can still have a small portion be used to try to minimize the tracking error as there is something to be said for what kind of tracking error do you accept as the fund's returns may differ from the index by some measure. Yes. For example, if you were to have a fund that had a 50% and -50% return in back to back periods, what would your final return be? Answer: -25%, which if you need to visualize this, take $1 that then becomes $1.50 by going up 50% and then becomes $.75 by going down 50% in a compounded fashion. This is where you have to be careful of the risks of leverage as those returns will compound in a possibly negative way. |
IRA contributions in a bear (bad) market: Should I build up cash savings instead? | You should consider dollar cost averaging your investments. Retirement account is perfect for that - it's long term with periodic deposits. Overall, by investing in stocks now for a long term, you'll benefit more because the stocks are at their low(er) point. |
Anyone have experience with Brink's 5% savings account? | Down in the Fine Print are these points to consider for the limit: For an average daily balance up to but not exceeding $5,000.00, the interest rate for the Savings Account is 4.91% with an annual percentage yield (APY) of 5.00%. For that portion of the average daily balance of the Savings Account that is $5,000.01, or more, the interest rate is 0.49% with an annual percentage yield (APY) of 0.50%. The interest rates and APYs of each tier may change. The APYs were accurate as of March 1, 2014. These are promotional rates and may change without notice pursuant to applicable law. No minimum balance necessary to open Savings Account or obtain the yield(s). Because Savings Account funds are withdrawn through the Card Account (maximum 6 such transfers per calendar month), Card Account transaction fees could reduce the interest earned on the Savings Account. Card Account and Savings Account funds are FDIC-insured upon verification of Cardholder's identity. For purposes of FDIC coverage limit, all funds held on deposit by the Cardholder at BofI Federal Bank will be aggregated up to the coverage limit, currently $250,000.00. |
What's the fuss about Credit Score / History? | If human beings were Homo Economicus, i.e. textbook rational and self-interested economic-minded beings, as opposed to simply human, then yes, simple advice like "just stay out of debt and your credit score will take care of itself" could work. Your simplification would be very persuasive to such a being. However, people are not perfectly rational. We buy something we shouldn't have, we charge it on a credit card, we can't afford to pay it off at the end of the month. We lose our job. Our furnace breaks down, or our roof leaks, and we didn't anticipate the replacement cost. Some of this is our fault, some of it isn't – basically, shit happens .. and we get into debt... maybe even knowing all the while we shouldn't have. Our credit history and score takes a hit. Only then do we find out there are consequences! Our interest rates go up, our insurance companies raise premiums, our prospective new employers or landlords run credit checks and either deny us the job or the apartment. Telling a person who asks for help about their credit history/score that they shouldn't have taken on debt in the first place is like telling the farmer he should have kept the barn door shut so the horse wouldn't run out. While it is not "bad" advice, it's not the only kind of advice to offer when somebody finds themselves in such a situation. Adding advice about corrective actions is more helpful. The person probably already know that they shouldn't have overspent in the first place and got into debt. Yes, remind them of the value of being sensible about debt in the first place – it's good reinforcement – but add some helpful advice to the mix. e.g. "So you're in debt. You shouldn't have lived beyond your means. But now that you are in this mess, here's what you can do to improve the situation." |
Multiple accounts stagnant after quitting job. | What is my best bet with the 401K? I know very little about retirement plans and don't plan to ever touch this money until I retire but could this money be of better use somewhere else? If you don't know your options, I would suggest reading some material on it that might be a little more extensive than an answer here (for instance, http://www.getrichslowly.org/blog/ has some good and free information about a myriad of financial topics). With retirement accounts you can roll it over or leave it in the current account. Things to look at would be costs of the accounts, options you have in each account, and the flexibility of moving it if you need to. Depending on what type of retirement account it is (Roth 401K, Traditional 401K, etc, you may have some advantages with moving it to another type). The student loans.... pay them off in one shot? I have the extra money and it would not be a hardship to do so unless that money can be best used somewhere else? Unless I was making more money in a savings/investing/business opportunity, I would pay off the student loans in a lump sum. The reason is basic opportunity cost (economics) - if a better opportunity isn't on the horizon with your money, kill the interest you're paying because it's money you're losing every month. With the money just sitting in the bank I get a little sick feeling thinking that I can be doing something better with that. Outside of general savings you could look at investing in stocks, ETFs, mutual funds, currencies, lending club loans (vary by state), or something similar. Or you could try to start a business or invest in a start up directly (though, depending on the start up, they may not accept small investors). Otherwise, if you don't have a specific idea at this time, it's best to have money in savings while you ponder where else it would serve you. Keep in mind, having cash on hand, even if it's not earning anything, can bail you out in emergencies or open the door if an opportunity arises. So, you're really not "losing" anything by having it in cash if you're patiently waiting on opportunities. |
What's the catch with biweekly mortgage payments? | So the principle is true. Assuming that you get paid bi-weekly, you end up getting three paychecks two months during the year. Typically that is in January and July/August. So if things were different, and your mortgage was setup so you paid half a monthly payment each paycheck, then you would wind up making one full extra payment per year. Making that extra payment, most often, reduces the mortgage by 7 years on a 30 year note. While true, many of these companies charge exorbitant fees for the right for you to do so, so the principal reduction is not commensurate with what you are paying. You can simply do this yourself without paying fees. On those extra pay days, pay half a payment to principal only, and no fee, no fuss. This is pretty easy to do with most mortgage companies as they have online payments and it is just a matter of filling out a web form. For me this does not even cost a stamp as they pull from my checking account at another bank. |
If I short-sell a dividend-paying stock, do I have to pay the dividend? | Yes, you would. You owe it to the person you borrowed the shares from. (source) |
When will the U.K. convert to the Euro as an official currency? | I read an account of why the U.K. didn't end up with the euro as its currency in David M. Smick's great book The World Is Curved: Hidden Dangers to the Global Economy. Chapter 6 of the book is titled "Nothing Stays the Same: The 1992 Sterling Crisis." Here's a very brief excerpt; emphasis mine: [...] As this story shows, such blindness to the realities of a changing world can be very dangerous. In this case, the result was the brutal collapse of the British pound, which explains why the British people still use their own currency, the pound or sterling, and not the euro. The events that unfolded in the autumn of 1992 were totally unforeseen, yet they reshaped the European monetary world and represent a phenomenon that continues to impact global economies. [...] Smick's account of the events around 1992 runs about 28 pages. Here's my version, in a nutshell: At the time, Britain was part of the European Exchange Rate Mechanism, or ERM. The belief in Europe was that by uniting currencies under a common mechanism, Europe could gain influence in international financial policy largely dominated by the United States. The ERM was a precursor to monetary union. The Maastricht Treaty would eventually create the European Union and the euro. Britain joined the ERM later than other nations, in 1990, and after some controversy. Being part of the ERM required member nations to agree to expand and contract their currencies only within certain agreed upon limits called currency bands. Due to the way this had been structured, Germany's strong position placed it at the top of the system. At some point in 1992, Germany had raised interest rates to curb future inflation. However, Britain wanted Germany to cut rates – Britain was not in as enviable a position, economically speaking, and its currency was under pressure. The currency band system would put Britain in a tighter spot with Germany raising rates. Enter George Soros, the Hungarian billionaire, a.k.a. "the man who broke the Bank of England." Soros took a huge short position against the Sterling. He believed the Sterling was overvalued relative to the German deutsche mark, and Britain would be forced to devalue its currency and realign with respect to the ERM. Other traders followed and also sold the Sterling short. With much pressure on the currency, the Bank of England had to buy up Sterling in order to maintain its agreement under the ERM. Of course, they needed to borrow other currencies to do this. Soon the BoE was in over its head defending the Sterling, realizing the exchange rate it needed to maintain under the ERM simply wasn't sustainable. Britain was forced to withdraw from the ERM on Black Wednesday, September 16th, 1992. And so, Britain does not use the euro today – and any talk of doing so is politically controversial. Therefore I wouldn't bet on Britain adopting the euro any time soon – too many of the players are still in politics and remember 1992 well. I think if Britain adopting the euro is ever to happen, it will be when the memory of 1992 has faded away. BTW, George Soros made off with more than US$1 billion. Soros is a very smart guy. |
Putting borrowed money into an SIPP | You may have misunderstood some parts of the system. If you make a pension contribution in any given year, the tax relief is based on your income for that year - the gross pension contribution is subtracted from your gross income and you only end up paying tax based on the reduced gross income. So if the higher rate threshold is £40K, you have income for the year of £65K, and you make a gross contribution of £25K, then you'll get tax relief at 40% on the whole contribution, i.e. £10K. If your income for the year is less, e.g. £50K, then you'll get tax relief at 40% on £10K and at 20% on the other £15K, i.e. £7K. So if you're significantly into the higher-rate band, it's usually not worth making a contribution large enough to reduce you to basic-rate tax - better to wait till the next tax year for the rest. Overall, while you probably could do what you suggest subject to the caveats below, why not just spread the pension contribution over the three years, rather than making it all up front? If you are confident you can invest the money at better than the 3.4% interest on the loan, then it might make sense to borrow, but you should be pretty clear that you're deliberately borrowing to invest (otherwise known as investing with leverage). Or you might know that your income is going to drop next year. Another clarification, as your comment on another answer mentions: basic-rate tax relief is claimed directly by your pension provider ("relief at source"), whereas the higher-rate part of the relief comes straight to you via your tax return. So for the above £25K gross contribution example, you'd hand over £20K initially and then get £5K back at the end of the tax year, leaving you with £15K less in your pocket. If you did want to make a £20K net contribution and had enough higher-rate salary to cover it, the gross contribution you'd end up with would be £33,333, and you'd need to find £6,666 more temporarily. Note that there are also limits on the annual contribution you can make of £40K (the "annual allowance"), but you can carry forward allowances from three previous years so it's very unlikely to be relevant. |
stock(paper) delivery to home | Getting "physical stocks" will in most cases only be for the "fun of it". Most stocks nowadays are registered electronically and thus the physical stock will be of no value - it will just be a certificate saying that you own X amount of shares in company X; but this information is at the same time registered electronically. Stocks are not like bearer bonds, the certificate itself contains no value and is registered to each individual/entity. Because the paper itself is worthless, stealing it will not affect your amount of stock with the company. This is true for most stocks - there may exist companies who live in the 70s and do not keep track of their stock electronically, but I suspect it will only be very few (and most likely very small and illiquid companies). |
I have a horrible 401k plan, with high expenses. Should I stay with it or move my money elsewhere? | The first question is essentially asking for specific investment advice which is off-topic per the FAQ, but I'll take a stab at #2 and #3 (2) If my 401k doesn't change before I leave my job (not planned in the near future), I should roll it over into my Roth IRA after I leave due to these high expense ratios, correct? My advice is that you should roll over a 401K into an IRA the first chance you get (usually when you leave the job). 401K plans are NOTORIOUS for high expense ratios and why leave your money in a plan where you have a limited choice of investments anyway versus a self-directed IRA where you can invest in anything you want? (3) Should I still max contribute with these horrible expense ratios? If they are providing a match, yes. Even with the expense ratios it is hard to beat the immediate return of an employer match. If they aren't matching, the answer is still probably yes for a few reasons: You already are maxing out your ability to contribute to sheltered accounts, so assuming you still want to sock away that money for retirement, the tax benefits are still valuable and probably offset the expense ratios. Although you seem to be an exception, it is hard for most people to be disciplined enough to put money in a retirement account after they have it in their hands (versus auto-deduction from paychecks). |
Debt collector has wrong person and is contacting my employer | This seems very suspicious, as if it were fraud, and not a legitimate collector. Garnishing wages takes a court order. A court would require a bit more proof than a name. Names can easily be common, I know sets of first cousins named after the common grandparent, 4 pairs in my extended family, along with 2 triples. The court would certainly look for a social security number match. Your own credit history will show no activity in that state. A legitimate debt collector would handle this very differently. |
