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Impact of RMD on credit worthiness | I feel like this has nothing to do with income, and as such RMDs will not really help or harm you. After a person passes, credit card companies are unlikely to collect any outstanding balance. Debts cannot be inherited, however, assets can be made to stand for debts. Many assets pass to heirs without the probate process and in some cases all of them pass this way. This leaves creditors with nothing and having to write off the balance. Even if assets do pass through probate heirs may dispute the creditors. In that case credit card balances may not be high enough justify hiring a lawyer to fight for payment; or, if they do the judge may be unsympathetic and offer nothing or pennies on the dollar. The bottom line is that they probably see you, or your demographic, as a poor credit risk and reduced their exposure by lowering your limit. While that is not what they told you, they probably have to carefully structure what they say to avoid any discrimination claims. |
Steps to buying a home | At this stage, I would think about education. You can attend open houses, and often times real estate agents and bankers put on seminars for first time home buyers. Borrow books from the library and I would watch some HGTV. Many of the shows are entertaining and quite educational. Secondly you may want to get your finances in order. Make and stick to a budget. Start building a down payment and emergency fund. Pay down consumer debt/student loans. Picking up side work or overtime will help. You will look far more attractive to a lender if you go in with a large down payment and an emergency fund then someone with better credit scores and 100% financing. That is if the lender does manual underwriting. If not, then use a different lender. Once you get a budget figured out, how much of a down payment and emergency fund you need, and how much consumer debt to pay off, you can then predict when you will hit your goals. Then you will know when you are ready to buy. If it seems too far off, cut spending and work more if it is that important to you! You can make a prioritized list about what is most important features to you and your wife. I would wait on doing this until after you view some homes. Open houses are a great way to do this, but be careful not to get "house fever" and rush into a decision. You will get some encouragement to do so by the selling agents. After viewing some homes, and developing your list you can get an idea as of what the home will cost. This will further refine your budget, goals, and timeline. I think that is a lot of work to start. |
How to calculate the rate of return on selling a stock? | You probably want the Internal Rate of Return (IRR), see http://en.wikipedia.org/wiki/Internal_rate_of_return which is the compound interest rate that would produce your return. You can compute it in a spreadsheet with XIRR(), I made an example: https://spreadsheets.google.com/ccc?key=0AvuTW2HtDQfYdEsxVlM0RFdrRk1QS1hoNURxZkVFN3c&hl=en You can also use a financial calculator, or there are probably lots of web-based calculators such as the ones people have mentioned. |
Receiving important daily wires from abroad? | You can receive all the Money in your Bank. By Problem if you mean whether it will raise any alarms at the Bank. Most likely yes, such kind of activity would trigger AML. Bank would flag this off to regulators and questions would be asked. If you are doing a Legitimate business, its not an issue. Maintain a proper record of the transaction and pay your taxes. As funds are large 80 K a month, it makes sense to seek to advice of a Laywer and CA to help you keep thing in order. |
Investment Options for 14-year old? | When I was about your age I had the same kind of situation. I asked my bank about possible options and one of them was a guaranteed reserve. You lock the money away for a certain amount of years and you get a guaranteed amount of interest on it. I don't know what the current rate is at the moment so you'll have to ask your bank. The good thing about premium bonds is that you can access the money quickly at any time so you could always get premium bonds until you decide what to do with it. If I were you though, I'd make sure my parents didn't have control over my money. Whatever option you choose, keep your money in your name. |
If I have $1000 to invest in penny stocks online, should I diversify risk and invest in many of them or should I invest in just in one? | I've never invested in penny stocks. My #1 investing rule, buy what you know and use. People get burned because they hear about the next big thing, go invest! to just end up losing everything because they have no clue in what they're investing in. From what I've found, until you have minimum of $5k to invest, put everything in a single investment. The reason for this, as others have mentioned, is that commissions eat up just about all your profits. My opinion, don't put it in a bond, returns are garbage right now - however they are "safe". Because this is $1000 we're talking about and not your life savings, put it in a equity like a stock to try and maximize your return. I aim for 15% returns on stocks and can generally achieve 10-15% consistently. The problem is when you get greedy and keep thinking it will go above once you're at 10-15%. Sell it. Sell it right away :) If it drops down -15% you have to be willing to accept that risk. The nice thing is that you can wait it out. I try to put a 3 month time frame on things I buy to make money. Once you start getting a more sizable chunk of money to play around with you should start to diversify. In Canada at least, once you have a trading account with a decent size investment the commissions get reduced to like $10 a trade. With your consistent 10% returns and additional savings you'll start to build up your portfolio. Keep at it and best of luck! |
