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Buying and selling the same stock | No, you can not cheat the IRS. This question is also based on the assumption that the stock will return to $1 which isn't always a safe assumption and that it will continue to cycle like that repeatedly which is also likely a false assumption. |
Reinvesting earnings increases the book value of equity? | The book value is Total Assets minus Total Liabilities and so if you increase the Total Assets without changing the Total Liabilities the difference gets bigger and thus higher. Consider if a company had total assets of $4 and total liabilities of $3 so the book value is $1. Now, if the company adds $2 to the assets, then the difference would be 4+2-3=6-3=3 and last time I checked 3 is greater than 1. On definitions, here are a couple of links to clarify that side of things. From Investopedia: Equity = Assets - Liabilities From Ready Ratios: Shareholders Equity = Total Assets – Total Liabilities OR Shareholders Equity = Share Capital + Retained Earnings – Treasury Shares Depending on what the reinvestment bought, there could be several possible outcomes. If the company bought assets that appreciated in value then that would increase the equity. If the company used that money to increase sales by expanding the marketing department then the future calculations could be a bit trickier and depend on what assumptions one wants to make really. If you need an example of the latter, imagine playing a game where I get to make up the rules and change them at will. Do you think you'd win at some point? It would depend on how I want the game to go and thus isn't something that you could definitively say one way or the other. |
What do brokers do with bad stock? | Market makers, traders, and value investors would be who I'd suspect for buying the stock that is declining. Some companies stocks can come down considerably which could make some speculators buy the stock at the lower price thinking it may bounce back soon. "Short sellers" are out to sell borrowed stocks that if the stock is in free fall, unless the person that shorted wants to close the position, they would let it ride. Worthless stocks are a bit of a special case and quite different than the crash of 1929 where various blue chip stocks like those of the Dow Jones Industrials had severe declines. Thus, the companies going down would be like Apple, Coca-Cola and other large companies that people would be shocked to see come down so much yet there are some examples in recent history if one remembers Enron or Worldcom. Stocks getting delisted tend to cause some selling and there are some speculators may buy the stock believing that the shares may be worth something only to lose the money possibly as one could look at the bankrupt cases of airlines and car companies to study some recent cases here. Circuit breakers are worth noting as these are cases when trading may be halted because of a big swing in prices that it is believed stopping the market may cause things to settle down. |
Why is Insider Trading Illegal? | I'm surprised at the tone of the answers to this question! Trading with insider information is corruption and encourages fraud. As in many areas, there's an ethical line where behavior the gap between "ok" and "illegal" or unethical is thin. The classic local government insider information example is when the local councilman finds out that a highway exit is being constructed in an area that consists mostly of farmland. Knowing this, he buys out the farmers at what they think is a premium, and turns around for 10x profit a few months later. In that context, do you think that the councilman acting on that insider information is committing a crime or ethical lapse? Most people say yes. Even in this case, the line is thin. If the same councilman has his finger on the pulse of growth patterns in the area, and realizes that the terrain makes a certain area a prime candiate for a highway and exit, buying up land would not be criminal -- but it would be risky as it creates a perception that he is abusing his position. |
Should I sell a 2nd home, or rent it out? | It sounds like you plan to sell sooner or later. If your opinion is that there is still room for the housing market to grow, make your bet and sell later. The real estate market is much less liquid than other markets you might be invested in, so if you do end up seeing trouble (another housing crash) you may be stuck with your investment for longer than you hoped. I see more risk renting the house out, but I don't see significantly more reward. If you are comfortable with the risk, by all means proceed with your plan to rent. My opinion is contrary to many others here who think real estate investments are more desirable because the returns are less abstract (you can collect the rent directly from your tenants) but all investments are fraught with their own risks. If you like putting in a little sweat equity (doing your own repairs when things break at your rental) renting may be a good match for you. I prefer investments that don't require as much attention, and index funds certainly fit that bill for me. |
Does bull/bear market actually make a difference? | The main difference between a bull market and a bear market is due the "the leverage effect". http://www.princeton.edu/~yacine/leverage.pdf The leverage effect refers to the observed tendency of an asset’s volatility to be negatively correlated with the asset’s returns. Typically, rising asset prices are accompanied by declining volatility, and vice versa. The term “leverage” refers to one possible economic interpretation of this phenomenon, developed in Black (1976) and Christie (1982): as asset prices decline, companies become mechanically more leveraged since the relative value of their debt rises relative to that of their equity. As a result, it is natural to expect that their stock becomes riskier, hence more volatile. More volatile assets in a bear market are not such good investments as less volatile assets in a bull market. |
Can I invest in the USA or EU from an Asian 3rd-world country, over the Internet? | Absolutely. It does highly depend on your country, as US brokerages are stricter with or even closed to residents of countries that produce drugs, launder money, finance terror, have traditional difficulty with the US, etc. It also depends on your country's laws. Some countries have currency controls, restrictions on buying foreign/US securities, etc. That said, some brokerages have offices world-wide, so there might be one near you. If your legal situation as described above is fortunate, some brokers will simply allow you to setup online using a procedure not too different from US residents: provide identification, sign tons of documents. You'll have to have a method to deliver your documentation in the ways you'd expect: mail, fax, email. E*Trade is the best starter broker, right now, imo. Just see how far you can go in the sign-up process. |
Best steps to start saving money for a fresh grad in Singapore? | Firstly, make sure annual income exceeds annual expenses. The difference is what you have available for saving. Secondly, you should have tiers of savings. From most to least liquid (and least to most rewarding): The core of personal finance is managing the flow of money between these tiers to balance maximizing return on savings with budget constraints. For example, insurance effectively allows society to move money from savings to stocks and bonds. And a savings account lets the bank loan out a bit of your money to people buying assets like homes. Note that the above set of accounts is just a template from which you should customize. You might want to add in an FSA or HSA, extra loan payments, or taxable brokerage accounts, depending on your cash flow, debt, and tax situation. |
Money market account for emergency savings | So long as you have complete, virtually instant access to funds through checks, debit card, or ATM transaction, then yes it would be a better option than a "vanilla" savings account. If it's in a brokerage account that you would need to process a transfer and potentially wait a few days for everything to settle, then I would just keep it in savings. The amount earned in interest isn't worth the extra hassle. A compromise might be to keep a few thousand in a savings account and the rest in a money market. That way you earn some interest and still have instant access to enough funds to cover most emergencies. |
Why are the banks and their customers in the United States still using checks? [duplicate] | In a system where electronic payment is well developed you can consider the following 2 scenarios: Now let us zoom in. Regardless of what costs are actually charged, it should not be hard to see which system is most (real cost) efficient once electronical payments are well developed. And so, the conclusion is not hard to reach: |
Placing limit order and stop loss on same stock at same time | Although this is possible with many brokers, it's not advisable. In many cases you may end up with both trades executed at the same time. This is because during the opening, the stock might spike up or down heavily, bid/ask spread widens, and both of your orders would get picked up, resulting in an instant loss. Your best bet is to place the stop manually sometime after you get filled. |
devastated with our retirement money that we have left | Get a job, if you don't have one right now. Take deductions from your paycheck for an IRA or 401K if the company has one. |
If I have all this stock just sitting there, how can I lend it out to people for short selling? | Lending of securities is done by institutional investors and mutual funds. The costs of dealing with thousands of individual investors, small share blocks and the various screw-ups and drama associated with each individual are too high. Like many exotic financial transactions, if you have to ask about it, you're probably not qualified to do it. |
How should I prepare for the next financial crisis? | Your asset mix should reflect your own risk tolerance. Whatever the ideal answer to your question, it requires you to have good timing, not once, but twice. Let me offer a personal example. In 2007, the S&P hit its short term peak at 1550 or so. As it tanked in the crisis, a coworker shared with me that he went to cash, on the way down, selling out at about 1100. At the bottom, 670 or so, I congratulated his brilliance (sarcasm here) and as it passed 1300 just 2 years later, again mentions how he must be thrilled he doubled his money. He admitted he was still in cash. Done with stocks. So he was worse off than had he held on to his pre-crash assets. For sake of disclosure, my own mix at the time was 100% stock. That's not a recommendation, just a reflection of how my wife and I were invested. We retired early, and after the 2013 excellent year, moved to a mix closer to 75/25. At any time, a crisis hits, and we have 5-6 years spending money to let the market recover. If a Japanesque long term decline occurs, Social Security kicks in for us in 8 years. If my intent wasn't 100% clear, I'm suggesting your long term investing should always reflect your own risk tolerance, not some short term gut feel that disaster is around the corner. |
What publicly available software do professional stock traders use for stock analysis? | Another one I have seen mentioned used is Equity Feed. It had varies levels of the software depending on the markets you want and can provide level 2 quotes if select that option. http://stockcharts.com/ is also a great tool I see mentioned with lots of free stuff. |
If I'm cash-flow negative, should I dollar-cost-average the money from my bonus over the entire year? | You will maximize your expected wealth by investing all the money you intend to invest, as soon as you have it available. Don't let the mythos of dollar cost averaging induce you to allocate more much money to a savings account than is optimal. If you want the positive expected return of the market, don't put your money in a savings account. That's especially true now, when you are certainly earning a negative real interest rate on your savings account. Dollar cost averaging and putting all your money in at the beginning would have the same expected return except that if you put all your money in earlier, it spends more time in the market, so your expected return is higher. Your volatility is also higher (because your savings account would have very low volatility) but your preference for investment tells me that you view the expected return and volatility tradeoff of the stock market as acceptable. If you need something to help you feel less stress about investing right away, think of it as dollar cost averaging on a yearly basis instead of monthly. Further, you take take comfort in knowing that you have allocated your wealth as you can instead of letting it fizzle away in real terms in a bank account. |