How to get an ITIN if I don't have passport? | On the IRS site you can find a list of "acceptance agents" in your country. Talk to one of them, they'll deal with the IRS on your behalf. If you don't have any in your country, you can contact the big-4 accounting firms or any other agent elsewhere to provide you service. I'd suggest doing this through an agent. |
Short selling - lender's motivation | As the other answer said, the person who owns the lent stock does not benefit directly. They may benefit indirectly in that brokers can use the short lending profits to reduce their fees or in that they have the option to short other stocks at the same terms. Follow-up question: what prevents the broker lending the shares for a very short time (less than a day), pocketing the interest and returning the lenders their shares without much change in share price (because borrowing period was very short). What prevents them from doing that many times a day ? Lack of market. Short selling for short periods of time isn't so common as to allow for "many" times a day. Some day traders may do it occasionally, but I don't know that it would be a reliable business model to supply them. If there are enough people interested in shorting the stock, they will probably want to hold onto it long enough for the anticipated movement to happen. There are transaction costs here. Both fees for trading at all and the extra charges for short sale borrowing and interest. Most stocks do not move down by large enough amounts "many" times a day. Their fluctuations are smaller. If the stock doesn't move enough to cover the transaction fees, then that seller lost money overall. Over time, sellers like that will stop trading, as they will lose all their money. All that said, there are no legal blocks to loaning the stock out many times, just practical ones. If a stock was varying wildly for some bizarre reason, it could happen. |
How to rescue my money from negative interest? | In Switzerland you should have access to many brokers with fair rates, e.g. Interactive Brokers. Going through them you then put the money in various Swiss stocks like Roche, Novartis, Swisscom, Credit Suisse, Logitech, etc. No stock should be more than 10% of the total. Since you pay 0% taxes on investment profits, you really should invest. By going through a broker instead of your bank, you can cash out at any time without losing outrageous fees for the stock commissions (often 2% for banks, around 0% for brokers). If you're employed you can also ask your employer to increase the amount of your salary that goes to the pension (2. Säule), which is not limited like the 7000 you mentioned (3.Säule). |
Why might it be advisable to keep student debt vs. paying it off quickly? | There are a great number of financial obligations that should be considered more urgent than student loan debt. I'll go ahead and assume that the ones that can land people in jail aren't an issue (unpaid fines, back taxes, etc.). I cannot stress this enough, so I'll say it again: setting money aside for emergencies is so much more important than paying off student loans. I've seen people refer to saving as "paying yourself" if that helps justify it in your mind. My wife and I chose to aggressively pay down debt we had stupidly accrued during college, and I got completely blindsided by a layoff during the downturn. Guess what happened to all those credit cards we'd paid off and almost paid off? Guess what happened to my 401k? If all we had left were student loans, then I still wouldn't prioritize paying those off. There are income limits to Roth IRAs, so if you're in a field where you'll eventually make too much to contribute, then you'll lose that opportunity forever. If you're young and you don't feel like learning too much about investing, plop 100% of your contributions into the low-fee S&P 500 index fund and forget it until you get closer to retirement. Don't get suckered into their high-fee "Retirement 20XX" managed funds. Anyway, sure, if you have at least three months of income replacement in savings, have maximized your employer 401k match, have maximized your Roth IRA contributions for the year, and have no other higher interest debt, then go ahead and knock out those student loans. |
Is there an advantage to a traditional but non-deductable IRA over a taxable account? [duplicate] | The simplest answer is that you can convert the IRA to a Roth, and since it was already taxed, pay no tax on conversion. If, in your hypothetical situation, you happen to have an IRA already in place, you are subject to pro-rata rules on conversions, e.g. your balance is total $40K, $10K 'not deducted', a conversion is 75% taxed, convert $20K and the tax is on $15K of that money. But, there also might be a time when you are able to transfer IRA money into a 401(k), effectively removing the pretax deposits, and leaving just post tax money for a free conversion. |
How to allocate profit and loss in partnership where one partner's activities are profitable and the other's aren't? | You should have a partnership agreement of some sort. The reason partnership agreements exist is so nobody can change the game because of the outcome. I'd say the most typical partnership agreement is that everyone gets an equal cut, meaning that everyone also makes an equal contribution. If you have start up expenses of $10,000, you'd each contribute $5,000. Separately, you can determine ownership share by contribution amounts, maybe one of you contributed $2,000 and the other $8,000; this would be an 80/20 split. The performance of the operation doesn't have anything to do with determining how to divide the pie, your partnership agreement determines that. How much have you each contributed and what agreement did you make before you decided to be partners? If you have a poor performing business segment, then the partnership should get together and consider adjusting or stopping that line of business. But you don't change how the pie is divided because of it; unless your partnership agreement says you do. |
Implications of a Canadian company IPO having a dual TSX/NYSE stock listing? | Investors who are themselves Canadian and already hold Canadian dollars (CAD) would be more likely to purchase the TSX-listed shares that are quoted in CAD, thus avoiding the currency exchange fees that would be required to buy USD-quoted shares listed on the NYSE. Assuming Shopify is only offering a single class of shares to the public in the IPO (and Shopify's form F-1 only mentions Class A subordinate voting shares as being offered) then the shares that will trade on the TSX and NYSE will be the same class, i.e. identical. Consequently, the primary difference will be the currency in which they are quoted and trade. This adds another dimension to possible arbitrage, where not only the bare price could deviate between exchanges, but also due to currency fluctuation. An additional implication for a company to maintain such a dual listing is that they'll need to adhere to the requirements of both the TSX and NYSE. While this may have a hard cost in terms of additional filing requirements etc., in theory they will benefit from the additional liquidity provided by having the multiple listings. Canadians, in particular, are more likely to invest in a Canadian company when it has a TSX listing quoted in CAD. Also, for a company listed on both the TSX and NYSE, I would expect the TSX listing would be more likely to yield inclusion in a significant market index—say, one based on market capitalization, and thus benefit the company by having its shares purchased by index ETFs and index mutual funds that track the index. I'll also remark that this dual U.S./Canadian exchange listing is not uncommon when it comes to Canadian companies that have significant business outside of Canada. |
What is the basis of an asset that is never depreciated? | That's tricky, actually. First, as the section 1015 that you've referred to in your other question says - you take the lowest of the fair market value or the actual donor basis. Why is it important? Consider these examples: So, if the relative bought you a brand new car and you're the first title holder (i.e.: the relative paid, but the car was registered directly to you) - you can argue that the basis is the actual money paid. In essence you got a money gift that you used to purchase the car. If however the relative bought the car, took the title, and then drove it 5 miles to your house and signed the title over to you - the IRS can argue that the car basis is the FMV, which is lower because it is now a used car that you got. You're the second owner. That may be a significant difference, just by driving off the lot, the car can lose 10-15% of its value. If you got a car that's used, and the donor gives it to you - your basis is the fair market value (unless its higher than the donor's basis - in which case you get the donor's basis). You always get the lowest basis for losses (and depreciation is akin to a loss). Now consider the situation when your relative is a business owner and used the car for business. He didn't take the depreciation, but he was entitled to. IRS can argue that the fact that he didn't take is irrelevant and reduce the donor's basis by the allowable depreciation. That may bring your loss basis to below the FMV. I suggest you take it to a tax professional licensed in your state who will check all the facts and circumstances of your situation. Your relative might be slapped with a gift tax as well, if the car FMV is above certain amount (currently the exemption is $14000). |
What kinds of exchange-traded funds (ETFs) should specifically be avoided? | Stay away from leveraged or synthetic ETFs. This answer talks about why leveraged ETFs are dangerous. There are numerous articles to be found by searching for "leveraged etf". My answer to this question links to one of the more accessible explanations I've read. |
Can GoogleFinance access total return data? | This is the same answer as for your other question, but you can easily do this yourself: ( initial adjusted close / final adjusted close ) ^ ( 1 / ( # of years sampled) ) Note: "# of years sampled" can be a fraction, so the one week # of years sampled would be 1/52. Crazy to say, but yahoo finance is better at quick, easy, and free data. Just pick a security, go to historical prices, and use the "adjusted close". money.msn's best at presenting finances quick, easy, and cheap. |
Would I ever need credit card if my debit card is issued by MasterCard/Visa? | I was hoping to comment on the original question, but it looks to me like the asker lives in the EU, where credit cards are a lot less common and a lot of the arguments (car rental, building up of credit etc) brought forward by people living in the US just don't apply. In fact especially airlines (and other merchants) will charge you extra when using a credit card instead of a debit card and this can add up fairly quickly. I hold a credit card purely for travelling outside the EU and occasionally I will travel for work and make my own arrangements, then it can come in handy as I am able to reclaim my expenses before I have to pay my credit card bill (in this case I will also claim the extra credit card fees from my employer). This however is for my personal convenience and not strictly necessary. (I could fill out a bunch of paperwork and claim the costs from my employer as an advance.) In the EU I find that if my VISA debit card will not work in a shop, neither will my credit card, so on that note it's pretty pointless. So to answer the asker question: If you live (and travel) in the EU you don't need a credit card, ever. If you travel to the US, it would be advantageous to get one. Occasionally banks will offer you a credit card for free and there's no harm in taking it (apart from the fact that you have one more card to keep track off), but if you do, set up a direct debit to pay it off automatically. And as other people have said: Don't spend money you don't have. If you are not absolutely sure you can't do this, don't get a credit card. |
Why invest for the long-term rather than buy and sell for quick, big gains? | Every time you buy or sell a share for some price, somebody must have thought that that was exactly the right moment to sell or buy that share at that price (and to trade with you). Every time a trade is made, both sides think they are doing the smart thing. Most of the time, one will turn out to be wrong, the other right. Nothing in your proposed method of trading explains why you would be the side that was right more often. So they'll probably even out. Or maybe there are people in the market who actually do have a slightly better than average method, and you'll be wrong somewhat more often than right. Each trade has transaction costs. If you simply hang on to your shares, that's more or less the same as evening out good trades and bad trades, but without the transaction costs. |
How much do large sell orders affect stock price? | The volume required to significantly move the price of a security depends completely on the orderbook for that particular security. There are a variety of different reasons and time periods that a security can be halted, this will depend a bit on which exchange you're dealing with. This link might help with the halt aspect of your question: https://en.wikipedia.org/wiki/Trading_halt |
How much percent of my salary should I use to invest in company stock? | I would not hold any company stock for the company that provides your income. This is a too many eggs in one basket kind of problem. With a discounted stock purchase plan, I would buy the shares at a 10% discount and immediately resell for a profit. If the company prevents you from immediately reselling, I don't know if I would invest. The risk is too great that you'll see your job lost and your 401k/investments emptied due to a single cause. |
What can I do when the trading price of a stock or ETF I want to buy is too high? | If you find a particular stock to be overvalued at $200 for example and a reasonable value at $175, you can place a limit order at the price you want to pay. If/when the stock price falls to your desired purchase price, the transaction takes place. Your broker can explain how long a limit order can stay open. This method allows you to take advantage of flash crashes when some savvy stock trader decides to game the market. This tactic works better with more volatile or low-volume stocks. If it works for an S&P500 tracking ETF, you have bigger problems. :) Another tactic is to put money into your brokerage cash account on a regular basis and buy those expensive stocks & funds when you have accumulated enough money to do so. This money won't earn you any interest while it sits in the cash account, but it's there, ready to be deployed at a moment's notice when you have enough to purchase those expensive assets. |
How much should a new graduate with new job put towards a car? | most of the people who lurk in money.se will probably tell you to spend as little as possible on a car, but that is a really personal decision. since you live with your parents, you can probably afford to waste a lot of money on a car. on the other hand, you already have a large income so you don't really have the normal graduate excuses for deferring student loans and retirement savings. for the sake of other people in a less comfortable position, here is a more general algorithm for making the decision: |