Will prices really be different for cash and cards? | I think the question relates to the discussion here: http://clarkhoward.com/liveweb/shownotes/2010/10/05/19449/ It was always the case that merchants could discount purchases made with cash. What wasn't allowed is allowing the merchant to charge extra for credit card transactions (presumably to cover the fees the merchants pay). These fees usually carry a flat fee per transaction, plus around 2% of the purchase price. What also wasn't allowed was them to refuse any credit transactions. People could charge a pack of gum, even if the fees put that transaction in the red. What's allowed according to this new development is different levels of discounting for different credit cards. Somewhat related to this discussion is another development that happened this summer: merchants now have the ability to refuse credit card transactions of less than $10. Here's my feeling on all of this. I think we'll see merchants imposing minimum credit transaction amounts before we see them monkeying at the 1-2% level on pricing for different types of credit cards. My feeling is that they'd be wise not to change anything, even though they can. Refusing transactions (or charging more for others) is going to come as a unpleasant shock to enough people that they may take their business elsewhere. |
Are multiple hard inquiries for a specific loan type okay? | tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling. The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can. I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model: With one inquiry, your scores will adjust as such: Two inquiries: Three inquiries: Here's a helpful quote from the simulator notes: "Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months." Of course, take that with a grain of salt, as myfico provides the following disclaimer: The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator. Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter. Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run. |
What is a negotiable security and how are they related to derivatives? | As Dheer pointed out, Wikipedia has a good definition of what a negotiable instrument is. A security is an instrument or certificate that signifies an ownership interest in something tangible. 1 share of IBM represents some small fraction of a company. You always have the ability to choose a price you are willing to pay -- which may or may not be the price that you get. A derivative is a level of abstraction linked by a contract to a security... if you purchase a "Put" contract on IBM stock, you have a contractural right to sell IBM shares at a specific price on a specific date. When you "own" a derivative, you own a contract -- not the actual security. |
Given a certain yearly savings, how much can I spend on a capital improvement? NPV of future cash flow | The question states :- Our insurance company is offering a 30% discount on an $8200/year commercial policy, if we install sprinklers. The insurance is paid in two installments. ... This appears to mean six-monthly payments, so I'll make some comparison calculations using six-monthly loan repayments to keep things simple. Without the loan or sprinklers the insurance costs $4100 every six months. Using this loan payment formula, the calculation below shows, with the 30% discounted insurance, sprinkler maintenance and loan repayment, you would be paying $4655.28 every six months. The discount required to break even is 43.5%. I.e. rearranging the equation :- Alternatively, with the discount of 30% you would break even if the six-monthly repayment amount was $1030. Solving the payment equation for s gives an equation for the loan :- So with the 30% discount you would break even if the loan required was $25989. Checking by back-calculating the periodic payment amount, a :- Likewise we can keep the loan at $40000 and solve for t to find the break-even loan term :- (Note, in this formula Log denotes the natural logarithm.) Now we can set some values :- So with break-even payments the $40000 loan is paid off in just under 65.5 years. I.e. checking :- This just beats the $4100 cost of proceeding without the sprinklers. Notes If your loan repayment was monthly it would reduce the cost of the loan slightly. The periodic interest rate is calculated from the APR according to the method used in the EU and in some cases in US. The calculations above were run using Mathematica. |
The penalty on early redemption of a personal loan | In month 9 you still owe $7,954.25. You need to pay that, plus the $250. At that line, you haven't made the payment, the rest of the line with next month's payment due. So you haven't paid the $242.47 in col 4. |
Do those who invest large amounts of money in stocks pay typical brokerage commissions? | Other than the brokerage fee you should also consider the following: Some brokerages provide extra protection against the these and as you guessed it for a fee. However, there could be a small bonus associated with your trading at scale: You are probably qualified for rebates from the exchanges for generating liquidity. "Fees and Credits applicable to Designated Market Makers (“DMMs”)" https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf All in all, I will say that it will be really hard for you to avoid paying brokerage fee and yes, even Buffet pays it. |