Anticipating being offered stock options in a privately held company upon employment. What questions should I ask? | Good questions. I can only add that it may be valuable if the company is bought, they may buy the options. Happened to me in previous company. |
Analyze stock value | A Bloomberg terminal connected to Excel provides the value correcting splits, dividends, etc. Problem is it cost around $25,000. Another one which is free and I think that takes care of corporate action is "quandl.com". See an example here. |
How to donate to charity that will make a difference? | In the. US, i'd suggest hitting the Charity Navigator website for evaluation of how efficiently various charities will use your money. At this point I won't donate money to anything that gets less than three stars unless I know the organization very well indeed -- and I've been progressively swapping out 3-star groups for 4-star organizations in the same category. Many of the groups reviewed by CN are international, so you might find it useful even if you're donating from/to elsewhere. |
How can I compare having accounts at various banks without opening an account? | I think that your best option is to use the internet to look for sites comparing the various features of accounts, and especially forums that are more focused on discussion as you can ask about specific banks and people who have those accounts can answer. "Requests for specific service provider recommendations" are off-topic here, so I won't go into making any of my own bank recommendations, but there are many blogs and forums out there focusing on personal finance. |
Are TD e-Series Funds worthwhile, or am I better off with ETFs? Why or why not? | M Attia, the advantages of the TD e-series are that they are a low cost way to index your portfolio as well it gives you to opportunity to invest small amounts at a time. With ETF's, purchasing small amounts at a time would simply get too expensive. |
What are the risks & rewards of being a self-employed independent contractor / consultant vs. being a permanent employee? | When I worked for myself it was bad because But Ultimately I gave up my business and went to work for a school teaching, and through a series of other jobs ended up in a very stable reliable trustworthy job. When I was younger the variable paycheck didn't outweigh the freedom. Now that I am a dad I only think about having insurance and a secure job. The other option to consider is having a regular job, and then doing a little side work for yourself. You get all the benefits of both (and all the detractions) |
Will the ex-homeowner still owe money after a foreclosure? | Yes, the borrower is responsible for paying back the full amount of the loan. Foreclosure gives the bank possession of the property, which they can (and do) sell. Any shortfall is still the borrower's responsibility. But, no, the bank can't sell the property for a dollar; they have to make a reasonable effort. Usually the sale is done through a sheriff's sale, that is, a more or less carefully supervised auction. Bankruptcy will wipe out the shortfall, and most other debts, but the downside is that most of the rest of your assets will also be sold to help pay off what you owe. Details of what you can keep vary from state to state. If you want to go this route, hire a lawyer. |
Should Emergency Funds be Used for Infrequent, but Likely, Expenses? | If you think about it, it's really all one big pot of money. The idea behind an "emergency fund" is that you want to make sure your financial life has stability: it's not going to be suddenly driven into the red, below $0. As long as that doesn't happen, you can figure out how to live your life as you want. The reason we separate out an "emergency fund" is to simplify decision making. In theory, every single purchase you make should include a consideration of how it destabilizes you. Every $100 you spend on groceries is $100 you won't be able to bring to bear if you get fired or have a major accident. In practice, this would be a crippling way of thinking about things. You don't know what emergencies can hit you, nor when they will hit. That's why they're "emergencies." If you had to think about them all the time, it'd be horrible! You would end up simply not thinking about it (like most people), and then the emergency hits when you don't have enough cash to stay solvent. The purpose of an "emergency fund" is to help make these decisions easier. If you have money set aside for "emergencies" that you only have to think about every now and then, you can make the decisions in the rest of your financial life without too much concern for them. You don't have to worry about that $100 in groceries because you are confident that if an emergency hits, that $100 won't be the straw that broke the camel's back because you have reserves to draw on. So you should define an "emergency fund" in a way which is most helpful for you to remain stable and solvent without having to fret about it too much. For most people, the criteria for tapping that fund is very high, because the goal is to not have to think about it all that much. If you wanted to, you could feel free to lump those "medium predictability" items into the emergency fund, but it just means you have to spend more time and effort thinking about the state of the fund. Every medium predictability purchase has to come with the thought process "what is the state of the emergency fund? Could this purchase meaningfully destabilize my ability to handle emergencies?" Your emergency fund might yo-yo under these extra purchases, which could force you to think about the state of your emergency fund for normal purchases. That'd be bad. Different people might want to think about things different ways. I'm a big-picture guy, so I prefer to think about all of my assets as one big account when I make a lot of my decisions. My wife, on the other hand, prefers not to have to think that way when she makes her purchases. For her, having a very discrete "emergency fund" has great value. For me, it has less. So when I look at the finances, I choose to lump the emergency funds in with, say, the funds to re-do our backyard (something we are looking at doing over the next 2-5 years). For me, that is the most natural way to deal with analyzing the risks -- I just have to be aware of how backyard purchases interact with our safety net. My wife prefers to keep those funds separate in her head, so that she can look at how to spend money on the backyard without thinking about how it affects our emergency readiness. While complicated, it shows that even within a household, it's possible to think about emergency funding two different ways. (it causes minimal headaches, though a fair bit of book-keeping) So define "emergency fund" however suits you and your life best. However, practically speaking, most people find it desirable to not put those medium predictability purchases into the same bucket as emergencies. Those that do find it desirable to put them in the same bucket typically have a personal reason for why that suits their needs better. |
If a stock doesn't pay dividends, then why is the stock worth anything? | Securities change in prices. You can buy ten 10'000 share of a stock for $1 each one day on release and sell it for $40 each if you're lucky in the future for a gross profit of 40*10000 = 400'0000 |
What is the best source of funding to pay off debt? | Thirty thousand in credit card debt is a "big elephant to eat" so to speak. But you do it by taking a bite at a time. One positive is that you do not want to borrow from your 401K. Doing so is a horrible idea. The first question you have to ask yourself and understand, is how you accumulated 30K in credit card debt in the first place? Most people get there by running up a relatively small amount, say 5K, and playing the zero transfer game a few times. Then add in a late payment, and a negative event or two (like the car breaking down or a trip to the emergency room) and poof a large amount of credit card debt. Obviously, I have no idea if this is how you got there, and providing some insight might help. Also, your age, approximate income, and other debts might also help provide more insight. I assume you are still working and under age 59.5 as you are talking about borrowing from your 401K. Where I come from is that my wife (then girlfriend) found ourselves under stifling debt a few years ago. When we married, we became very intentional and focused on ridding ourselves of debt and now sit completely debt free (including the house). During our debt payoff time, we lived off of less than 25% of our salary. We both took extra jobs when we were able. Intensity was our key. If I were you, I would not refi the house. There are costs associated with this and why would you put more debt on your home? I might cash out the annuity provided that there are no negative tax consequences and depending on how much you can get for it. Numbers are the key here. However, I feel like doing so will not retire this debt. The first thing you need to do is get on a written budget. A game plan for spending and stick to it. If you are married, your spouse has to be part of this process. The budget has to be fresh each month, and each month you and your wife should meet. To deviate from the budget, you will also need to have a meeting. My wife and I still do this despite being debt free and enjoying very healthy incomes. Secondly, it is about cutting expenses. Cable: off. No eating out or vacations. Cut back on cell phone plans, only basic clothing. Gift giving is of the $5 variety and only for those very close to you. Forget lattes, etc. Depending on your income I would cut 401K contributions to zero or only up to the company match (if your household income is above 150K/year). Third, it is about earning more. Ebay, deliver pizzas, cut grass, overtime, whatever. All extra dollars go to credit card balance reduction. At a minimum, you should find an extra $1000/month; however, I would shoot for 2K. If you can find 2K, you will be done with this in 13 months. I know the math doesn't work out for that, but once you get momentum, you find more. How good will it feel to be out from under this oppression next March? I know you can do this without cashing in the annuity or refinancing. Do you believe it? |
Does girlfriend have too much savings, time to invest? | There are ETF funds that only purchase preferred stock from banks. I have one that pays a monthly dividend of a little under 6% per year. That means that it pays just under 0.5% every month. The purchase price of this stock just slowly goes up and up. You can do a whole lot better than 2% per year. The crux of the issue, as I understand it, is the lousy 2% interest she is getting. My point is that you can do a lot better than 2%. An ETF is not a scam. The price has stability and slow growth because it buys preferred stock from banks. http://www.marketwatch.com/investing/Fund/PGF?countrycode=US http://stockcharts.com/h-sc/ui?s=PGF&p=D&yr=2&mn=3&dy=0&id=p52078664654 Yes, she should invest. My answer is yes because 2% ROI is a lousy return and she can do better. Looking at the 200 day moving average, the price goes from 15.25 in May of 2014 to 17.95 in Dec of 2015. That, in price appreciation alone, is a 17.7% increase. Add on top of that a 0.5% increase per month and you get a stellar 27.7% Total Return. The increase in the Fed funds rate is a benefit to banks. PGF invests in Banks by buying their preferred stock. This means that the share price of PGF will continue to increase and its ability to pay the, nearly, 6% per year dividend will also improve. |
After consulting HR Block, are you actually obligated to file your taxes with them, if they've found ways to save you money? | It sounds like they want to enter you into a contract in which they are allowed to charge a flat fee for filing contingent on money saving results from a tax review service, paid in full. Like those who answered before I have no legal experience. IRS Circular 230 defines the ethics for tax practitioners and the definition of a tax practitioner is broad enough (effective Aug 2011) to include those who are not EAs, CTRPs, CPAs as long as the person is compensated to prepare or assist in a substantial part of the preparation of a document pertaining to a taxpayer's liability for submission to the IRS. Section 10.27 Fees: (b)(2)A practitioner may charge a contingent fee for services rendered in connection with the Service’s examination of, or challenge to — (i) An original tax return Paragraph c defines what a contingent fee is basically a fee that depends on the specific result attained, in this case saving you money. In the section above 'Service's examination' is an audit in plain speak. If your 2013 return has not been submitted and you have not received a written notice for examination, H&R block can not charge a contingent fee, period. Furthermore, H&R Block cannot hold your tax documents, upon your request, they must return all original tax documents like W2s and 1099s ( they don't have to return the tax forms an employee prepared). Like I said above, I'm not a lawyer, unless I missed a key detail, I don't believe they were permitted to charge you a filing fee contingent on saving you money. |