How much should a new graduate with new job put towards a car? | I think the answer to how much you "should" spend depends on a few more questions: Once you answer these questions I think you'll have a better idea of what you should spend. If you have no financial goals then what kind of car you buy doesn't really matter. But if your goals are to build and accumulate wealth both in the short and long term then you should know that, by the numbers, a car is terrible financial investment. A new car loses thousands of dollars in value the moment you drive it off the lot. Buy the cheapest, reliable commuter you can ($5k or less) and use the extra money to pay off your debts. Then once your debts are paid off start investing that money. If you continue this frugal mindset with your other purchases (what house to buy, what food to eat, what indulgences to indulge in, etc...) and invest a bit, I think you'll find it pretty easy to create a giant amount of wealth. |
I'm thinking of getting a new car … why shouldn't I LEASE one? | You SHOULDN'T lease one if you are going to get an economy car, if you don't drive too much (<15K / year), and you want to hang on to the car for a long time. Otherwise, if you are a regular driver, driving a leased new quality car can be cost effective. Many cars now have bumper-to-bumper warranties that last as long as the lease (say 80K). So there is rarely any extra costs apart from regular maintenance. The sweet spot for most new cars is in the 5th, 6th, or 7th years, after they are paid off. But at that point, you may find you have maintenance bills that are approaching an average of $200 - $300 per month. In which case, a lease starts to look pretty good. I owned a 7 year old Honda Accord that cost only $80 less per month in maintenance than the new leased VW that replaced it. Haven't looked back after that. Into my 3rd car and 9th year of leasing. |
Prices go up and salary doesn't: where goes delta? | I expected a word or two on the price elasticity of demand here :) Andrey, Your question needs slight revision in its current form. Rising prices actually do not mean increased profitability for a company. The quantity they sell also pays a huge part and actually is correlated to the price at which they sell the goods (and other factors such as the price at which their competitor sells the goods etc., but we will ignore it for simplicity). The net profit of sales for any firm is equal to (Qty x Sale Price) - COGS - SG&A - taxes - other expenses where, COGS means cost of goods sold SG&A means sales, general and admin costs (e.g., cleaning the inventory storage area daily so that the goods stay fresh etc.) other expenses include any miscellaneous other costs that the firm incurs to make the sale. Now, if everything in that equation remains same (COGS, SG&A, taxes, and other expenditures), rising prices will only translate into a higher profit if the quantity does not fall by the same margin. Prices may also rise simply as a response to risking COGS, SG&A or other expenditures --the latter may be observed in inflationary environments. In such a case, the supplying firm can end up losing its profit margin if the quantity falls by more than the price rise. |
Does my net paycheck decrease as the year goes on due to tax brackets filling up? | No, you will (generally speaking) not see a decrease in your net earnings from crossing a tax bracket: This means that your highest marginal rate (the top bracket you fall into) only applies to the portion of your income that is in that bracket, not your total income. This helps ensure that your total tax burden does not increase measurably from crossing a tax bracket. Be aware that you can still see measurable changes in your total taxes due if increases in income make you no longer eligible for certain deductions and/or benefits that were otherwise reducing your tax burden, but this is not the same as how changes in your highest marginal rate affect your overall average tax rate. Note that when you see a rate table such as the one on efile.com's federal income tax rates page or on Wikipedia's Income tax in the United States page, the rates listed are for each segment of income, not for your overall income: In other words the 15% rate below (for 2014, filing single) only applies to the portion of your income falling between the listed numbers, not to income below it or above it: that would be calculated under the respective rates given. You can use the i1040tt tax tables to gain a sense of how this works in practice: (The linked resource is for 2014 taxes) The threshold in 2014 for the 25% rate vs 15% was $36,900. Using the linked table, if you were single and made between 36,850 and 36,900 in gross income, your tax liability before other considerations was $5,078. If you made between 36,900 and 36,950, your base tax liability was $5,088. |
Can I open a personal bank account with an EIN instead of SSN? | According to IRS Publication 1635, Understanding your EIN (PDF), under "What is an EIN?" on page 2: Caution: An EIN is for use in connection with your business activities only. Do not use your EIN in place of your social security number (SSN). As you say your EIN is for your business as a sole proprietor, I would also refer to Publication 334, Tax Guide for Small Business, under "Identification Numbers": Social security number (SSN). Generally, use your SSN as your taxpayer identification number. You must put this number on each of your individual income tax forms, such as Form 1040 and its schedules. Employer identification number (EIN). You must also have an EIN to use as a taxpayer identification number if you do either of the following. Pay wages to one or more employees. File pension or excise tax returns. If you must have an EIN, include it along with your SSN on your Schedule C or C-EZ as instructed. While I can't point to anything specifically about bank accounts, in general the guidance I see is that your SSN is used for your personal stuff, and you have an EIN for use in your business where needed. You may be able to open a bank account listing the EIN as the taxpayer identification number on the account. I don't believe there's a legal distinction between what makes something a "business" account or not, though a bank may have different account offerings for different purposes, and only offer some of them to entities rather than individuals. If you want to have a separate account for your business transactions, you may want them to open it in the name of your business and they may allow you to use your EIN on it. Whether you can do this for one of their "personal" account offerings would be up to the bank. I don't see any particular advantages to using your EIN on a bank account for an individual, though, and I could see it causing a bit of confusion with the bank if you're trying to do so in a way that isn't one of their "normal" account types for a business. As a sole proprietor, there really isn't any distinction between you and your business. Any interest income is taxable to you in the same way. But I don't think there's anything stopping you legally other than perhaps your particular bank's policy on such things. I would suggest contacting your bank (or trying several banks) to get more information on what account offerings they have available and what would best fit you and your business's needs. |
Will prices really be different for cash and cards? | My guess would be for small merchants there could be a small difference. For large merchants, the cash is also at a cost equivalent to the card fees. Check for my other answer at How do credit card companies make profit? |
Investing small amounts at regular intervals while minimizing fees? | Keep it simple: mutual funds (preferably index, low fee or ETF linked funds) do make a nice start for your little princess college fund. You dont need a real fortune to offset the trading cost of an online broker but if your really going to take advantage of dollar cost averaging, you might want to invest into a trusted fund company. Do your research, it is worth it. Ignore what the investment salesman is saying, he works for his wealth, not yours. A good DIY strategy, either joint with your own retirement account agregate or on a low cost index fund will make wonders. Keep in mind to be resilient: you will cash out when the princess will be in college in 20 yerars. Make sure to make proper time horizon investment and allocation. Cheers, All the best. Feel free to edit |
Calculate investment's interest rate to break-even insurance cost [duplicate] | I wouldn't call it apples and oranges. This is literally an opportunity cost calculation. You can safely assume S&P500 will perform at least 11% over any 10 year period. Since failing companies are delisted and replaced with new growing companies, the market should continue to grow. No, it's not guaranteed. Lets use an aggressive number for inflation, 4%, leaving a 7% ROR estimate for S&P500. I assume OP has better credit than me, assume a rate around 3.5%. So it looks like net 3.5% ROR. The PMI erases that. You have to continue paying it until you pay off the loan. Put 20% down, get a 15 year fixed at lowest rate. Pay it off quicker. |
Pay off car or use money for down payment | To focus on your question.. pay it off then trade in. The reason is because say you just have 14k laying around and buy a car for 14k, you must pay 14k plus tax. If you are in one of the states that allows the tax break, then trading the 14k valued vehicle in for a 14k vehicle will nullify your sales tax. As per your question, if you traded the car in at 7k, you would then owe 7k plus tax. You only have 7k..so how would you pay for the tax and why would you want to? Pay off the car and you'll have 14k of tax free off any car. |
Is it ever logical to not deposit to a matched 401(k) account? | The other answers assumed student loan debt -- and for that, it's rarely worth it (unless your company only offers managed plans w/ really bad returns, or the economy recovers to the point where banks are paying 5% again on money market accounts) ... but if it's high rate debt, such as carrying a credit card debt, and the current rate of returns on the 401k aren't that great at the time, it would be worth doing the calculations to see if it's better to pay them down instead. If you're carrying extremely high interest debt (such as 'payday loans' or similar), it's almost always going to be worth paying down that debt as quickly as possible, even if it means forgoing matching 401k payments. The other possible reason for not taking the matching funds are if the required contributions would put you in a significant bind -- if you're barely scraping by, and you can't squeeze enough savings out of your budget that you'd risk default on a loan (eg, car or house) or might take penalties for late fees on your utilities, it might be preferable to save up for a bit before starting the contributions -- especially if you've maxed your available credit so you can't just push stuff to credit cards as a last resort. |
Do Americans really use checks that often? | Ever since my apartment complex started accepting rent payments online, I've almost never written a check. I use my debit card for everything. And I get paid by direct deposit. |
Saving $1,000+ per month…what should I do with it? | Daniel, first of all, I'm jealous of your predicament. That said, I think you've gotten some good advice already, so I won't repeat what's been said. But I will throw out a few ideas that haven't come up. My first thought is that you may be underestimating upcoming expenses. It sounds like your current expenses are low, and that's great! I'm impressed that you're living below your means, and looking for the best way to use your extra cash. But you may not be thinking of a few things. You have a girlfriend, and maybe your relationship isn't such that you are planning a wedding quite yet. But, regardless of whether your current girlfriend is your future life partner or not, if you think marriage may be in your future at all, you'll save yourself a lot of stress if you've got some savings for a wedding in place before you're ready to commit. Next, what are you driving? If it's a good car that you expect to last you another 10 years, you're probably ok right now. But if you may need to replace your vehicle in the next few years, start saving now and you may be able to buy it outright. (I expect your interest rate on financing a car would be higher than your current student loan rates, so I would save for a car before paying down loans with such beautiful rates.) A house has already been discussed, and there was also mention of additional education, and both of those require a solid financial plan that begins far in advance. In summary, I think you need a lot more than $5K in savings. Sure, have some fun, and take advantage of opportunities to travel, etc, as they come along, but if you're able to bump your savings by $500 to $1000/month, I think you'll really be glad you did. When it comes time for a new car, or you find you're ready to settle down, it will be nice to have somewhere to draw from, and if there's only $5K in your savings, you may come to regret choices you made when you were 22. |
Are there any disadvantages to DHA Investment Properties? | Well, I am an investor/ Lessor under DHA properties. Oflate, DHA lost it identity as a Govt agency and try to imitate a worst (not the best) real eastate agent. Every year rental valuation is a drama or waste of time and money to lessor. They pull down the rent by 10 to 22% and ask for a secondary valuation for no reasons. They don't even agree with market evidence and start bullying or black mailing tactics to force you to aceept a below market rent or the threat of third review , a very expensive review shared 50% by lessor and rest the poor tax payers! The thir review also badly influenced by DHA by submitting biased valuations and thereby destroying the independence of valuation. The API appointed valuer neither follow the DHA gudie nor the API guide and also ignore the market reality and take the average rent for the area. You also losse 14 to 18% as management fees paid to DHA. Selling also a problem and its high time the CWG and the Minster in charge of the DHA must institute an independent investigation to expose the potential nexus between the valuers and the DHA and how the lessor (a self funded retiree, pensioners and others). I already lodged a complaint with Ombudsman and waiting for a reply. There are 14 Lessors all in a Private street (Only DHA leased property in that street) near 213 Ray rd Epping 2121 that are leased to DHA for more than 10 years. Please note most of those Lessors almost lost $10000 per year because DHA under cut the rent to them when they paid me the market rent for many years. DHA by mistake send the rent paid to all. We have called for the details of rent paid to all the 14 lessors in that private street from 2008 todate under the Freedom of Information Act and waiting. |
Estimated Taxes after surge in income | Well a definitive answer would require a lot of information. Instead of posting that kind of info online, you should take a look at the instructions for Form 2210 and in particular "Schedule AI -- Annualized Income Installment Method," which corrects the penalty for highly variable income. Using this form you will likely be able to avoid the penalty, but it is hard to know for sure. |
Please explain: What exactly is a CDS or “Credit Default Swap”? | From my understanding, a CDS is a financial product to buy protection against an event of "default" (default of payment). Example: if General Motors owes me money $10,000,000 (because I own GM bonds for example) and I wish to protect myself against the event of GM not repaying the money they owe me (event called "credit default"), I pay FinancialCompany_X (the seller of the CDS) perhaps $250,000 per year against the promise that FinancialCompany_X will pay me in case GM is not paying me. This way I protected myself against that risk. FinancialCompany_X took the risk (against money). A CDS is in fact an insurance. Except they don't call it an insurance which enabled the financial industry to avoid the regulation that applies to insurances. There is a lot of infos here: http://en.wikipedia.org/wiki/Credit_default_swap |
How does the price of oil influence the value of currency? | Because we need energy in the form of oil. If more of our money is spent on oil, there is less money to spend on other items especially luxuries like dining out and new cars (ironically) Since there is less money available, the price of other things shift with it and the whole economy moves. Since less money is available, the value of a single dollar goes up. Basically, it is because we as a species (let alone nations) are unbelievably dependent on having oil at this point in our existence. How do currency markets work? What factors are behind why currencies go up or down? |
Should the poor consider investing as a means to becoming rich? | Definitions are in order: These definitions are important. Someone making 1,000,000 a year who spends all of it is poor. Someone who makes 500K, spends 450K a year and has three million in stocks and a paid-for million dollar home may be rich but they can't retire. They need another seven to eight million to retire. Someone with a million dollars in assets who makes 40K a year through their job, can be Financially Independent and retire. This last example is important. In The Millionaire Next Door the authors share their discovery that the average millionaire accumulated their wealth with just a working income of around 50K (the book is a bit dated so the number should be elevated if you adjust for inflation). Finance Independent is a strange thing to wrap your head around and people with high incomes often fall victim to misunderstanding it. When figuring out how much a person needs to accumulate for their "nest egg", their working income is not a direct variable. Their spending and savings rate are. A doctor making 500K, who spends 450K needs to work for 51 years if they are planning to keep spending 450K/year (adjusted for inflation) forever. Someone making 60K starting at age 21 who saves 18K (30%), could retire at 49. Someone with a truly low income and poor, say 30K and under and living in a old developed nation, investing will help them a bit. Say they save 10% of their income, by the time they reach 65 (the typical age federal retirement pensions begin), they'll have enough money to live off of in perpetuity and in comfort. They'll actually have a higher retirement income than income while they were working. But, it is challenging at those levels to save 10% of your net income. Events like your car randomly deciding to break down one day can destroy an entire year's saving. |
Should I Pay Off my Student Loan Debts First or Invest in an Index Fund? | Pay off the debt first. Life circumstances change without notice, and starting any stage of life with a debt puts you at a disadvantage. Luckily, your debt is small. Please also consider accumulating a 6 month emergency fund before making investments. This will further protect you when life hands you a curveball. |
Single investment across multiple accounts… good, bad, indifferent? | The other issue you could run into is that each deferred account is going to be subject to its own RMD's (Required Minimum Distributions) when you've retired or hit 70.5 years of age. Roth's don't generally care about RMD's at first, but are still subject to them once the person that created the Roth has passed. Having fewer accounts will simplify the RMD stuff, but that's really only a factor in terms of being forced to sell 'something' in each account in order to make the RMD. Other than that, it's just a matter of remembering to check each account if you come to a decision that it's time to liquidate holdings in a given security, lest you sell some but forget about the rest of it in another account. (and perhaps as Chris pointed out, maybe having to pay fee's on each account for the sale) Where this really can come into play is if you choose to load up each individual account with a given kind of investment, instead of spreading them across the accounts. In that case RMD's could force you into selling something that is currently 'down' when you want to hold onto it, because that is your only choice in order to meet RMD's for account X. So if you have multiple accounts, it's a good idea to not 'silo' particular vehicles into a single account, but spread similar ivestments across multiple accounts, so you always have the choice in each account of what to sell in order to meet an RMD. If you have fewer accounts, it's thus a lot easier to avoid the siloing effect |
How could I find someone to find a room for me to live in? (For a fee, of course.) | There are services, usually associated with real estate agents, that provide apartment search services for relocating professionals. I was very underimpressed when I was offered the use of such a service and did better on my own, but I did have the company paying for a hotel room while I searched so I had time to investigate alternative channels -- and in fact found and took a place being offered by a co-worker's father. But if you're really looking for "a room" in a shared living situation, and you aren't already on campus talking to other students, I agree that the school's housing office, or the dorms and/or fraternity houses and/or independent living groups are your best bet. In a college town most roommate openings get snapped up pretty quickly and are more likely to go to someone who is a known or vouched-for quantity. |
Finding stocks following performance of certain investor, like BRK.B for Warren Buffet | Since the vast majority of fund managers/big investors run private entities, it's not possible to track their performance. It's possible to look at what they are holding (that's never real-time information) and emulate their performance. |
What investments are positively related to the housing market decline? | During the actual decline, there's very little money to be made and a lot to lose. When housing prices tank, everybody loses; the banks are exposed to higher risk of mortgage defaults, insurers start having to pay out more for "gas leaks" claiming over-leveraged homes, realtors starve because their commissions go down (even as foreclosures put more homes on the market) and people faced with financial uncertainty will stay put in their current homes instead of moving elsewhere. And homebuilders and contractors go broke because nobody wants to spend cash on a new home or major reno that looks like a losing investment. There can be some bright spots. Smaller hardware stores will make money as people do relatively small DIY projects to improve the condition of their current home. The larger stores get this business too, but it tends to be more than offset by the loss of contractor business (FAR more lucrative, and something the ACEs and True-Values don't really get in on). Of course the "grave-robbers" do well; gold buyers, auctioneers, pawn shops, repo firms; these guys eat well when other people are defaulting on loans or have to sell their stuff for fast cash. Most of these businesses are not publicly traded. One thing that was seen was increased revenues at discount retailers like Wal-Mart, Dollar General etc. When things are bad, people in the middle class who had avoided these stores for image or morality reasons learn to swallow their pride and buy discount store brands for half the price of national brand names. That lessens the blow felt by the discount retailers as overall consumer spending decreases; the pie shrinks, but the discount retailers get a bigger slice of the mandatory spending on food, clothing, etc (and the higher-level retailers get it in the shorts). When the pie starts to grow again as consumer spending picks back up, the discount retailers retain their percentage for a while, as the fickle middle class can afford to buy more from the discount retailer but can't yet afford to take their business back to the shopping mall stores. This produces a flatter, "offset" price graph for discount retailers through the business cycle; they don't lose as early or as much as everyone else in a major downturn, and they turn it around sooner while everyone else may still be on the way down, but as everything gets better for everyone on the upswing it's less great for the discount guys, as they start losing customers and their dollars to competitors with better stuff, even as the ones they keep spend more. This doesn't generally manifest as a true negative correlation, but it can be a good hedge. The number one money-making investment in a tanking economy is gold. When things go down the crapper, everyone wants gold, so if you see the train wreck coming far enough in advance, you can make a big move to gold and really make some money off that investment. For instance, when the first whispers about ARM adjustments and mass defaults reached the public consciousness in mid-2005, gold bullion jumped from about $400 to over $700 in a nine-month period. It cooled off again in 06-07 but only to about $600/oz, and then in late 07 it steadily climbed to peak at $1000/oz; even if you got in late, an investment of $1000 in July '07 in "bulk" gold would have netted you $650 in one year; that's a 65% APY. Then the economy hit bottom and a lot of investors ditched gold for investments they thought would pull back out of their holes quickly; For just a little while in '08 gold was down to $700 again. Then came all the government reports; unemployment not budging, home prices still declining, a lot of banks still hiding just how bad their position was. If you had seen that it was going to be bad, bad, bad, like a lot of now-billionaire hedge fund investors did, a $1000 investment in gold in July 05, and then cashing out at the tops of the peaks and buying back in at the major troughs, would be worth almost $4000 today. That's a 400% return over 7 years, or an annual average yield of 57%. There simply hasn't been anything like that in the last 7 years. |
For what dates are the NYSE and U.S. stock exchanges typically closed? | Stumbled upon this question, I've found the updated dates for 2016 and 2017 in a more permanent location. https://www.nyse.com/markets/hours-calendars |
Why would I buy a bond with a negative yield? | Perhaps something else comes with the bond so it is a convertible security. Buffett's Negative-Interest Issues Sell Well from 2002 would be an example from more than a decade ago: Warren E. Buffett's new negative-interest bonds sold rapidly yesterday, even after the size of the offering was increased to $400 million from $250 million, with a possible offering of another $100 million to cover overallotments. The new Berkshire Hathaway securities, which were underwritten by Goldman, Sachs at the suggestion of Mr. Buffett, Berkshire's chairman and chief executive, pay 3 percent annual interest. But they are coupled with five-year warrants to buy Berkshire stock at $89,585, a 15 percent premium to Berkshire's stock price Tuesday of $77,900. To maintain the warrant, an investor is required to pay 3.75 percent each year. That provides a net negative rate of 0.75 percent. |
New business owner - How do taxes work for the business vs individual? | Through your question and then clarification through the comments, it looks like you have a U.S. LLC with at least two members. If you did not elect some other tax treatment, your LLC will be treated as a partnership by the IRS. The partnership should file a tax return on Form 1065. Then each partner will get a Schedule K-1 from the partnership, which the partner should use to include their respective shares of the partnership income and expenses on their personal Forms 1040. You can also elect to be taxed as an S-Corp or a C-Corp instead of a partnership, but that requires you to file a form explicitly making such election. If you go S-Corp, then you will file a different form for the company, but the procedure is roughly the same - Income gets passed through to the owners via a Schedule K-1. If you go C-Corp, then the owners will pay no tax on their own Form 1040, but the C-Corp itself will pay income tax. As far as whether you should try to spend the money as business expense to avoid paying extra tax - That's highly dependent on your specific situation. I'd think you'd want to get tailored advice for that. |
How do I calculate two standard deviations away from the stock price? | The formula for standard deviation is fairly simple in both the discrete and continuous cases. It's mostly safe to use the discrete case when working with adjusted closing prices. Once you've calculated the standard deviation for a given time period, the next task (in the simplest case) is to calculate the mean of that same period. This allows you to roughly approximate the distribution, which can give you all sorts of testable hypotheses. Two standard deviations (σ) away from the mean (μ) is given by: It doesn't make any sense to talk about "two standard deviations away from the price" unless that price is the mean or some other statistic for a given time period. Normally you would look at how far the price is from the mean, e.g. does the price fall two or three standard deviations away from the mean or some other technical indicator like the Average True Range (an exponential moving average of the True Range), some support level, another security, etc. For most of this answer, I'll assume we're using the mean for the chosen time period as a base. However, the answer is still more complicated than many people realize. As I said before, to calculate the standard deviation, you need to decide on a time period. For example, you could use S&P 500 data from Yahoo Finance and calculate the standard deviation for all adjusted closing prices since January 3, 1950. Downloading the data into Stata and applying the summarize command gives me: As you can probably see, however, these numbers don't make much sense. Looking at the data, we can see that the S&P 500 hasn't traded close to 424.4896 since November 1992. Clearly, we can't assume that this mean and standard deviation as representative of current market conditions. Furthermore, these numbers would imply that the S&P 500 is currently trading at almost three standard deviations away from its mean, which for many distribution is a highly improbable event. The Great Recession, quantitative easing, etc. may have changed the market significantly, but not to such a great extent. The problem arises from the fact that security prices are usually non-stationary.. This means that the underlying distribution from which security prices are "drawn" shifts through time and space. For example, prices could be