Is my mortgage more likely to be sold if I pre-pay principal? | It's not unusual/undesirable. If everyone prepaid their mortgage, banks would not like this, but we're in no danger of that :). Also, the amount you are pre-paying is not so significant as to make them pay special attention. In many cases when a borrower pre-pays, they will not continue to do so over the life of the loan since it's so easy to stop at any time, and the extra payments are voluntary. Depending on who originated the mortgate, it might be sold even more often than in your case. It's no longer commonplace for a bank to hold a mortgage to maturity, now that banks and other institutions have separated the origination of the loan from its servicing. It's likely that your mortgage was bundled with others through a process called securitization, and will be bought/sold based on the bank's need for liquitity or to balance out the maturity of its assets and liabilities (whether they need more cash now versus later), or based on the types of ways your bank has decided that it wants to make money versus farming out other types of business to others. What would substantially change the value of your mortgage to a bank is if it were performing (ie you are paying on time) but then became non-performing (ie you fall behind in your payments). It's also possible that if you have a very small mortgage or principal balance, that there is very little risk to the bank, and little difference between the present and future values of your loan, but banks don't typically make these types of transactions based on the characteristics of an individual loan. |
Which banks have cash-deposit machines in Germany? | HypoVereinsbank (member of UniCredit group), a few savings banks ("Sparkasse") and VR Banks offer cash (bill) deposit machines. However, it can take a few business days until the deposit is credited to your checking account, which has to be with the same bank. Google for "Bargeldeinzahlungsautomat" (=cash deposit machine). As Duffbeer stated correctly, HSBC Trinkaus which is the German arm of the HSBC group does not operate any ATMs in Germany. In addition they do not share the same bank accounts. So I would recommend going with the classic banks mentioned above. |
Germany: Employee and Entrepreneur at same time (for getting AppStore payments) | In Germany you can register a Einzelunternehmen and receive payments into your personal bank account with a German bank. Apple will certainly be able to transfer to accounts in Germany as payments go via the European SEPA standard. Tax wise if you are living in Germany you will need to pay tax in Germany, so this is really the easiest way of doing it. |
Is there a good forum where I can discuss individual US stocks? | I've used Wikinvest before and think that's close to what you're looking for - but in Wiki-style rather than forums. Otherwise, I agree with CrimsonX that The Motley Fool is a good place to check out. |
Estimated Taxes Fall Short of tax liability — how do I pay extra online (Federal and NYS) | If you qualify for the safe harbor, you are not required to pay additional quarterly taxes. Of course, you're still welcome to do so if you're sure you'll owe them; however, you will not be penalized. If your income is over $150k (joint) or $75k (single), your safe harbor is: Estimated tax safe harbor for higher income taxpayers. If your 2014 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2015 or 110% of the tax shown on your 2014 return to avoid an estimated tax penalty. Generally, if you're under that level, the following reasons suggest you will not owe the tax (from the IRS publication 505): The total of your withholding and timely estimated tax payments was at least as much as your 2013 tax. (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen.) The tax balance due on your 2014 return is no more than 10% of your total 2014 tax, and you paid all required estimated tax payments on time. Your total tax for 2014 (defined later) minus your withholding is less than $1,000. You did not have a tax liability for 2013. You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. If you paid one-fourth of your last year's taxes (or of 110% of your last-year's taxes) in estimated taxes for each quarter prior to this one, you should be fine as far as penalties go, and can simply add the excess you know you will owe to the next check. |
Should I invest in a Health Insurance +1 policy from my Employer? | One thing to look into is if there is an extra fee for covering a spouse under you plan, if she is covered under her own employer's plan. I know that my wife's company charges around $100-$200 a year if I was to be covered under her plan, since I am eligible for the coverage where I work. As far as tax issues, there shouldn't be any. I think the choice comes down to the coverage offered by both plans. |
How can I help my friend change his saving habits? | If he's not used to cooking, recipes might not be enough. Maybe he needs cooking lessons. I used to think if you could read, you could cook -- but I grew up "helping" my mom in the kitchen and in the process learning what all the instructions in cookbooks meant. But it also might just be force of habit, in which case about all you could do would be to go over and cook for (or with) him. Maybe if you helped him get into a good habit, he would be more likely to continue with it. Otherwise, I don't see that there's much of anything you can do. If he isn't motivated to change his habits to save for his trip, you can't make him be. |
Where to Park Proceeds from House Sale for 2-5 Years? | With 100K, I would dump the first 95K into something lame like a tax advantaged bond or do as the others here suggested. My alternative would be to take the remaining 5K and put into something leveraged. For instance, 5K would be more than enough to buy long term LEAPS options on the SPY ETF. @ Time of post, you could get 4 contracts on the DEC 2017 leaps at the $225 strike (roughly 10% out of the money) for under $1200 apiece. Possibly $1100 if you scalp them. 4 * $1200 = $4800 at risk. 4 * $22500 = $90,000 = amount of SPY stock you control with your $4800. If the market drops, SPY never reaches $225 in the next 3 years and you are out the $4800, but can use that to reduce capital gains and still have the $95K on the sidelines earning $950 or so per year. Basically you'd be guaranteed to have $97K in the bank after two years. If the market goes up significantly before 2018, you'll still have 95K in the bank earning a measly 1%, but you've also got 4 contracts which are equal to $90K shares of S&P 500. Almost as if every single dollar was invested. Bad news, if SPY goes up 20% or more from current levels over the next three years you'll unfortunately have earned some taxable income. Boo freaking hoo. https://money.stackexchange.com/a/48958/13043 |
Offer Price for my stock not shown on quote and a subsequent sale higher than my offer | There are a few things you are missing here. These appear to be penny stocks or subpenny stocks. Buying these are easy.... selling is a total different ball game. Buying commissions are low and selling commissions are outrageous. Another thing you are missing in this order is... some trading platform may assume the "AON" sale. That is All Or None. There was an offer of 10k shares @ .63. The buyer only wanted 10k what was the broker to do with the other 20k? Did you inform the broker that partial sales where acceptable? You may want to contact your broker and explain this to them. The ALL OR NONE order has made plenty of investor a little unhappy, which seems to be your new learning experience for the day. Sorry, school of hard knocks is not always fun. |
Transfer money from a real estate sale in India to the US | How would I go about doing this? Are there any tax laws I should be worried about? Just report it as a regular sale of asset on your form 8949 (or form 4797 if used for trade/business/rental). It will flow to your Schedule D for capital gains tax. Use form 1116 to calculate the foreign tax credit for the taxes on the gains you'd pay in India (if any). |
30% share in business | Get involved a lawyer and Accountant. Without it you may not be sure what you are getting. What exactly will 30% mean for me? It will mean exactly what gets written in contract. It can mean you are owner of 30% of the company. If this is structured as partnership, it would also mean you are party to 30% loss. It can mean by current valuation, you get x fixed shares. In future if the directors creates more shares, your % ownership can get diluted. Or anything else. It all depends on what is written in contract and how the contract is structured. Is there anything I should I be aware of before agreeing? Get a draft and talk to a Lawyer and Accountant, they should be able to tell you exactly what it means and you can then decide if you agree to it or not; or need this contract worded differently. |
I forgot to write the name on the check | If you forgot to put the name on the "pay to the order of" line then anybody who gets their hands on the check can add their name to the check and deposit it at their bank into their account. If it goes to the correct person they will have an easy time making sure that the check is made out correctly. They don't have to worry about that picky teller who doesn't know what to do with a check made out to Billy Smith and a drivers license for Xavier William Smith. On the other hand... a criminal will also be able to make sure it is processed exactly the way they want it. If I made it out to a small business or a person I would let them know. You might not have a choice but to wait and see what happens if it was sent to a large business, the payment processing center could be a long way from where you will be calling. |
New 1099 employee with Cobra insurance | For the first four months of the year, when you were an employee, the health insurance premiums were paid for with pre-tax money. When you receive your W-2 at the end of the year, the amount in Box 1 of the W-2 will be reduced by the amount you paid for health insurance. You can't deduct it on your tax return because it has already been deducted for you. Now that you are a 1099 independent contractor, you are self-employed and eligible for the self-employed health insurance deduction. However, as you noted, the COBRA premiums are likely not eligible for this deduction, because the policy is in your old employer's name. See this question for details, but keep in mind that there are conflicting answers on that question. |
Should the poor consider investing as a means to becoming rich? | Given that a poor person probably has much less to invest, how can odds be in their favor? To add to Lan's great answer, if one is "poor" because they don't have enough income to build wealth (invest), then there are only two ways to change the situation - earn more or spend less. Neither are easy but both are usually possible. One can take on side jobs, look for a better-paying career, etc. Cutting spending can also be hard but is generally easier than adding income. In general, wealth building is more about what you do with your income than about how much you make. Obviously the more you make, the easier it is, but just about anyone can build wealth if they spend less than they make. Once your NET income is high enough that you have investible income, THEN you can start building wealth. Unfortunately many people have piles of debts to clean up before they are able to get to that point. What could a small guy with $100 do to make himself not poor anymore, right? Just having $100 is not going to make you "rich". There is a practical limit to how much return you can make short of high-risk activities like gambling, lottery tickets, etc. (I have actually seen this as a justification for playing the lottery, which I disagree with but is an interesting point). If you just invest $100 at 25% per year (for illustration - traditional investments typically only make 10-12% on average), in 10 years you'll have about $931. If instead you invest $100 per month at 12% annualized, in 10 years you'll have over $23,000. Not that $23,000 makes you rich - the point is that regularly saving money is much more powerful than having money to start with. |