normally distributed in the 50's, then gamma distributed in the 60's because of a shock, then normally distributed again in the 70's. This implies that calculating summary statistics, e.g. mean, standard deviation, etc. are essentially meaningless for time periods in which prices could follow multiple distributions. For this and other reasons, it's standard practice to look at the standard deviation of returns or differences instead of prices. I covered in detail the reasons for this and various procedures to use in another answer. In short, you can calculate the first difference for each period, which is merely the difference between the closing price of that period and the closing price of the previous period. This will usually give you a stationary process, from which you can obtain more meaningful values of the standard deviation, mean, etc. Let's use the S&P500 as an example again. This time, however, I'm only using data from 1990 onwards, for the sake of simplicity (and to make the graphs a bit more manageable). The summary statistics look like this: and the graph looks like this; the mean is the central horizontal red line, and the top and bottom lines indicate one standard deviation above and below the mean, respectively. As you can see, the graph seems to indicate that there were long periods in which the index was priced well outside this range. Although this could be the case, the graph definitely exhibits a trend, along with some seemingly exogenous shocks (see my linked answer). Taking the first difference, however, yields these summary statistics: with a graph like this: This looks a lot more reasonable. In periods of recession, the price appears much more volatile, and it breaches the +/- one standard deviation lines indicated on the graph. This is only a simple summary, but using first differencing as part of the wider process of detrending/decomposing a time series is a good first step. For some technical indicators, however, stationary isn't as relevant. This is the case for some types of moving averages and their associated indicators. Take Bollinger bands for instance. These are technical indicators that show a number of standard deviations above and below a moving average. Like any calculation of standard deviation, moving average, statistic, etc. they require data over a specified time period. The analyst chooses a certain number of historical periods, e.g. 20, and calculates the moving average for that many previous periods and the moving/rolling standard deviation for those same periods as well. The Bollinger bands represent the values a certain number of standard deviations away from the moving average at a given point in time. At this given point, you can calculate the value two standard deviations "away from the value," but doing so still requires the historical stock price (or at least the historical moving average). If you're only given the price in isolation, you're out of luck. Moving averages can indirectly sidestep some of the issues of stationarity I described above because it's straightforward to estimate a time series with a process built from a moving average (specifically, an auto-regressive moving average process) but the econometrics of time series is a topic for another day. The Stata code I used to generate the graphs and summary statistics: |
Is there a term that better describes a compound annual growth rate (CAGR) when it is negative? | Not sure why CAGR is a problem for both directions. I used to be a physicist, and, when I taught classes in graduate school, students always wanted to use the terms "accelerate" and "decelerate" to describe "speeding up" and "slowing down". But acceleration is just a vector with magnitude and direction. There's nothing special about slowing down that it needs a special name. It's just acceleration in a direction opposite to the direction of motion. I think the same thing applies here. There's nothing special about negative growth rates that they need a special name. Just stick a minus sign in front of the number and you convey the required information. |
Should I purchase a whole life insurance policy? (I am close to retirement) | First of all, congratulations on being in an incredible financial position. you have done well. So let's look at the investment side first. If you put 400,000 in a decent index fund at an average 8% growth, and add 75,000 every year, in 10 years you'll have about $1.95 Million, $800k of which is capital gain (more or less due to market risk, of course) - or $560k after 30% tax. If you instead put it in the whole life policy at 1.7% you'll have about $1.3 Million, $133k of which is tax-free capital gain. So the insurance is costing you $430K in opportunity cost, since you could have done something different with the money for more return. The fund you mentioned (Vanguard Wellington) has a 10-year annualized growth of 7.13%. At that growth rate, the opportunity cost is $350k. Even with a portfolio with a more conservative 5% growth rate, the opportunity cost is $178k Now the life insurance. Life insurance is a highly personal product, but I ran a quick quote for a 65-year old male in good health and got a premium of $11,000 per year for a $2M 10-year term policy. So the same amount of term life insurance costs only $110,000. Much less than the $430k in opportunity cost that the whole life would cost you. In addition, you have a mortgage that's costing you about $28K per year now (3.5% of 800,000). Why would you "invest" in a 1.7% insurance policy when you are paying a "low" 3.5% mortgage? I would take as much cash as you are comfortable with and pay down the mortgage as much as possible, and get it paid off quickly. Then you don't need life insurance. Then you can do whatever you want. Retire early, invest and give like crazy, travel the world, whatever. I see no compelling reason to have life insurance at all, let alone life insurance wrapped in a bad investment vehicle. |
Which types of insurances do I need to buy? | Can you afford to replace your home if it suffers major damage in a fire or earthquake? Is your home at risk of flooding? In the United States, one can purchase insurance for each of these risks, but the customer has to ask about each of them. (Most default American homeowners policies cover fire and wind damage, but not earthquake or flooding. I am not sure about hurricane or tornado damage.) Your most cost-effective insurance against fire, earthquake, or flood damage is to prevent or minimize such damage. Practical measures cannot completely eliminate these risks, so homeowners' insurance is still a good idea (unless you are so rich you can easily afford to replace your home). But you can do things like: Your most cost-effective health insurance is to have clean water, wash your hands before handling food, eat healthily (including enough protein, vitamins, and minerals), exercise regularly, and not smoke. Your medical insurance can cover some of the inevitable large medical expenses, but cannot make you healthy. |
How does the importance of a cash emergency fund change when you live in a country with nationalized healthcare? | The issue is how likely you will have zero income for six months, and what are your monthly expenses. If you know the maximum medical bill you face that may allow you to save a smaller amount. But you still have to protect for that loss of income. The interuption could be because of job loss, medical emergency, or other family crisis. If I told you that the chances you would face a crisis dropped by 50%, would you decide that the need for an emergency fund went away? Or would you still create a fund? I think the need still exists just to avoid the downside if you aren't prepared. |
Are variable rate loans ever a good idea? | The simple answer is absolutely. With the parameters you quote, if you will pay off the loan in 82 months or less, you will be ahead taking the variable rate. You have put your finger on the important question as well. The higher initial interest is buying insurance against rates rising if you don't pay off the loan within 82 months. I suspect the contract loan term is much longer than that, because otherwise a variable rate does not make sense. You need to assess whether the insurance you are buying is worth the premium. You can look at what the formula for the variable rate would set the rate at today. It is probably somewhat higher than the 3.79%. That will tell you how much rates have to rise to make the variable rate go above 5.02%. Note that if the loan term is around 160 months (and it could well be 180 months, 15 years) you can afford the interest to rise to about 6.2% for the last half and you will still be dollars ahead. It could even rise higher if you discount expenses in the future. You could also hope that if inflation rises to make interest rates rise like that you will get cost of living raises that make this easy to pay. |
Paid cash for a car, but dealer wants to change price | I've been an F&I Manager at a new car dealership for over ten years, and I can tell you this with absolute certainty, your deal is final. There is no legal obligation for you whatsoever. I see this post is a few weeks old so I am sure by now you already know this to be true, but for future reference in case someone in a similar situation comes across this thread, they too will know. This is a completely different situation to the ones referenced earlier in the comments on being called by the dealer to return the vehicle due to the bank not buying the loan. That only pertains to customers who finance, the dealer is protected there because on isolated occasions, which the dealer hates as much as the customer, trust me, you are approved on contingency that the financing bank will approve your loan. That is an educated guess the finance manager makes based on credit history and past experience with the bank, which he is usually correct on. However there are times, especially late afternoon on Fridays when banks are preparing to close for the weekend the loan officer may not be able to approve you before closing time, in which case the dealer allows you to take the vehicle home until business is back up and running the following Monday. He does this mostly to give you sense of ownership, so you don't go down the street to the next dealership and go home in one of their vehicles. However, there are those few instances for whatever reason the bank decides your credit just isn't strong enough for the rate agreed upon, so the dealer will try everything he can to either change to a different lender, or sell the loan at a higher rate which he has to get you to agree upon. If neither of those two things work, he will request that you return the car. Between the time you sign and the moment a lender agrees to purchase your contract the dealer is the lien holder, and has legal rights to repossession, in all 50 states. Not to mention you will sign a contingency contract before leaving that states you are not yet the owner of the car, probably not in so many simple words though, but it will certainly be in there before they let you take a car before the finalizing contract is signed. Now as far as the situation of the OP, you purchased your car for cash, all documents signed, the car is yours, plain and simple. It doesn't matter what state you are in, if he's cashed the check, whatever. The buyer and seller both signed all documents stating a free and clear transaction. Your business is done in the eyes of the law. Most likely the salesman or finance manager who signed paperwork with you, noticed the error and was hoping to recoup the losses from a young novice buyer. Regardless of the situation, it is extremely unprofessional, and clearly shows that this person is very inexperienced and reflects poorly on management as well for not doing a better job of training their employees. When I started out, I found myself in somewhat similar situations, both times I offered to pay the difference of my mistake, or deduct it from my part of the sale. The General Manager didn't take me up on my offer. He just told me we all make mistakes and to just learn from it. Had I been so unprofessional to call the customer and try to renegotiate terms, I would have without a doubt been fired on the spot. |
When should I walk away from my mortgage? | To put a different spin on it, suppose you loaned someone $100K, expecting that they would pay it back, and then a little later they decided not too. They are perfectly capable of paying back the money, but just decided they didn't want to, and it seems the laws of your state said you couldn't make them. How would you feel about that? Since this is supposed to be an answer to the question, the answer is: "only if you can't afford to repay it". That's what foreclosure is supposed to be about, not you deciding you would rather not pay your debts. Let's not forget who pays that bill for you - every one of your bank's other customers. EDIT:For the people decrying the moral aspect and saying "it's perfectly alright because the law says that's the punishment and I'm willing to pay it", the law also says "if you kill someone, you go to prison for life". Does that mean that someone who decides they are going to kill someone has a perfect right to do it as long as they are prepared to take the consequences? |
Why do employer contributions count against HSA limits? | It's going to be quite a challenge to give a definitive answer to any "Why" question about law, and especially so for a question about tax law. One would need to try to dig up statements made by the legislators (and/or their aides) crafting and debating the law. As it is, tax law is already inconsistent in many ways. (Why are there people who can't contribute to a Roth IRA directly but can contribute to a Traditional and then immediately convert it to Roth? Why are maximum limits for 401(k) plans and IRAs separate rather than being one combined "retirement" savings maximum?) In the absence of some specific legislative statements saying that it was set up this way for some specific purpose, one must assume that it was written with the some goals as all tax law: As a compromise between various ideas, trying to accomplish some specific purpose. Feel free to add in some level of inefficiency and it being hard to completely understand the entirely of the tax law, which leads to things perhaps not being as "tidy" as one might hope for. But there's no reason to think that the people crafting the tax advantages for HSA plans had any reason to use 401(k) plans as a template, or wanted them to accomplish the same goals. |
Is there a list of OTC stocks being added to the major exchanges? | Reuters has a service you can subscribe to that will give you lots of Financial information that is not readily available in common feeds. One of the things you can find is the listing/delist dates of stocks. There are tools to build custom reports. That would be a report you could write. You can probably get the data for free through their rss feeds and on their website, but the custom reports is a paid feature. FWIW re-listing(listings that have been delisted but return to a status that they can be listed again) is pretty rare. And I can not think of too many(any actually) penny stocks that have grown to be listed on a major exchange. |