Are AAA private-sector corporate bonds safer than government bonds? | Haven't there been examples of governments defaulting, delaying payment and imposing haircuts on investors? Greece and Argentina come to mind. Quite a few Govt have defaulted in the past or were very of default or crisis. Most 3rd world countries or developing countries have under gone stress at some point. Greece was amongst the first example of Developed country going bankrupt. am I not better off if the fund invests solely in AAA corporate bonds, avoiding government bonds? Well that depends. Corporate bonds are not safer than Government Bonds. There have been instances of Corporate bonds not giving the required returns. |
Why is everyone saying how desperately we need to save money “in this economy”? | Saving some money for the future is a good idea. But how much to save is a tough question. I retired with a small fraction of what the experts said I would need. Three years later, I can confidently say I did not even need what I had saved. |
Should I pay off my credit card online immediately or wait for the bill? | It does not matter. Your credit score is affected by late payments, by credit usage and by age of credit. DO NOT PAY LATE. Paying early is only good in that it means you don't pay late. Your credit usage is calculated by percentage of the credit you have that you actually use. Keep your usage to under 20% of your limit and you look great as a credit risk as you have lots of buffer. |
What's the point of a benchmark? | Yes an index is by definition any arbitrary selection. In general, to measure performance there are 2 ways: By absolute return - meaning you want a positive return at all times ie. 10% is good. -1% is bad. By relative return - this means beating the benchmark. For example, if the benchmark returns -20% and your portfolio returns -10%, then it has delivered +10% relative returns as compared to the benchmark. |
Query regarding international transaction between governments | Buyer A didn't send money to the US government, Buyer A sent money to Seller B, a US resident. I think the most common way to facilitate a transaction like this is a regular old international wire transfer. Buyer A in India goes to their bank to exchange X INR to $1mm USD. $1mm USD is then wire transferred to Seller B's bank account. The USD was sold to Buyer A, either by funds held by Buyer A's bank, or foreign exchange markets, or possibly the US government. Seller B may owe taxes on the gain derived from the sale of this thing to Buyer A, but that taxation would arise regardless of who the buyer was. Buyer A may owe an import tax in India upon importing whatever they bought. I don't think it's common to tax imported money in this sort of transactional setting though. |
How do I interpret this analysis from Second Opinion? | No, you shouldn't buy it. The advice here is to keep any existing holdings but not make new purchases of the stock. |
How to spend more? (AKA, how to avoid being a miser) | Maybe minimalism is an option for you. Make your self clear what you really want You only buy what you really need and for that you spend the money. Then there is no point of saving money, i.e. I for example like to invite friends and cook them some fancy diner with expensive products, but the value I get from that exceeds any money I spend. On the other hand most present are the opposite, they have less value to recipient than what they originally have costs. |
Why does BlackRock's XIN page show XIN as having only 1 holding? | EFA must be bought and sold in US dollars. XIN allows people to buy and sell EFA in Canadian dollars without exposing their investment to unpredictable swings in the USD/CAD ratio. This is what's known as a currency-hedged instrument. Now, why the chart sums up to over 100% is anyone's guess. Presumably it's the result of a couple hundred rounding errors from all the components. If you view their most recent report, it also sums up to over 100%, but at least the EFA component is (sensibly) under 100%. P.S. I'm not seeing where it says there's only one holding. There's the primary holding, plus over 100 other cash holdings to effect the currency-hedging. |
Where I am I liable for taxes? | You will have to pay your taxes in the UK not USA. For tax purposes it is the company's tax residency not where the server is located. You are just hiring a server in USA. Take for example a CDN being used for your same service then would you pay taxes in 300 different countries if you use Akamai? Does not work that way. |
It is worth using a discount stock broker? I heard they might not get the best price on a trade? | Always use limit orders never market orders. Period. Do that and you will always pay what you said you would when the transaction goes through. Whichever broker you use is not going to "negotiate" for the best price on your trade if you choose a market order. Their job is to fill that order so they will always buy it for more than market and sell it for less to ensure the order goes through. It is not even a factor when choosing between TradeKing and Scottrade. I use Trade King and my friend uses ScottTrade. Besides the transaction fee (TK is a few $$ cheaper), the only other things to consider are the tools and research (and customer service if you need it) that each site offers. I went with TK and the lower transaction fee since tools and research can be had from other sources. I basically only use it when I want to make a trade since I don't find the tools particularly useful and I never take an analyst's opinion of a stock at face value anyway since everybody always has their own agenda. |
Recommended finance & economy book/blog for a Software Engineer? | Another good economic comment blog is Naked Capitalism. |
Pros & cons in Hungary of investing retirement savings exclusively in silver? What better alternatives, given my concerns? | First is storage which is a big and a detrimental headache. Security is another big headache. Investing in precious metal has always been an investment opportunity in the countries in the east i.e. India and China because of cultural reason and due to absence of investment opportunities for the less fortunate ones. It isn't the case so in the West. Secondly what is the right an opportune moment is open to question. When the worlwide economy is up and running, that is probably the time to buy i.e. people would like to put money in use rather than store. The saying goes the other way when the economy is stagnating. Then there is also the case of waiting out the bad periods to sell your gold and silver. If you do want to buy precious metals then use a service like BullionVault, rather than doing those yourself. It takes care of the 2 big headaches, I mentioned earlier. |
Can the risk of investing in an asset be different for different investors? | In a perfect market, share prices are by definition a perfect reflection of the true value of a share. Hence, you always get $10 for a share that's worth that much. In reality, the market is imperfect. Prices are somewhat of an average of all different estimates, and there's a cost-of-trading margin between sales and buy prices. Hence, in a perfect market it doesn't matter whether you have a stop loss order at $9.00. That just trades your stock worth $9 for cash worth the same $9. In an imperfect market, that trade nets you less. Furthermore, is risk a linear function of money? Perhaps not, if you bought on margin, need to lend extra and your interest rate increases with the extra credit demand. |
What type of returns Vanguard is quoting? | From the Vanguard page - This seemed the easiest one as S&P data is simple to find. I use MoneyChimp to get - which confirms that Vanguard's page is offering CAGR, not arithmetic Average. Note: Vanguard states "For U.S. stock market returns, we use the Standard & Poor's 90 from 1926 through March 3, 1957," while the Chimp uses data from Nobel Prize winner, Robert Shiller's site. |
Why could rental costs for apartments/houses rise while buying prices can go up and down? | Economically, you would say that purchased and rented real estate are not perfect substitutes--they are largely separate markets. Only a few people are able to easily switch from one to the other and that choice is sticky--for example, once you buy a house, prices would have to rise a lot for it to be worth it to sell it and move into an apartment. In both markets there is a supply and demand curve, but the slope of the demand curve for houses to purchase is much steeper than the demand curve for rentals. The market for new housing fluctuates rapidly because it requires a large change in housing prices to change the number of people looking to buy a house. Most decisions to buy a house are not driven by the state of the housing market. This describes a supply/demand graph with a very steep demand curve. Additionally, because of the leverage provided by mortgages, the demand for houses depends critically on relatively small changes in the interest rate and availability of loans. Thus the steep demand curve shifts all over the place as borrowing conditions change. On the other hand, apartment prices are more stable because people easily move from one apartment to another and people living in their parent's basements easily move into apartments if prices change. A small change in the price or quantity of rentals brings about reasonable response in quantity demanded. This is the situation where the demand curve is shallow. In addition, rentals are not tied to interest rates tightly, nor are they as strongly tied to economic conditions (in a recession, people avoid buying but renters continue to rent). |
What can I do with “stale” checks? Can I deposit/cash them? | Find smaller payments he can make. Maybe a % of each client he takes payment from. Consult with a lawyer or google buisness contract elements and find fill them out and see what he can do. If the checks are no good bouncing them isn't going to help anything. Nor is getting a judgment from a small claims court. He can still not pay(though stays on his credit for 25 years), file for bankruptcy, etc. |
What is the smartest thing to do in case of a stock market crash | If the market has not crashed but you know it will, sell short or buy puts. If the market has crashed, buy equities while they are cheap. If you don't know if or when it will crash hold a diversified portfolio including stocks, bonds, real estate, and alternatives (gold, etc). |
What should I look at before investing in a start-up? | Previous answers have done a great job with the "Should I invest?" question. One thing you may be overlooking is the question "Am I allowed to invest?" For most offerings of stock in a startup, investors are required to be accredited by the SEC's definition. See this helpful quora post for more information on requirements to invest in startups. To be honest, if a startup is looking for investors to put in "a few thousand dollars" each, this would raise my alarm bells. The cost and hassle of the paperwork to (legitimately) issue shares in that small of number would lead me just to use a credit card to keep me going until I was able to raise a larger amount of capital. |
Why would a car company lend me money at a very low interest rate? | They aren't actually. It appears to be a low interest rate, but it doesn't cover their true cost of capital. It is a sales tactic where they are raising the sticker price/principal of the car, which is subsidizing the true cost of the loan, likely 4% or higher. It would be hard to believe that the true cost of a car loan would be less than for a mortgage, as with a mortgage the bank can reclaim an asset that tends to rise in value, compared to a used car, which will have fallen in value. This is one reason why you can generally get a better price with cash, because there is a margin built in, in addition to the fact that with cash they get all their profit today versus a discount of future cash flows from a loan by dealing with a bank or other lending company. So if you could see the entire transaction from the "inside", the car company would not actually be making money. The government rate is also so low that it often barely covers inflation, much less operating costs and profit. This is why any time you see "0% Financing!", it is generally a sales tactic designed to get your attention. A company cannot actually acquire capital at 0% to lend to you at 0%, because even if the nominal interest rate were 0%, there is an opportunity cost, as you have observed. A portion of the sticker price is covering the real cost, and subsidizing the monthly payment. |