What are the downsides that prevent more people from working in high-income countries, and then retiring in low-income (and cost of living) ones? | I know folks who considered retiring to another country. Their conclusion was that while base cost of living was lower, the cost of the things that they enjoy doing -- not to mention the cost of spending time with friends they didn't want to give up -- would be sufficiently higher to erase most of the advantages. Those of us who grew up in or close to cities feel much the same way about moving out to less-populated and less-expensive parts of our own country. Basically, when cost of living is high it tends to be because there are more people who want to live there and are competing for resources (and driving prices up). Low cost of living is generally tied to less-desired locations, for the same reasons. IF you can find a location that appeals to you, and if you can get the resources there which your preferred lifestyle requires, this may make sense. For a while there were a number of professional writers moving from the US to Ireland, in part because the Irish tax structure heavily favored writers and other creative artists. (Katherine Kurtz spent several years living in a renovated Irish castle.) I'm not sure how many have stayed there after the novelty wore off. |
What emergencies could justify a highly liquid emergency fund? | If you engage in any kind of dangerous activity, the training courses will often state that an accident is not the result of a simple error. Examples of this include SCUBA and motorcycle training. Properly maintained equipment and training will mitigate many emergencies. Recently my dive buddy was 60' down, and ran out of air due to a tank O ring failure. She did not panic, and all of the dive team rallied to get her to the surface without anyone getting hurt, or even coming close to it. Financial tragedies are similar. In some cases, a single event triggers an avalanche of events that leads to tragedy. For example, hard economic times may lead to an employer doing 5% pay cuts across the board. However, they also cut bonuses and other ancillary pay items. This leads to a real cut of 20-25% of income. Leading a true cash flow emergency. As such cutbacks are needed, and this might put a strain on an already shaky relationship, this leads to that relationship ending, requiring more cash. Perhaps a car dies in this process or some household item needs repairing. Sure one can borrow money, but this tends to exasperate the avalanche rather than solve it. Having a low debt and a liquid emergency fund stops the avalanche in its tracks. In the case cited above issues would have been solved if the person lived off of 50% of their income rather than the way most people live (paycheck-to-paycheck). Also if there were savings for the car repair then that becomes a pain, but not a true stress. Think of a liquid emergency fund as "properly maintained equipment". It allows you to build a financial life on a solid foundation. In my own case, I attempted to live and invest without an emergency fund. It just did not work. I often had to liquidate investments at in opportune times, and could never really hold onto money. With the foundation of an emergency fund, one can build a prosperous life for one's self. You are welcome to try it your way, but if you fall, hopefully you will remember this answer and build your foundation first. |
Option on an option possible? (Have a LEAP, put to me?) | I can sell a PUT on it a bit out of the money, and I seemingly "win" either way: i.e. make money on selling the PUT, and either I get to pick up the stock cheaper if XYZ goes down, or the PUT expires worthless. In 2008, I see a bank stock (pick one) trading at $100. I buy that put from you, a $90 strike, and pay you $5 for the option. The bank blew up, and trades for a dollar. I then buy the $1 share and sell it to you for $90. You made $500 on the sale of the put, but lost $8900 when it went bad. You don't win either way, there is a chart you can construct (or a table) showing your profit or loss for every price of the underlying stock. When selling a put, you need to know what happens if the stock goes to zero since the odds of such an occurrence is non-trivial. A LEAP is already an option. With the new coding scheme for options, I'm not sure there's really any distinction between a LEAP and standard option, the LEAP just starts with a long-till-expiration time. There are no options on LEAPS that I am aware of, as they are options already. |
What is a good rental yield? | The rule of thumb I have always heard and what we rent our rental house at is 1% per month at the minimum (in the US). The rent has to cover the mortgage, the property taxes, the homeowners insurance, your income taxes (on the rent), the maintenance of the property and the times when the property is vacant. Even at 1% per month that doesn't leave a whole lot of profit compared to what you put in. I have no idea why anybody would buy a rental property in Australia if all they could get is 5% per year before expenses. They couldn't possibly be making money in that investment, not to mention the aggravations of getting late night phone calls because something broke in the rental house. No way I would make that investment. |
Is it ever logical to not deposit to a matched 401(k) account? | The original question was aimed at early payment on a student loan at 6%. Let's look at some numbers. Note, the actual numbers were much lower, I've increased the debt to a level that's more typical, as well as more likely to keep the borrower worried, and "up at night." On a $50K loan, we see 2 potential payoffs. A 6 year accelerated payoff which requires $273.54 extra per month, and the original payoff, with a payment of $555.10. Next, I show the 6 year balance on the original loan terms, $23,636.44 which we would need to exceed in the 401(k) to consider we made the right choice. The last section reflects the 401(k) balance with different rates of return. I purposely offer a wide range of returns. Even if we had another 'lost decade' averaging -1%/yr, the 401(k) balance is more than 50% higher than the current loan debt. At a more reasonable 6% average, it's double. (Note: The $273.54 deposit should really be adjusted, adding 33% if one is in the 25% bracket, or 17.6% if 15% bracket. That opens the can of worms at withdrawal. But let me add, I coerced my sister to deposit to the match, while married and a 25%er. Divorced, and disabled, her withdrawals are penalty free, and $10K is tax free due to STD deduction and exemption.) Note: The chart and text above have been edited at the request of a member comment. What about an 18% credit card? Glad you asked - The same $50K debt. It's tough to imagine a worse situation. You budgeted and can afford $901, because that's the number for a 10 year payoff. Your spouse says she can grab a extra shift and add $239/mo to the plan, because that' the number to get to a 6 year payoff. The balance after 6 years if we stick to the 10 year plan? $30,669.82. The 401(k) balances at varying rates of return again appear above. A bit less dramatic, as that 18% is tough, but even at a negative return the 401(k) is still ahead. You are welcome to run the numbers, adjust deposits for your tax rate and same for withdrawals. You'll see -1% is still about break-even. To be fair, there are a number of variables, debt owed, original time for loan to be paid, rate of loan, rate of return assumed on the 401(k), amount of potential extra payment, and the 2 tax rates, going in, coming out. Combine a horrific loan rate (the 18%) with a longer payback (15+ years) and you can contrive a scenario where, in fact, even the matched funds have trouble keeping up. I'm not judging, but I believe it's fair to say that if one can't find a budget that allows them to pay their 18% debt over a 10 year period, they need more help that we can offer here. I'm only offering the math that shows the power of the matched deposit. From a comment below, the one warning I'd offer is regarding vesting. The matched funds may not be yours immediately. Companies are allowed to have a vesting schedule which means your right to this money may be tiered, at say, 20%/year from year 2-6, for example. It's a good idea to check how your plan handles this. On further reflection, the comments of David Wallace need to be understood. At zero return, the matched money will lag the 18% payment after 4 years. The reason my chart doesn't reflect that is the match from the deposits younger than 4 years is still making up for that potential loss. I'd maintain my advice, to grab the match regardless, as there are other factors involved, the more likely return of ~8%, the tax differential should one lose their job, and the hope that one would get their act together and pay the debt off faster. |
Options revisited: Gold fever | Your plan already answers your own question in the best possible way: If you want to be able to make the most possible profit from a large downward move in a stock (in this case, a stock that tracks gold), with a limited, defined risk if there is an upward move, the optimal strategy is to buy a put option. There are a few Exchange Traded Funds (ETFs) that track the price of gold. think of them as stocks that behave like gold, essentially. Two good examples that have options are GLD and IAU. (When you talk about gold, you'll hear a lot about futures. Forget them, for now. They do the same essential thing for your purposes, but introduce more complexity than you need.) The way to profit from a downward move without protection against an upward move is by shorting the stock. Shorting stock is like the opposite of buying it. You make the amount of money the stock goes down by, or lose the amount it goes up by. But, since stocks can go up by an infinite amount, your possible loss is unlimited. If you want to profit on a large downward move without an unlimited loss if you're wrong and it goes up, you need something that makes money as the stock drops, but can only lose so much if it goes up. (If you want to be guaranteed to lose nothing, your best investment option is buying US Treasuries, and you're technically still exposed to the risk that US defaults on its debt, although if you're a US resident, you'll likely have bigger problems than your portfolio in that situation.) Buying a put option has the exact asymmetrical exposure you want. You pay a limited premium to buy it, and at expiration you essentially make the full amount that the stock has declined below the strike price, less what you paid for the option. That last part is important - because you pay a premium for the option, if it's down just a little, you might still lose some or all of what you paid for it, which is what you give up in exchange for it limiting your maximum loss. But wait, you might say. When I buy an option, I can lose all of my money, cant I? Yes, you can. Here's the key to understanding the way options limit risk as compared to the corresponding way to get "normal" exposure through getting long, or in your case, short, the stock: If you use the number of options that represent the number of shares you would have bought, you will have much, much less total money at risk. If you spend the same "bag 'o cash" on options as you would have spent on stock, you will have exposure to way more shares, and have the same amount of money at risk as if you bought the stock, but will be much more likely to lose it. The first way limits the total money at risk for a similar level of exposure; the second way gets you exposure to a much larger amount of the stock for the same money, increasing your risk. So the best answer to your described need is already in the question: Buy a put. I'd probably look at GLD to buy it on, simply because it's generally a little more liquid than IAU. And if you're new to options, consider the following: "Paper trade" first. Either just keep track of fake buys and sells on a spreadsheet, or use one of the many online services where you can track investments - they don't know or care if they're real or not. Check out www.888options.com. They are an excellent learning resource that isn't trying to sell you anything - their only reason to exist is to promote options education. If you do put on a trade, don't forget that the most frustrating pitfall with buying options is this: You can be basically right, and still lose some or all of what you invest. This happens two ways, so think about them both before you trade: If the stock goes in the direction you think, but not enough to make back your premium, you can still lose. So you need to make sure you know how far down the stock has to be to make back your premium. At expiration, it's simple: You need it to be below the strike price by more than what you paid for the option. With options, timing is everything. If the stock goes down a ton, or even to zero - free gold! - but only after your option expires, you were essentially right, but lose all your money. So, while you don't want to buy an option that's longer than you need, since the premium is higher, if you're not sure if an expiration is long enough out, it isn't - you need the next one. EDIT to address update: (I'm not sure "not long enough" was the problem here, but...) If the question is just how to ensure there is a limited, defined amount you can lose (even if you want the possible loss to be much less than you can potentially make, the put strategy described already does that - if the stock you use is at $100, and you buy a put with a 100 strike for $5, you can make up to $95. (This occurs if the stock goes to zero, meaning you could buy it for nothing, and sell it for $100, netting $95 after the $5 you paid). But you can only lose $5. So the put strategy covers you. If the goal is to have no real risk of loss, there's no way to have any real gain above what's sometimes called the "risk-free-rate". For simplicity's sake, think of that as what you'd get from US treasuries, as mentioned above. If the goal is to make money whether the stock (or gold) goes either up or down, that's possible, but note that you still have (a fairly high) risk of loss, which occurs if it fails to move either up or down by enough. That strategy, in its most common form, is called a straddle, which basically means you buy a call and a put with the same strike price. Using the same $100 example, you could buy the 100-strike calls for $5, and the 100-strike puts for $5. Now you've spent $10 total, and you make money if the stock is up or down by more than $10 at expiration (over 110, or under 90). But if it's between 90 and 100, you lose money, as one of your options will be worthless, and the other is worth less than the $10 total you paid for them both. |
Companies that use their cash to buy back stock, issue dividends, etc. — how does this this typically affect share price? | IBM is famous for spending lots of money on stock buyback to keep the stock price higher. The technique works, and investors in growth stocks generally prefer a high market prices to a taxable dividend payment. Dividends are ways to return shareholder value when a company generates a lot of cash, but doesn't have alot of growth. Electric and gas companies are a classic example of high-dividend companies. |