I received $1000 and was asked to send it back. How was this scam meant to work? | The initial story sounds normal. Happens every day. Checksums cannot prevent this, since it is a typo by the sender. The sender typed in a wrong account number. That account number happened to exist (so the sender wouldn't get any immediate error message), your account. But, that innocent story can also be used as part of a money laundering plan. Namely, to give the money a legitimate source. Also can be used in a scheme to frame you for something. The question of how the person got your phone number raises suspicion. The bluffs to avoid the normal paperwork, and then disappearing, make it incriminating. No doubt. Take this to the police. The question arises: even if the plan (whatever it was) failed, why didn't he do the paperwork and get the money back? The answer is that that would leave a trail to possibly be picked up in a future investigation. |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | I'm pretty sure it's merchant-dependent. If a credit card transaction doesn't go through, PayPal will automatically charge your bank account. Some merchants may want that extra insurance. |
What evidence or research suggests that mid- or small-capitalization stocks should perform better than large caps? | Efficient Frontier has an article from years ago about the small-cap and value premiums out there that would be worth noting here using the Fama and French data. Eugene Fama and Kenneth French (F/F) have shown that one can explain almost all of the returns of equity portfolios based on only three factors: market exposure, market capitalization (size), and price-to-book (value). Wikipedia link to the factor model which was the result of the F/F research. |
Taxes due for hobbyist Group Buy | You do actually have some profits (whatever is left from donations). The way it goes is that you report everything on your Schedule C. You will report this: Your gross profits will then flow to Net Profit (line 31) since you had no other expenses (unless you had some other expenses, like paypal fees, which will appear in the relevant category in part II), and from line 31 it will go to your 1040 for the final tax calculation. |
What should I be aware of as a young investor? | As a young investor, you should know that the big secret is that profitable long term investing is boring. It is is not buying one day and selling the next and keeping very close tabs on your investments and jumping on the computer and going 'Buy!' , 'Sell'. That makes brokers rich, but not you. So look at investments but not everyday and find something else that's exciting, whether it's dirt biking or WOW or competitive python coding. As a 19 year old, you have a ton of time and you don't need to swing for the fences and make 50% or 30% or even 20% returns every year to do well. And you don't have to pick the best performing stocks, and if you do, you don;t have to buy them at their lowest or sell them at their highest. Go read A Random Walk's guide to Investing by Burton Malkiel and The only Investment Guide you'll ever need by Andrew Tobias. Buy them at used bookstores because it's cheaper that way. And if you want more excitement read You Can Be a Stock Market Genius by Joel GreenBlatt, One up On Wall Street By Peter Lynch, something by Warren Buffet and if you want to be really whacked, read Fooled By Randomness by Nassim Nicholas Talib, But never forget about Tobias and Malkiel, invest a regular amount of money every month from 19 to 65 according to what they write and you'll be a wealthy guy by 65. |
How to acquire assets without buying them? | There are a number of ways someone acquires assets without buying it. People could have inherited assets. They could have been gifted assets. They might have won assets in a lawsuit (unlikely to be a mall, but not impossible). They could have married into the assets. So there's other ways of acquiring assets without purchasing them. |
Combined annual contribution limits for individuals [duplicate] | Your contribution limit to a 401(k) is $18,000. Your employer is allowed to contribute to your 401(k), usually a "matching contribution". That matching contribution comes from your employer, so is not subject to your personal contribution limit. A contribution to a regular 401(k) is typically made with pre-tax money (i.e. you don't pay payroll taxes on the money you contribute) so you pay less taxes for the current tax year. However when you retire and you take money out, you pay taxes on the money you take out. On one hand, your tax rate may be lower when you have retired, but on the other hand, if your investments have appreciated over time, the total amount of tax you pay would be higher. If your company offers a Roth 401(k) plan, you can contribute $18,000 of after tax money. This way you pay the tax on the $18,000 today, as you would if you did not put the money in the 401(k), but when you take the money out at retirement, you would not have to pay tax. In my opinion, that serves as a way to pay effectively more money into your 401(k). Some firms put vesting provisions on the amount that they match in your 401(k), e.g. 4 years at 25% per year. So you have to work 1 full year to be entitled to 25% of their matching contribution, 2 years for 50%, and 4 years to receive all of it. Check your company's Summary Plan Description of the 401(k) to be sure. You are not allowed to invest pre-tax money into a Traditional IRA if you are already contributing to a 401(k) plan and have reached the income limits ($62,000 AGI for single head of household). You are allowed to contribute post-tax money to a Traditional IRA plan if you have already contributed to a 401(k), which you can then Roll-over into a Roth IRA (look up 'backdoor IRA'). The IRA contribution limit applies to all IRA accounts over that calendar year. You could put some money in a traditional IRA, a Roth IRA, another traditional IRA, etc. so long as the total amount is not more than the contribution limit. This gives you an upper limit of 5.5k + 18k = 23.5 investments in retirement accounts. Note however, once you reach age 50, these limits increase to 6.5k (IRA) + 24k (401(k)). They also are adjusted periodically with the rate of inflation. The following approach may be more efficient for building wealth: This ordering is the subject of debate and people have different opinions. There is a separate discussion of these priorities here: Best way to start investing, for a young person just starting their career? Note however, a 401(k) loan becomes payable if you leave your company, and if not repaid, is an unauthorised distribution from your 401k (and therefore subject to an additional 10% tax penalty). You should also be careful putting money into an IRA, as you will be subject to an additional 10% tax penalty if you take out the money (distribution) before retirement, unless one of the exceptions defined by the IRA applies (e.g. $10,000 for first time home purchase), which could wipe out more than any gains you made by putting it in there in the first place. Your specific circumstances may vary, so this approach may not be best for you. A registered financial advisor may be able to help - ensure they are legitimate: https://adviserinfo.sec.gov |
How to calculate PE ratios for indices such as DJIA? | You could look up the P/E of an equivalent ETF, or break the ETF into components and look those up. Each index has its own methodology, usually weighted by market cap. See here: http://www.amex.com/etf/prodInf/EtAllhold.jsp?Product_Symbol=DIA |
Smart to buy a house in college? | I've heard success stories but personally, I was considering it and I'm so glad I didn't. I ended up hating the atmosphere; left after one semester. To take care of that house I rent out, I'd need to hire someone, or drive 2.5h each way for anything that needed my attention. If you plan to stay in the area, I'd consider the housing prices, the rental market, considering the responsibility of maintenance, your expected margin (trust me, it will be lower. I've never heard a landlord say he didn't encounter significant unintended expenses.) It's such a unique situation, it really requires more detail. After all, you'd be saving rent, have control over the house and who lives there, but you have a whole hell of a lot of responsibility. I met one guy who had basically became the house's mom because he had a vested interest and was always cleaning up spills, preventing staining or damage to the paint, facing awkward social situations as they tried to chase down rent. With the right people I've seen it go very well. Oh, one more caveat. With a live-in super', they can provide notice of any necessary repairs instantly and from there, the clock starts. They can legally withhold rent until the repairs are completed and if you're not too liquid after that down payment and the mortgage payments, plus school, etc.. this could put you between a rock and some hard ass creditors. |
Changes in Capital Gains Tax in the US - Going to 20% in 2011? | Consider doing things that will allow for tax deductions, such as short selling. The IRS has regulations on this as well. And consider that Futures are taxed more favorably than other kinds of investments. (60% taxed as long term, 40% taxed as short term) |
Does the Black-Scholes Model apply to American Style options? | Just a few observations within the Black-Scholes framework: Next, you can now use the Black-Scholes framework (stock price is a Geometric Brownian Motion, no transaction costs, single interest rate, etc. etc.) and numerical methods (such as a PDE solver) to price American style options numerically, but not with a simple closed form formula (though there are closed-form approximations). |
Why is day trading considered riskier than long-term trading? | But I don't see how it's any different than buying a stock at a low price and holding on to it for some months. Based on your question, I would say the difference is time. Day trading by its nature is a 6-hour endeavor. If you buy low and are planning to sell high, then you only have a few hours to make this happen. As a previous poster mentioned, there is a lot of "white noise" that occurs on a weekly/daily/hourly/min basis. Long-term investors have the time to wait it out. Although, as a side note, if you were a buy-and-hold investor from the 1960s-early 1980s, then buy and hold was not very good. Is it just the psychological/addictive aspect of it? This is the biggest reason. Day trading is stressful and stress can cause financially destructive decisions such as over-leveraging, over-trading, etc. Why is day trading stressful? Because you are managing hundreds to thousands of trades a year. When combined with the lack of time in a day to make moves, it becomes stressful. Also, many day traders do it full time. Which adds to the pressure to be correct and to be incredible at money managment. A lot of buy-and-hold investors have full time jobs and may only check their positions every month or so. |
Can I actually get a share of stock issued with a piece of paper anymore? | Yes, indeed. For example, Ford Motor Company's website has a bit about them. Is there any advantage to having an actual physical note instead of a website? You can safeguard them yourself. Which may or may not be a good thing. It certainly brings up a bit of hassle and extra costs if you want to sell them. Though you can have lost certificates replaced, so there is more to it than just having physical possession of the certificates. |
How much time would I have to spend trading to turn a profit? | Yeah, too subjective of a question I shorted BP last year during the deep water crisis, using a leveraged account 20 times larger than the amount of cash I actually had, instantly profitable. I was long Freddie Mac in March 2009 and that took several months to turn to move and turned a 100% gain I've flipped penny stocks trading at .0001 cents, bought a few million shares and sold them at .0002 cents. Sometimes instantly, sometimes over several months because they were illiquid I'm primarily a derivatives trader right now, which I did not know about or understand less than a year ago. Dont have crazy targets, that how you will blow up your account. Have meticulously calculated plans. Also you need to determine what kind of trader you are. |
What kind of life insurance is cheaper? I'm not sure about term vs. whole vs. universal, etc | Term is the way to go. Whole/universal are basically a combo of term and savings, so buy term life insurance and invest the difference in cost yourself. You should make a lot more that way (as far as savings go) than by buying whole life. By the time term life gets too expensive to be worth (when you're a lot older) you will have enough saved to become "self-insured". Just don't touch the savings :) You really only need insurance when there is income to replace and debts to cover - house/mortgage, kids/school, job income, etc. |
Using stock options to lower income tax in the USA? | You're talking about NQO - non-qualified stock options. Even assuming the whole scheme is going to work, the way NQO are taxed is that the difference between the fair market value and the strike price is considered income to you and is taxed as salary. You'll save nothing, and will add a huge headache and additional costs of IPO and SEC regulations. |
Are my purchases of stock, mutual funds, ETF's, and commodities investing, or speculation? | This depends on what your definition of the word is is. Strictly speaking, you are only investing in a company when you buy stock from them somehow. This is usually done during an IPO or a secondary offering. Or, if you are someone like Warren Buffet or an institutional investor, you strike a deal with the company to buy shares directly from them. Otherwise, your money goes to someone else. Merriam-Webster defines speculate as 1b: to review something idly or casually and often inconclusively However, it also defines it as: 2: to assume a business risk in hope of gain; especially : to buy or sell in expectation of profiting from market fluctuations The typical use of the term stock speculation vs stock investing involves definition 1b. This alludes to the idea that little to no research was done about the stock. This may be due to a lack of time, interest, knowledge, etc., or it may be due to a lack of information. The former usually has a negative connotation. The latter may have a negative connotation, though usually the connotation is one of greater risk. Strictly speaking, definition 2 includes investing as you define it along with investing in securities/commodities. |
How do I use investments to lower my taxes [US]? | Not exactly. There are a few ways to manage your taxes with investments. 1) For most investments you get taxed on any gain in value in the investment or dividends paid by that investment. Most investments (with some exceptions for mutual funds) you don't take the tax hit until you sell the investment and realize the gain. For bonds, cds, and other cash type investments you have to pay taxes in the year they pay out the interest or dividend. 2) You can put money (up to a certain limit) in a traditional IRA and can subtract that amount from your income for tax calculation for the year you invest it. However, you are going to pay taxes on it when you take the money out at retirement. It really just delays the taxes. 3) If you put the money in a Roth IRA, you don't get a tax break now, but you don't have to pay any taxes on the money or the gains when you take it out at retirement. 4) The gains from some mutual funds can be tax exempt, but that just saves you from paying tax on the increase in value. 5) Don't fall for scams that try to use insurance policies as investments to avoid taxes. The fees are ginormous, which usually makes them a ripoff. |
Why do put option prices go higher when the underlying stock tanks (drops)? | When you buy a put on a stock, you buy the right to sell the stock at fixed price, F, that his usually different from the market price, M. You paid a price, P, for the put. Your potential profit, going forward, is represented by the DIFFERENCE you get to collect between your fixed price F, and that market price M, plus the price you paid for the put, or F-(M+P). (This assumes that F>(M+P). P is fixed, but the smaller M gets, the larger the term F-(M+P), and therefore the higher your potential profit from owning the put. So when M "tanks," the put goes higher. The $395 put is already in the money. If it were settled today, the value would be $395-$376 or $19. This, minus the cost of the put itself, represents your profit. The $365 put is "out of the money." The stock has to fall $11 more before the put is exercised. But if the stock went down 8 points today, that is less than the $19 difference at the start of the day. Because there is time between now and October, there is a chance for the stock to go down further, thereby going into the money. The current value of the put is represented by this "chance." Obviously, the chances of the stock going down $11 more (from today) is greater than the chance of it going down $19 more. On the other hand, the closer it gets to the expiration date, the less an out of the money put is worth. It's a race between the stock's fall, and the time to expiration. |
How do I get into investing in stocks? | The best way I know of is to join an investment club. They club will act like a mutual fund, investing in stocks researched and selected by the group. Taking part in research and presenting results to the group for peer review is an excellent way to learn. You'll learn what is a good reason to invest and what isn't. You'll probably pick both winners and losers. The goal of participation is education. Some people learn how to invest and continue happily doing so. Others learn how to invest in single stocks and learn it is not for them. |
Changing Bank Account Number regularly to reduce fraud | Couple of my friends went through a fraud agent who ran off with their money and the landlords were none the wiser. So it always pays to be a bit diligent. Are they a well known letting agents nationally ? Many agents do have different accounts to manage their properties. Yours seems a case as such probably i.e. they manage the property on behalf of the landlord so keeping their monies differentiated. Did you sign an agreement ? If yes go through what is written in the agreement, most of it is same in all agreements but have a look anyway. Check if there is mention of deposit protection scheme. One thing you could do is go to a bank to do the transfer, the same bank where the letting agent holds their account and confirm from them if it is really a personal account or a business account. I am not sure how possible it is, but doesn't hurt to ask. If it is a personal account, then fraud is the most possible cause. The sort code should tell you which branch and which bank. Or the best option is to ask the estate agents to show a recent statement of the bank account, where the money is to be deposited into. Some tips |
why is the money withdrawn from traditional IRA taxed at the ordinary income tax rate? | You are missing something very significant. The money in a traditional IRA (specifically, a deductible traditional IRA; there is not really any reason to keep a nondeductible traditional IRA anymore) is pre-tax. That means when you pay tax on it when you take it out, you are paying tax on it for the first time. If you take ordinary money to invest it in stocks, and then pay capital gains tax on it when you take it out, that is post-tax money to begin with -- meaning that you have already paid (income) tax on it once. Then you have to pay tax again on the time-value growth of that money (i.e. that growth is earned from money that is already taxed). That means you are effectively paying tax twice on part of that money. If that doesn't make sense to you, and you think that interest, capital gains, etc. is the first time you're paying tax on the money because it's growth, then you have a very simplistic view of money. There's something called time value of money, which means that a certain amount of money is equivalent to a greater amount of money in the future. If you invest $100 now and end up with $150 in the future, that $150 in the future is effectively the same money as the $100 now. Let's consider a few examples. Let's say you have $1000 of pre-tax income you want to invest and withdraw a certain period of time later in retirement. Let's say you have an investment that grows 100% over this period of time. And let's say that your tax rate now and in the future is 25% (and for simplicity, assume that all income is taxed at that rate instead of the tax bracket system). And capital gains tax is 15%. You see a few things: Traditional IRA and Roth IRA are equivalent if the tax rates are the same. This is because, in both cases, you pay tax one time on the money (the only difference between paying tax now and later is the tax rate). It doesn't matter that you're paying tax only on the principal for the Roth and on the principal plus earnings for Traditional, because the principal now is equivalent to the principal plus earnings in the future. And you also see that investing money outside fares worse than both of them. That is because you are paying tax on the money once plus some more. When you compare it against the Roth IRA, the disadvantage is obvious -- in both cases you pay income tax on the principal, but for Roth IRA you pay nothing on the earnings, whereas for the outside stock, you pay some tax on the earnings. What may be less obvious is it is equally disadvantageous compared to a Traditional IRA; Traditional and Roth IRA are equivalent in this comparison. 401(k)s and IRAs have a fundamental tax benefit compared to normal money investment, because they allow money to be taxed only one time. No matter how low the capital gains tax rate it, it is still worse because it is a tax on time-value growth from money that is already taxed. |
What happens to people without any retirement savings? | There are a host of programs in the US to help low/no-income seniors: Many states discount property taxes for the elderly as well. Not a dream retirement, but plenty of people are provided for without having prepared for retirement whether due to poor decisions or unfortunate circumstances. |
Got charged ridiculous amount for doctor's walk in visit. What are my options? | You should start by calling the clinic and asking them to tell you how the visit was coded. Some clinics have different billing codes based on the complexity of the visit. If you have one thing you are seeing the doctor about, that could be coded differently than if you have 4 things you are seeing the doctor about. In fact, even if you are there just for one ailment, but while you are there you happen to ask a few quick questions about other possible ailments, the doctor could decide to use the billing code for the higher complexity. If when speaking to the billing department it is determined that the visit is using a higher complexity billing code (and a higher charge as a result), you could then request that it be re-coded with the lower complexity visit. Realize if you request that they will probably have to first get approval from the doctor that saw you. Note: I am basing this answer on first hand experience about 6 months ago in Illinois, where the situation I described happened to me because I asked some unrelated questions about other possible ailments at the end of a visit to an after hours clinic. The billing department explained that my visit was coded for 4 issues. (3 of them were quick questions I asked about at the end of the visit, one of which she referred me to another doctor. My additional questions probably extended the visit by 3-4 minutes.) In my case I never got the bill reduced, mainly due to my own laziness and my knowing that I would hit my deductible anyway this year. Of course I can't say for sure if this is what happened in your case, or even if this practice is widespread. This was the first and only time in my life that I encountered it. As a side note, your primary doctor would likely rarely ever bill you for a more complex visit, as it likely wouldn't lead to much repeat business. As for your last question regarding your credit: if the provider decides to lower the price, and you pay the lower price, this in no way can affect your credit. Surprising Update: When I called the billing office months ago, I had asked if they could confirm the code with the doctor, and I was told they would look into it. I never heard back, never followed up, and assumed that was the end of it. Well, today I got a call back (months later) and was informed that they had re-coded the visit which will result in a lower charge! It's still pending the insurance adjustment but at some point in the future I expect to receive either a credit on my next statement or a check in the mail. (The price difference pre-insurance in my case has gone from $359 to $235.) Update: I did receive a check for the difference. The check was dated July 20, 2016, which is just over 2 months after the phone call informing me I would receive it. |