How do cashier's checks work and why are they good for scams? | There are two different issues at play here, and they are completely separate from each other: A bank or cashier's check is "safer" than a regular personal or business check because it avoids problem #1. Problem #2 exists with all kinds of paper checks. I assume the reason the warnings are about cashier's check moreso than personal checks, is simply because people already know to wait for personal checks to clear before handing over merchandise to the buyer. People are less likely to do that when receiving cashier's checks, but perhaps they still should if there is any doubt about the validity of the check. One could argue that a cashier's check actually provides a false sense of security due to this (to the receiver). On the flip side, if you are the payer, then a cashier's check could be thought of as more secure than a personal check because you don't have to reveal your bank account information to a stranger. |
Can you use external money to pay trading commissions in tax-free and tax-deferred accounts? | According to Publication 590, broker's commissions for stock transactions within an IRA cannot be paid in addition to the IRA contribution(s), but they are deductible as part of the contribution, or add to the basis if you are making a nondeductible contribution to a Traditional IRA. (Top of Page 10, and Page 12, column 1, in the 2012 edition of Pub 590). On the other hand, trustees' administrative fees can be paid from outside the IRA if they are billed separately, and are even deductible as a Miscellaneous Deduction on Schedule A of your income tax return (subject to the 2% of AGI threshold). A long time ago, when my IRA account balances were much smaller, I used to get a bill from my IRA custodian for a $20 annual administrative fee which I paid separately (but never got to deduct due to the 2% threshold). My custodian also allowed the option of doing nothing in which case the $20 would be collected from (and thus reduce) the amount of money in my IRA. Note that this does not apply to the expenses charged by the mutual funds that you might have in your IRA; these expenses are treated the same as brokerage commissions and must be paid from within the IRA. |
What is a better way for an American resident in a foreign country to file tax? | If you live outside the US, then you probably need to deal with foreign tax credits, foreign income exclusions, FBAR forms (you probably have bank account balances enough for the 10K threshold) , various monsters the Congress enacted against you like form 8939 (if you have enough banking and investment accounts), form 3520 (if you have a IRA-like local pension), form 5471 (if you have a stake in a foreign business), form 8833 (if you have treaty claims) etc ect - that's just what I had the pleasure of coming across, there's more. TurboTax/H&R Block At Home/etc/etc are not for you. These programs are developed for a "mainstream" American citizen and resident who has nothing, or practically nothing, abroad. They may support the FBAR/FATCA forms (IIRC H&R Block has a problem with Fatca, didn't check if they fixed it for 2013. Heard reports that TurboTax support is not perfect as well), but nothing more than that. If you know the stuff well enough to fill the forms manually - go for it (I'm not sure they even provide all these forms in the software though). Now, specifically to your questions: Turbo tax doesn't seem to like the fact that my wife is a foreigner and doesn't have a social security number. It keeps bugging me to input a valid Ssn for her. I input all zeros for now. Not sure what to do. No, you cannot do that. You need to think whether you even want to include your wife in the return. Does she have income? Do you want to pay US taxes on her income? If she's not a US citizen/green card holder, why would you want that? Consider it again. If you decide to include here after all - you have to get an ITIN for her (instead of SSN). If you hire a professional to do your taxes, that professional will also guide you through the ITIN process. Turbo tax forces me to fill out a 29something form that establishes bonafide residency. Is this really necessary? Again in here it bugs me about wife's Ssn Form 2555 probably. Yes, it is, and yes, you have to have a ITIN for your wife if she's included. My previous state is California, and for my present state I input Foreign. When I get to the state tax portion turbo doesn't seem to realize that I have input foreign and it wants me to choose a valid state. However I think my first question is do i have to file a California tax now that I am not it's resident anymore? I do not have any assets in California. No house, no phone bill etc If you're not a resident in California, then why would you file? But you might be a partial resident, if you lived in CA part of the year. If so, you need to file 540NR for the part of the year you were a resident. If you have a better way to file tax based on this situation could you please share with me? As I said - hire a professional, preferably one that practices in your country of residence and knows the provisions of that country's tax treaty with the US. You can also hire a professional in the US, but get a good one, that specializes on expats. |
Pay Yourself With Credit Card Make Money With Cash Back [duplicate] | This is basically a form of credit card kiting, it's not necessarily illegal but it can be. It is, however, against the TOS in pretty much every merchant agreement (including Paypal and Square), so you'd most likely have your account suspended, and the merchant could pursue legal action if they felt they could prove intent to deceive. It's not practical given actual fee structures, but even if it were, most merchants are quite good at detecting this sort of thing and quick to shut down accounts. |
What should we consider when withdrawing a large amount of money from a bank account? | You state "Any info will be appreciated", so here's some background information on my answer (you can skip to my answer): When I worked for banks, I was required to submit suspicious activity to the people above me by filling out a form with a customer's name, SSN, account number(s) and ID. You may hear in media that it is $10K or sometimes $5K. The truth is that it could be lower than that, depending on what the institution defines as suspicious. Every year we were required to take a "course" which implied that terrorists and criminals use cash regularly - whether we agree or disagree is irrelevant - this is what the course implied. It's important to understand that many people use cash-only budgets because it's easier than relying on the banking system which charges overdraft fees for going over, or in some cases, you pay more at merchants because of card usage (some merchants give discounts for cash). If someone has a budget of $10K a month and they choose to use cash, that's perfectly fine. Also, why is it anyone's business what someone does with their private property? This created an interesting contrast among differently aged Americans - older Americans saw the banking system as tyrannical busybodies whereas young Americans didn't care. This is part of why I eventually left the banking system; I felt sick that I had to report this information, but it's amazing how quick everyone is to accept the new rules. Notice how one of the comments asks you what you intend to do with the money, as if it's any of their business. Welcome to the New America©! My answer: If you withdraw $100,000, here is what will more than likely happen: Now, watch the anger at this answer because I'm telling you the truth. This article will explain why. Your very question had a negative 1, as if asking what you're asking is wrong (see the absurdity)! If Joseph Stalin ran for president in the United States, the majority of Americans would welcome him. You have good reason to be concerned; others at this site have noticed this as well. |
What to do with your savings in Japan | Been here in Japan 12 years mate, and you're right, the investment options here suck. Be very wary of them, they will take all your money in outrageous fees--3% in and 3% out of some "investment" options. It's a scam. Send the money back home and manage it there. I recommend setting up a Vanguard account back in the UK, then you can invest in Vanguard index funds. Vanguard charges no commission for buying and selling their funds when you have a Vanguard account. I have nearly all my money there (Vanguard US), and I use the free Personal Capital online software to understand how to best manage the allocations in my portfolio. Of course you'll lose a bit of money on wire transfer fees, but you'll more than make up for it if in the long-term, and they may also be offset by currency rate anyway (right now the yen is strong, so a good time to use it to buy GBP). Also you may never need to send the money back to Japan unless you plan on retiring here. |
If I go to a seminar held overseas, may I claim my flights on my tax return? | I think you can. I went to Mexico for business and the company paid for it, so if you are self employed you should be able to expense it. |
Is it OK to use a credit card on zero-interest to pay some other credit cards with higher-interest? | I am sure everyone is different, but it has helped me a great deal. I have had several card balances go up and the interest on those per month was more than $200 in just interest combined. I transferred the balances over to 0% for 15 months – with a fee, so the upfront cost was about $300. However, over the next 15 months at 0% I'm saving over $200 each month. Now I have the money to pay everything off at 14 months. I will not be paying any interest after that, and I cut up all of my cards so I won't rack up the bills with interest on them anymore. Now, if I can't buy it with a debit card or cash, I don't get it. My cards went up so high after remodeling a home so they were justified. It wasn't because I didn't pay attention to what I could afford. My brother, on the other hand, has trouble using credit cards properly and this doesn't work for him. |
If a stock doesn't pay dividends, then why is the stock worth anything? | Not sure how this has got this far with no obvious discussion about the huge tax advantages of share buy backs vs dividend paying. Companies face a very simple choice with excess capital - pay to shareholders in the form of a taxable dividend, invest in future growth where they expect to make more than $1 for every $1 invested, or buy back the equivalent amount of stock on the market, thus concentrating the value of each share the equivalent amount with no tax issues. Of these, dividends are often by far the worst choice. Virtually all sane shareholders would just rather the company put the capital to work or concentrate the value of their shares by taking many off the market rather than paying a taxable dividend. |
Tracking down forgotten brokerage account | A company as large as Home Depot will have a fairly robust Human Resources department and would probably be able to steer you in the right direction: odds are they know the name of the brokerage and other particulars. I did some googling around, their # is (1-866-698-4347). Different states have different rules about how long an institution can have assets abandoned before turning them over to the state. California, as an example, has an abandoned property search site that you can use. That being said, I had some penny stocks sitting in a brokerage account I never touched for about 20 years and when I finally logged back in there they were, still sitting there. |
Is expense to freelancers tax deductible? | Yes, but make sure you issue a 1099 to these freelancers by 1/31/2016 or you may forfeit your ability to claim the expenses. You will probably need to collect a W-9 from each freelancer but also check with oDesk as they may have the necessary paperwork already in place for this exact reason. Most importantly, consult with a trusted CPA to ensure you are completing all necessary forms correctly and following current IRS rules and regulations. PS - I do this myself for my own business and it's quite simple and straight forward. |
Why would you not want to rollover a previous employer's 401(k) when changing jobs? | Another minor reason not to rollover would be to avoid the pro-rata taxes when doing a backdoor Roth IRA contribution. |
What's the point of Ford loosening financing requirements? | The article states their reasons pretty clearly, and indicates that some people won't qualify under the new requirements that would have previously, they're not courting people with bad credit, they're just looking beyond credit score at other factors. They aren't opening floodgates for anyone with a pulse to get a car loan, just shifting things a bit to cast a slightly wider net. This is not new in the world of secured debt, the FHA has methodology for establishing a non-traditional credit report based on things like rental history, utility payments, auto-insurance payments, a person can't be declined an FHA loan for lack for lack of traditional credit history. I look beyond credit score as a landlord, a tenant with poor credit but a stellar rental history is more appealing than someone with great credit but a bad rental history. Vehicles and housing are very important to people, so they are likely to prioritize them above credit card payments or hospital bills. Time will tell, but it seems like a solid move in my view, they can refine their model over time and likely find a solid customer base among those who wouldn't qualify on credit score alone. |
What is inflation? | Money itself has no value. A gold bar is worth (fuzzy rushed math, could be totally wrong on this example figure) $423,768.67. So, a 1000 dollars, while worthless paper, are a token saying that you own %.2 of a gold bar in the federal reserve. If a billion dollars are printed, but no new gold is added to the treasury, then your dollar will devalue, and youll only have %.1 percent of that gold bar (again, made up math to describe a hypothetical). When dollars are introduced into the economy, but gold has not been introduced to back it up, things like the government just printing dollars or banks inventing money out of debt (see the housing bubble), then the dollar tokens devalue further. TL;DR: Inflation is the ratio of actual wealth in the Treasury to the amount of currency tokens the treasury has printed. |