Why is retirement planning so commonly recommended? | In addition to the choice that saving for retirement affords - itself a great comfort - the miracle of compounding is so great that even if you chose to work in old age, having set aside sums of money that grow will itself help your future. The are so many versions of the "saving money in your 20s" that equals millions of dollars that the numbers aren't worth showing here. Still, any time value of money example will illustrate the truth. That said, time value of money does start with the assumption that a dollar today is worth more than a dollar tomorrow. Inflation, after all, eats away at the value of a dollar. It's just that compounding so outshines inflation that any mature person who is willing to wait, should be convinced. Until you work the examples, however, it's not at all obvious. It took my daughter years to figure out that saving her allowance let her get way better stuff. The same is true of everyone. |
How do I treat the income from an ESPP I sold now that I am a non-resident alien? | That's a tricky question and you should consult a tax professional that specializes on taxation of non-resident aliens and foreign expats. You should also consider the provisions of the tax treaty, if your country has one with the US. I would suggest you not to seek a "free advice" on internet forums, as the costs of making a mistake may be hefty. Generally, sales of stocks is not considered trade or business effectively connected to the US if that's your only activity. However, being this ESPP stock may make it connected to providing personal services, which makes it effectively connected. I'm assuming that since you're filing 1040NR, taxes were withheld by the broker, which means the broker considered this effectively connected income. |
Using P/E Ratio of an ETF to decide on asset mix | P/E alone would not work very well. See for example http://www.hussmanfunds.com/html/peak2pk.htm and http://www.hussmanfunds.com/rsi/profitmargins.htm (in short, P/E is affected too much by cyclical changes in profit margins, or you might say: booms inflate the E beyond sustainable levels, thus making the P/E look more favorable than it is). Here's a random blog post that points to Schiller's normalized earnings measure: http://seekingalpha.com/article/247257-s-p-500-is-expensive-using-normalized-earnings I think even Price to Sales is supposed to work better than P/E for predicting 10-year returns on a broad index, because it effectively normalizes the margins. (Normalized valuation explains the variance in 10-year returns better than the variance in 1-year returns, I think I've read; you can't rely on things "reverting to mean" in only 1 year.) Another issue with P/E is that E is more subject to weird accounting effects than for example revenues. For example whether stock compensation is expensed or one-time write-offs are included or whatever can mean you end up with an economically strange earnings number. btw, a simple way to do what you describe here would be to put a chunk of money into funds that vary equity exposure. For example John Hussman's fund has an elaborate model that he uses to decide when to hedge. Say you invest 40% bonds, 40% stocks, and 20% in Hussman Strategic Growth. When Hussman fully hedges his fund, you would effectively have 40% in stocks; and when he fully unhedges it, you would have 60% in stocks. This isn't quite the whole story; he also tries to pick up some gains through stock picking, so when fully hedged the fund isn't quite equivalent to cash, more like a market-neutral fund. (For Hussman Funds in particular, he's considered stocks to be overvalued for most of the last 15 years, and the fund is almost always fully hedged, so you'd want to be comfortable with that.) There are other funds out there doing similar stuff. There are certainly funds that vary equity exposure though most not as dramatically as the Hussman fund. Some possibilities might be PIMCO All-Asset All-Authority, PIMCO Multi-Asset, perhaps. Or just some value-oriented funds with willingness to deviate from benchmarks. Definitely read the prospectus on all these and research other options, I just thought it would be helpful to mention a couple of specific examples. If you wanted to stick to managing ETFs yourself, Morningstar's premium service has an interesting feature where they take the by-hand bottom-up analysis of all the stocks in an ETF, and use that to calculate an over- or under-valuation ratio for the ETF. I don't know if the Morningstar bottom-up stuff necessarily works; I'm sure they make the "pro" case on their site. On the "con" side, in the financial crisis bubble bursting, they cut their valuation on many companies and they had a high valuation on a lot of the financials that blew up. While I haven't run any stats and don't have the data, in several specific cases it looked like their bottom-up analysis ended up assuming too-high profit margins would continue. Broad-brush normalized valuation measures avoided that mistake by ignoring the details of all the individual companies and assuming the whole index had to revert to mean. If you're rich, I think you can hire GMO to do a varied-equity-exposure strategy for you (http://www.gmo.com/America/). You could also look at the "fundamental indexing" ETFs that weight by dividends or P/E or other measures of value, rather than by market cap. The bottom line is, there are lots of ways to do tactical asset allocation. It seems complex enough that I'm not sure it's something you'd want to manage yourself. There are also a lot of managers doing this that I personally am not comfortable with because they don't seem to have a discipline or method that they explain well enough, or they don't seem to do enough backtesting and math, or they rely on macroeconomic forecasts that probably aren't reliable, or whatever. All of these tactical allocation strategies are flavors of active management. I'm most comfortable with active management when it has a fairly objective, testable, and logical discipline to it, such as Graham&Buffett style value investing, Hussman's statistical methods, or whatever it is. Many people will argue that all active management is bad and there's no way to distinguish among any of it. I am not in that camp, but I do think a lot of active managers are bad, and that it's pretty hard to distinguish among them, and I think active management is more likely to help with risk control than it is to help with beating the market. Still you should know (and probably already do know, but I'll note for other readers) that there's a strong argument smart people make that you're best off avoiding this whole line of tactical-allocation thinking and just sticking to the pure cap-based index funds. |
Insurance broker - Online vs. physical location? | Traditional insurance agent guy here. There is no right answer in my opinion because your individual needs cannot be generalized. There are a variety of factors that influence the price charged to you including but not limited to your past claims history, geographic location, credit profile, and the carrier's book of business itself. This is just a small sampling, in reality their pricing calculations may be far more complicated. The point is there is no one-size-fits all carrier. My agency works with 15 different carriers. Sometimes we can offer the best combination of coverage and cost to a prospective client that beats their existing coverage; other times we are nowhere close to being competitive. The most important thing you can do is find a person/site/company you can trust and one that does not take advantage of you. Insurance policies are complex and "getting the best deal" may oftentimes mean lessening coverage without realizing it. So I would recommend using whatever service channel (online, phone, local agent) that's most convenient and consultative for you. And otherwise, shop around once every year or two to make sure you're still getting the most for your money. |
What are the advantages/disadvantages of a self-directed IRA? | There is nothing wrong with self directed IRA's the problem is that most of the assets they specialize in are better done in other ways. Real estate is already extremely tax advantaged in the US. Buying inside a Traditional IRA would turn longterm capital gains (currently 15%) into ordinary income taxed at your tax rate when you withdraw this may be a plus or minus, but it is more likely than not that your ordinary income tax rate is higher. You also can't do the live in each house for 2 years before selling plan to eliminate capital gains taxes (250k individual 500k married couple). The final problem is that you are going to have problems getting a mortgage (it won't be a conforming loan) and will likely have to pay cash for any real estate purchased inside your IRA. Foreign real estate is similar to above except you have additional tax complexities. The key to the ownership in a business is that there are limits on who can control the business (you and maybe your family can't control the business). If you are experienced doing angel investing this might be a viable option (assuming you have a really big IRA you want to gamble with). If you want to speculate on precious metals you will probably be better offer using ETF's in a more traditional brokerage account (lower transactions costs more liquidity). |
Currently a Microsoft Money user on PC, need a replacement suitable for Mac | Long time Quicken user, but I have Bootcamp on my Mac, and one reason is so I can run Quicken Windows. That's one solution. You didn't mention what version of the Mac OS you're running, but Bootcamp is one alternative if you have (or can purchase) a Windows license. Be advised, Bootcamp 4, which is available with OS 10.7 (Lion) and OS 10.8 (Mountain Lion), officially supports Windows 7 only. Quicken running under Bootcamp isn't perfect, but it's better than any Mac version, and Quicken 2013 has a mobile app that allows you to view your data & enter transactions via your mobile. The Mac Version of Quicken has been panned by users. I do use Windows for work-related stuff, so I have a reason for running Windows besides using Quicken. I've read that Intuit has a market share of more than 70% in the personal finance software sector, and at this point it seems pretty clear that they are not interested in pursuing a larger share via Mac users. So if we ever see a highly functional version of Quicken for the Mac OS, it won't be any time soon. I've not used other products, but there are many reviews out there which rank them, and some consistently come to the front. Top 10 Reviews Mac Personal Finance Software 2013; WeRockYourWeb Personal Finance Software Rankings includes many Web-based alternatives; Personally, I'm not real enthusiastic about posting my personal financial data on someone's Web site. I have nothing to hide, but I just can't get comfortable with cloud-based personal finance software providers that are combing through my data, Google-like, to generate revenue. Too, it seems an unnecessary risk giving a third party a list of all my account numbers, user names, and passwords. I know that information is out there, if one has the right sort of access, but to my way of thinking, using a cloud-based personal finance software application makes it more out there. |
Why does Bank of America sometimes refer to itself as Banc of America on some documents? | From https://secure.wikimedia.org/wikipedia/en/wiki/Banc: Banq (also Banc, banc-corp, bancorp, or bancorporation) is an intentionally erroneous spelling of the word bank, but pronounced the same way. It has been adopted by companies which are not banks but wish to appear as such, and satisfy legal restrictions on the usage of the word bank. ... For instance, if the original company is known as Bank of America, then the new investment banking entity may be known as Banc of America Securities LLC. If the original company is known as Bank of Manhattan, then its insurance business might be known as "Banc of Manhattan Insurance" and its holding company might be called "Manhattan Bancorp". This practice originates from legal necessity: Under the laws of most states, a corporation may only use the word "bank" in its name if it has obtained a banking charter under state or federal banking laws. So, "Banc of America" is the subsidiary of BoA that doesn't have appropriate licenses to be called "bank". Wonders of complex regulation :) |
Where are Bogleheadian World ETFs or Index funds? | Half VTI (Vanguard Total Stock Market ETF) and half VEU (Vanguard FTSE All-World ex-US ETF), and stop futzing. The US is roughly half the world market cap so this is like a total world equity index. Very low costs. VTI Expense ratio is 0.04% as of 04/27/2017. I don't know what you mean by RSG, but it could be either a waste processor or a gold miner. Either way it seems kind of speculative to hold even 10% of your wealth. |