Selling put and call Loss Scenario Examples | The question you are asking concerns the exercise of a short option position. The other replies do not appear to address this situation. Suppose that Apple is trading at $96 and you sell a put option with a strike price of $95 for some future delivery date - say August 2016. The option contract is for 100 shares and you sell the contract for a premium of $3.20. When you sell the option your account will be credited with the premium and debited with the broker commission. The premium you receive will be $320 = 100 x $3.20. The commission you pay will depend on you broker. Now suppose that the price of Apple drops to $90 and your option is exercised, either on expiry or prior to expiry. Then you would be obliged to take delivery of 100 Apple shares at the contracted option strike price of $95 costing you $9,500 plus broker commission. If you immediately sell the Apple shares you have purchased under your contract obligations, then assuming you sell the shares at the current market price of $90 you would realise a loss of $500 ( = 100x($95-$90) )plus commission. Since you received a premium of $320 when you sold the put option, your net loss would be $500-$320 = $180 plus any commissions paid to your broker. Now let's look at the case of selling a call option. Again assume that the price of Apple is $96 and you sell a call option for 100 shares with a strike price of $97 for a premium of $3.60. The premium you receive would be $360 = 100 x $3.60. You would also be debited for commission by your broker. Now suppose that the price of Apple shares rises to $101 and your option is exercised. Then you would be obliged to deliver 100 Apple shares to the party exercising the option at the contracted strike price of $97. If you did not own the shares to effect delivery, then you would need to purchase those shares in the market at the current market price of $101, and then sell them to the party exercising the option at the strike price of $97. This would realise an immediate loss of $400 = 100 x ($101-$97) plus any commission payable. If you did own the shares, then you would simply deliver them and possibly pay some commission or a delivery fee to your broker. Since you received $360 when you sold the option, your net loss would be $40 = $400-$360 plus any commission and fees payable to the broker. It is important to understand that in addition to these accounting items, short option positions carry with them a "margin" requirement. You will need to maintain a margin deposit to show "good faith" so long as the short option position is open. If the option you have sold moves against you, then you will be called upon to put up extra margin to cover any potential losses. |
Could someone place an independent film on the stock market? | Stock is a part ownership of a business. First there has to be a business that people want to own part of because they expect to make a profit from that ownership. Nobody is going to be interested if the business isn't worth anything. In other words: sure, you could try to start a movie production house to make this film and others... But unless you are already a major player AND already have a lot of money invested in the studio, forget it. This isn't GoFundMe or Kickstarter. Nobody is going to buy stock because they want a copy of the DVD that you promise will be available in two years' time. |
$700 guaranteed to not be touched for 15 years+, should I put it anywhere other than a savings account? | (Since you used the dollar sign without any qualification, I assume you're in the United States and talking about US dollars.) You have a few options here. I won't make a specific recommendation, but will present some options and hopefully useful information. Here's the short story: To buy individual stocks, you need to go through a broker. These brokers charge a fee for every transaction, usually in the neighborhood of $7. Since you probably won't want to just buy and hold a single stock for 15 years, the fees are probably unreasonable for you. If you want the educational experience of picking stocks and managing a portfolio, I suggest not using real money. Most mutual funds have minimum investments on the order of a few thousand dollars. If you shop around, there are mutual funds that may work for you. In general, look for a fund that: An example of a fund that meets these requirements is SWPPX from Charles Schwabb, which tracks the S&P 500. Buy the product directly from the mutual fund company: if you go through a broker or financial manager they'll try to rip you off. The main advantage of such a mutual fund is that it will probably make your daughter significantly more money over the next 15 years than the safer options. The tradeoff is that you have to be prepared to accept the volatility of the stock market and the possibility that your daughter might lose money. Your daughter can buy savings bonds through the US Treasury's TreasuryDirect website. There are two relevant varieties: You and your daughter seem to be the intended customers of these products: they are available in low denominations and they guarantee a rate for up to 30 years. The Series I bonds are the only product I know of that's guaranteed to keep pace with inflation until redeemed at an unknown time many years in the future. It is probably not a big concern for your daughter in these amounts, but the interest on these bonds is exempt from state taxes in all cases, and is exempt from Federal taxes if you use them for education expenses. The main weakness of these bonds is probably that they're too safe. You can get better returns by taking some risk, and some risk is probably acceptable in your situation. Savings accounts, including so-called "money market accounts" from banks are a possibility. They are very convenient, but you might have to shop around for one that: I don't have any particular insight into whether these are likely to outperform or be outperformed by treasury bonds. Remember, however, that the interest rates are not guaranteed over the long run, and that money lost to inflation is significant over 15 years. Certificates of deposit are what a bank wants you to do in your situation: you hand your money to the bank, and they guarantee a rate for some number of months or years. You pay a penalty if you want the money sooner. The longest terms I've typically seen are 5 years, but there may be longer terms available if you shop around. You can probably get better rates on CDs than you can through a savings account. The rates are not guaranteed in the long run, since the terms won't last 15 years and you'll have to get new CDs as your old ones mature. Again, I don't have any particular insight on whether these are likely to keep up with inflation or how performance will compare to treasury bonds. Watch out for the same things that affect savings accounts, in particular fees and reduced rates for balances of your size. |
Can you recommend some good websites/brokers for buying/selling stocks in India? | API wise there's just one at the retail level: Interactive Brokers (India). Brokerage is high though - 3.5 bps for F&O and 5 bps for cash. I've used Sharekhan (good, can get to 2 bps brokerage, trading client software, no API). Also used multiple other brokerages, and am advising a new one, Zerodha http://www.zerodha.com. API wise the brokers don't provide it easily to retail, though I've worked with direct access APIs at an institutional level. |
Pay off car loan entirely or leave $1 until the end of the loan period? | I used to work for Ally Auto (formerly known as GMAC) and I'd advise not to pay off the account unless you need to free up some debt in your credit report since until the account is paid off it will show that you owe your financial institution the original loan amount. The reason why I am saying not to pay-off the account is because good/bad payments are sent to the credit bureau 30 days after the due date of the payment, and if you want to increase your credit score then its best to pay it on a monthly basis, the negative side to this is you will pay more interest by doing this. If ever you decide to leave $1.00 in loan, I am pretty much sure that the financial institution will absorb the remaining balance and consider the account paid off. What exactly is your goal here? Do you plan to increase your credit score? Do you need to free up some debt? |
What happens if the term insurance company closes? | This depends on the jurisdiction, but such companies are typically subject to regulations (and audits) that require them to keep the customers' accumulated premiums very strictly separated from the company's own assets, liabilities and expenses. Additionally, they are typically only allowed to invest the capital in very safe things like government bonds. So, unless something truly catastrophic happens (like the US government defaulting on its bonds) or people in the company break the regulations (which would invovle all kinds of serious crimes and require complicity or complete failure of the auditors), your premiums and the contractual obligation to you would still be there, and would be absorbed by a different insurance company that takes over the defunct company's business. Realistically, what all this means is that insurance companies never go bankrupt; if they do badly, they are typically bought up by a competitor long before things get that bad. |
Is there an online cost-basis calculator that automatically accounts for dividend re-investments and splits? | Calculating and adjusting cost basis accurately is a daunting task, but there is a (paid) online tool, NetBasis, which will automatically calculate and adjust your cost basis. It is used by brokerage firms and Fortune 500 companies and is available to the public. Go to netbasis.com. All you need are the purchase and sale dates and shares of the stock or mutual fund and the system has the rest of the information, such as corporate actions (splits, spin-offs, etc), pricing, and dividends and it also will apply the appropriate IRS rules for inherited and gifted shares. The regulation also gives investors the option to choose calculation methods. Not only does NetBasis automatically calculate the method you choose, it will also give the results for all options and allow you to choose the best result. NetBasis also provides you with detailed supporting documentation which shows all of the calculations and the adjustments in chronological order. NetBasis has data going back as far as 1925, so it will accurately calculate cost basis for your old American Telegraph and Telephone shares. NetBasis also handles complex investment scenarios such as wash sales, short sales, return of capital, etc. Moderator's note: Disclosure: The answerer's profile indicates they are affiliated with NetBasis. |
What is a good size distribution for buying gold? | You are really tangling up two questions here: Q1: Given I fear a dissolution of the Euro, is buying physical gold a good response and if so, how much should I buy? I see you separately asked about real estate, and cash, and perhaps other things. Perhaps it would be better to just say: what is the right asset allocation, rather than asking about every thing individually, which will get you partial and perhaps contradictory answers. The short answer, knowing very little about your case, is that some moderate amount of gold (maybe 5-10%, at most 25%) could be a counterbalance to other assets. If you're concerned about government and market stability, you might like Harry Browne's Permanent Portfolio, which has equal parts stocks, bonds, cash, and gold. Q2: If I want to buy physical gold, what size should I get? One-ounce bullion (about 10 x 10 x 5mm, 30g) is a reasonably small physical size and a reasonable monetary granularity: about $1700 today. I think buying $50 pieces of gold is pointless: However much you want to have in physical gold, buy that many ounces. |
What is the meaning of “writing put options”? | Write means sell to open. It is called that because options writers are creating (i.e. writing) new contracts. No such thing as "reading" an option. |
Purchasing options between the bid and ask prices, or even at the bid price or below? | Yes, almost always. I trade some of the most illiquid single stock options, and I would be absolutely murdered if I didn't try to work orders between the bid/ask. When I say illiquid, I mean almost non-existent: ~50 monthly contracts on ALL contracts for a given underlying. Spreads of 30% or more. The only time you shouldn't try to work an order, in my opinion, is when you think you need to trade immediately (rare), if implied volatility (IV) has moved to such a degree that the market makers (MM) won't hit your order while they're offering fair IV (they'll sometimes come down to meet you at their "real" price to get the exchange's liquidity rebate), or if the bid/ask spread is a penny. For illiquid single stock options, you need to be extremely mindful of implied and statistical volatility. You can't just try to always put your order in the middle. The MMs will play with the middle to get you to buy at higher IVs and sell at lower. The only way you can hope that an order working below the bid / above the ask will get filled is if a big player overwhelms the MMs' (who are lined up on the bid and ask) current orders and hits yours with one large order. I've never seen this happen. The only other way is like you said: if the market moves against you, the orders in front of yours disappear, and someone hits your order, but I think that defeats the intent of your question. |
What are the alternatives to compound interest for a Muslim? | In the UK at least, we have Credit Unions. Credit Unions are not-for-profit organisations that don't pay interest on your balance, but instead give you a share of their profits at the end of the year (or at least my local branch do). This normally equates to around 1% of my balance. |
Accounting for reimbursements that exceed actual expenses | I've been in a very similar situation to yours in the past. Since the company is reimbursing you at a flat rate (I assume you don't need to provide documentation/receipts in order to be paid the per diem), it's not directly connected to the $90 in expenses that you mention. Unless they were taking taxes out that would need to be reimbursed, the separate category for Assets:Reimbursable:Gotham City serves no real purpose, other than to categorize the expenses. Since there is no direct relationship between your expenses and the reimbursement, I would list them as completely separate transactions: Later, if you needed to locate all of the associated expenses with the Gotham trip, gnucash lets you search on memo text for "Gotham" and will display all of the related transactions. This is a lot cleaner than having to determine what piece of the per diem goes to which expenses, or having to create a new Asset account every time you go on a trip. |
What assets would be valuable in a post-apocalyptic scenario? | Guns. Without them, any other conceivable asset would be taken from you. By someone with guns. |
Paid cash for a car, but dealer wants to change price | Don't take the car back! The dealership wants you to take it back to try and earn more money. Simply stated, the dealerships hate paid up front cash deals. They make money on the financing. So to call back and try to up their fee is them realizing their not making a large enough profit. Say thank you and move on. The deal is done!! |
Do market shares exhaust? | Everyone has a price. If nobody is selling shares, then increase the price you will buy them for. And then wait. Somebody will have some hospital bills to pay for eventually. I buy illiquid investments all the time, and thats typically what happens. Great companies do not have liquidity problems. |
Pensions, annuities, and “retirement” | With an annuity, you invest directly into an annuity with money you have earned as wages/salary/etc. You pay for it, and trade your payments into the annuity for guaranteed payments from the annuity issuer in the future. The more you pay in before the annuity payments begin, the more you will receive for your annuity payment. With a pension, most often you invest implicitly, rather than directly, into the pension. Rather than making a cash contribution on a regular basis, it is likely that your employer has periodically invested into the pension fund for you, using monies that would otherwise have been paid to you if there were no pension system. This is why your pension benefits are often determined based on years of service, your rate of pay, and similar factors. |
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