Is candlestick charting an effective trading tool in timing the markets? | From what I have read from O'Neil to Van Tharp, etc, etc, no one can pick winners more than 75% of the time regardless of the system they use and most traders consider themselves successful if 60% of the trades are winners and 40% are losers. So I am on the side that the chart is only a reflection of the past and cannot tell you reliably what will happen in the future. It is difficult to realize this but here is a simple way for you to realize it. If you look at a daily chart and let's say it is 9:30 am at the open and you ask a person to look at the technical indicators, look at the fundamentals and decide the direction of the market by drawing the graph, just for the next hour. He will realize in just a few seconds that he will say to him or her self "How on earth do you expect me to be able to do that?" He will realize very quickly that it is impossible to tell the direction of the market and he realizes it would be foolhardy to even try. Because Mickey Mantle hit over 250 every year of his career for the first 15 years it would be a prudent bet to bet that he could do it again over the span of a season, but you would be a fool to try to guess if the next pitch would be a ball or a strike. You would be correct about 50% of the time and wrong about 50% of the time. You can rely on LARGER PATTERNS OF BEHAVIOR OVER YEARS, but short hourly or even minute by minute prediction is foolish. That is why to be a trader you have to keep on trading and if you keep on trading and cut your losses to 1/2 of your wins you will eventually have a wonderful profit. But you have to limit your risk on any one trade to 1% of your portfolio. In that way you will be able to trade at least 100 times. do the math. trade a hundred times. lose 5% and the next bet gain 10%. Keep on doing it. You will have losses sometimes of 3 or 4 in a row and also wins sometimes of 3 or 4 in a row but overall if you keep on trading even the best traders are generally only "right" 60% of the time. So lets do the math. If you took 100 dollars and make 100 trades and the first trade you made 10% and reinvested the total and the second trade you lost 5% of that and continue that win/loss sequence for 100 trades you would have 1284 dollars minus commissions. That is a 1200% return in one hundred trades. If you do it in a roth IRA you pay no taxes on the short term gains. It is not difficult to realize that the stock market DOES TREND. And the easiest way to make 10% quickly is to in general trade 3x leveraged funds or stocks that have at least 3 beta from the general index. Take any trend up and count the number of days the stock is up and it is usually 66-75% and take any down trend and it is down 66-75% of the days. So if you bet on the the beginning of a day when the stock was up and if you buy the next day about 66-75% of the time the stock will also be up. So the idea is to realize that 1/3 of the time at least you will cut your losses but 2/3 of the time you will be up then next day as well. So keep holding the position based on the low of the previous day and as the stock rises to your trend line then tighten the stock to the low of the same day or just take your profit and buy something else. But losing 1/3 times is just part of "the unpredictable" nature of the stock market which is causes simply because there are three types of traders all betting at the same time on the same stock. Day traders who are trading from 1 to 10 times a day, swing traders trading from 1 day to several weeks and buy and hold investors holding out for long term capital gains. They each have different price targets and time horizons and THAT DIFFERENCE is what makes the market move. ONE PERSON'S SHORT TERM EXIT PRICE AT A PROFIT IS ANOTHER PERSONS LONG TERM ENTRY POINT and because so many are playing at the same time with different time horizons, stop losses and exit targets it is impossible to draw the price action or volume. But it is possible to cut your losses and ride your winners and if you keep on doing that you have a very fine return indeed. |
Is Amazon's offer of a $50 gift card a scam? | Amazon has 2 different cards you can apply for, a store card and a credit card. The credit card is through Chase. The deal is not a scam, I can confirm this because I applied for their credit card and got $70 in the form of a digital gift card. By giving customers free money for signing up for their cards they get more people who are willing to give it a try. Once you have a card, you get benefits like 3-5 percent back on Amazon purchases that will entice consumers to use the card. Amazon likely has an agreement with Chase and they are hoping to get you hooked with the free money and benefits. |
How can someone with a new job but no credit history get a loan to settle another debt? | The more I think about this the more I think you are actually better off letting it go to collections. At least then you would be able to agree an affordable repayment schedule based on your real budget, and having a big dent in your credit score because it's gone to collections doesn't actually put you in any worse position (in terms of acquiring credit in the future) than you are now. Whoever is the creditor on your original loan is (IMO) quite unreasonable demanding a payment in full on a given date, especially given that you say you've only been made aware of this debt recently. The courts are usually much more reasonable about this sort of thing and recognise that a payment plan over several years with an affordable monthly payment is MUCH more likely to actually get the creditor their money back than any other strategy. They will also recognise and appreciate that you have made significant efforts to obtain the money. I'm also worried about your statement about how panicked and "ready to give up" you are. Is there someone you can talk to? Around here (UK) we have debt counselling bureaus - they can't help with money for the actual debt itself, but they can help you with strategies for dealing with debt and will explain all parts of the process to you, what your rights and responsibilities are if it does go to court, etc. If you have something similar I suggest you contact them, even just to speak to someone and find out that this isn't the end of the world. It's a sucky situation but in a few years you'll be able to look back and at least laugh wryly at it. |
How smart is it really to take out a loan right now? | The logic "the interest rate on the mortgage was so low it didn't make sense not to buy" is one reason the housing bubble happened. The logic was that it made the house affordable even at high prices. Once the prices collapsed people still had affordable payments, but were unable to sell because they were upside down on the mortgage. If you can refinance to a 15-year mortgage, or from a adjustable mortgage to a fixed rate mortgage. it can make sense. You can save on the monthly payment, and on the total cost of the mortgage. But don't buy to take advantage of rates; or to save on taxes; or to build a guaranteed equity. These can be false economies or things that can't be gaurenteed. Of course if nobody spends money, the economy will stay poor. As to hidden details. Only purchase housing you want to own for the long haul. If you expect to flip it in a few years, you might not be able to. You might end up stuck as a long distance landlord. |
Frequency of investments to maximise returns (and minimise fees) | Wow, this turns out to be a much more difficult problem than I thought from first looking at it. Let's recast some of the variables to simplify the equations a bit. Let rb be the growth rate of money in your bank for one period. By "growth rate" I mean the amount you will have after one period. So if the interest rate is 3% per year paid monthly, then the interest for one month is 3/12 of 1% = .25%, so after one month you have 1.0025 times as much money as you started with. Similarly, let si be the growth rate of the investment. Then after you make a deposit the amount you have in the bank is pb = s. After another deposit you've collected interest on the first, so you have pb = s * rb + s. That is, the first deposit with one period's growth plus the second deposit. One more deposit and you have pb = ((s * rb) + s) * rb + s = s + s * rb + s * rb^2. Etc. So after n deposits you have pb = s + s * rb + s * rb^2 + s * rb^3 + ... + s * rb^(n-1). This simplifies to pb = s * (rb^n - 1)/(rb - 1). Similarly for the amount you would get by depositing to the investment, let's call that pi, except you must also subtract the amount of the broker fee, b. So you want to make deposits when pb>pi, or s*(ri^n-1)/(ri-1) - b > s*(rb^n-1)/(rb-1) Then just solve for n and you're done! Except ... maybe someone who's better at algebra than me could solve that for n, but I don't see how to do it. Further complicating this is that banks normally pay interest monthly, while stocks go up or down every day. If a calculation said to withdraw after 3.9 months, it might really be better to wait for 4.0 months to collect one additional month's interest. But let's see if we can approximate. If the growth rates and the number of periods are relatively small, the compounding of growth should also be relatively small. So an approximate solution would be when the difference between the interest rates, times the amount of each deposit, summed over the number of deposits, is greater than the fee. That is, say the investment pays 10% per month more than your bank account (wildly optimistic but just for example), the broker fee is $10, and the amount of each deposit is $200. Then if you delay making the investment by one month you're losing 10% of $200 = $20. This is more than the broker fee, so you should invest immediately. Okay, suppose more realistically that the investment pays 1% more per month than the bank account. Then the first month you're losing 1% of $200 = $2. The second month you have $400 in the bank, so you're losing $4, total loss for two months = $6. The third month you have $600 in the bank so you lose an additional $6, total loss = $12. Etc. So you should transfer the money to the investment about the third month. Compounding would mean that losses on transferring to the investment are a little higher than this, so you'd want to bias to transferring a little earlier. Or, you could set up a spreadsheet to do the compounding calculations month by month, and then just look down the column for when the investment total minus the bank total is greater than the broker fee. Sorry I'm not giving you a definitive answer, but maybe this helps. |
Ethics and investment | Markets are amoral. If you don't buy stock in a company that has high growth/earnings, someone else will. By abstaining you will actually make it cheaper for someone else who is interested in making money. Investing in "socially responsible" funds will only ensure that you have less money to make a moral difference in the world when you decide to transition from working to philanthropy. Edit to clarify -- You aren't interested in buying individual stocks directly, that leaves you with two general options: You can make a statement with your investment now, or you can take the better returns and make a difference with your money later. |
Investing in the stock market during periods of high inflation | The relation between inflation and stock (or economic) performance is not well-understood. Decades ago, economists thought inflation corresponded with periods of high growth and good real returns, but since then we have had periods of low inflation and high growth and high inflation with low growth. It is generally understood among current economists that inflation levels (especially expected inflation) are neither indicative nor causative of real stock returns. Many things can affect inflation, and economic performance is only a minor one. Many things can cause economic performance, and inflation is only a minor one. It's not clear whether the overall relation between inflation and real stock returns is positive or negative. Notice, however, that in principle stock returns are real. That is, the money companies make is in inflated dollars so profit and dividends for a company whose prospects have not changed should go up and down at the same rate as inflation. This would mean if inflation goes up by 5% and nothing else changes, you would expect stock prices to go up by the same proportion so you wouldn't have strong feelings about inflation one way or the other. In real life stock prices will go up by either more or less than 5% but I'm not comfortable saying which, on average. Bottom line: current levels of inflation can't really be used to predict real stock returns, so you shouldn't let current inflation guide your decision about whether to buy stock. |
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