Should I invest in the world's strongest currency instead of my home currency? | The best thing is to diversify across multiple currencies. USD and EUR seem reliable. But not 100% reliable to keep all your investments in this types of currencies. Invest part of your savings in USD, part - in EUR, and part in your home country's currency. Apart from investing I recommend you to have certain sum in cash and certain on your bank account. |
still have mortgage on old house to be torn down- want to build new house | I could be wrong, but I doubt you're going to be able to roll the current mortgage into a new one. The problem is that the bank is going to require that the new loan is fully collateralized by the new house. So the only way that you can ensure that is if you can construct the house cheaply enough that the difference between the construction cost and the end market value is enough to cover the current loan AND keep the loan-to-value (LTV) low enough that the bank is secured. So say you currently owe $40k on your mortgage, and you want to build a house that will be worth $200k. In order to avoid PMI, you're going to have to have an LTV of 80% or less, which means that you can spend no more than $160k to build the house. If you want to roll the existing loan in, now you have to build for less than $120k, and there's no way that you can build a $200k house for $120k unless you live in an area with very high land value and hire the builders directly (and even then it may not be possible). Otherwise you're going to have to make up the difference in cash. When you tear down a house, you are essentially throwing away the value of the house - when you have a mortgage on the house, you throw away that value plus you still owe the money, which is a difficult hole to climb out of. A better solution might be to try and sell the house as-is, perhaps to someone else who can tear down the house and rebuild with cash. If that is not a viable option (or you don't want to move) then you might consider a home equity loan to renovate parts of the house, provided that they increase the market value enough to justify the cost (e.g. modernize the kitchen, add on a room, remodel bathrooms, etc. So it all depends on what the house is worth today as-is, how much it will cost you to rebuild, and what the value of the new house will be. |
I am the sole owner of an LLC. Does it make a difference if I file as an S-Corp or a sole-member LLC? | I'm assuming that when you say "convert to S-Corp tax treatment" you're not talking about actually changing your LLC to a Corporation. There are two distinct pieces of the puzzle here. First, there's your organizational form. Your state, which is where the business is legally formed and recognized, creates the LLC or Corporation. "S-Corp" doesn't come into play here: your company is either an LLC or a Corporation. (There are a handful of other organizational types your state might have, e.g. PLLC, Limited Partnership, etc.; none of these are immediately relevant to this discussion). Second, there's the tax treatment you receive by the IRS. If your company was created by the state as an LLC, note that the IRS doesn't recognize LLCs as a distinct organizational type: you elect to be taxed as an individual (for single member LLCs), a partnership (for multiple member LLCs), or as a corporation. The former two elections are "pass through" -- there's no additional level of taxation on corporate profits, everything just passes through to the owners. The latter election introduces a tax on corporate profits. When you elect pass-through treatment, a single-member LLC files on Schedule C; a multiple-member LLC will prepare a form K-1 which you will include on your 1040. If your company was created by the state as a Corporation (not an LLC), you could still elect pass-through taxation if your company qualifies under the rules in Subchapter S (i.e. "an S-Corp"). States do not recognize "S-Corp" as part of the organizational process -- that's just a tax distinction used by the IRS (and possibly your state's tax authorities). In your case, if you are a single-member LLC (and assuming there are no other reasons to organize as a corporation), talking about "S-Corp tax treatment" doesn't make any sense. You'll just file your schedule C; in my experience it's fairly simple. (Note that this is based on my experience of single- and multiple-member LLCs in just two states. Your state may have different rules that affect state-level taxation; and the rules may change from year to year. I've found that hiring a good CPA to prepare the forms saves a good bit of stress and time that can be better applied to the business.) |
What is the term for the quantity (high price minus low price) for a stock? | It is known as the range or the price spread of the stock. You can read more about it here http://www.investopedia.com/terms/r/range.asp |
Can I pay estimated taxes based on last year's taxes if I anticipate more income this year? | You're interpreting this correctly. Furthermore, if your total tax liability is less than $1000, you can not pay estimates at all, just pay at the tax day. See this safe harbor rule in the IRS publication 17: General rule. In most cases, you must pay estimated tax for 2016 if both of the following apply. You expect to owe at least $1,000 in tax for 2016, after subtracting your withholding and refundable credits. You expect your withholding plus your refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2016 tax return, or 100% of the tax shown on your 2015 tax return (but see Special rules for farmers, fishermen, and higher income taxpayers , later). Your 2015 tax return must cover all 12 months. |
What's the justification for the DJIA being share-price weighted? | The share-price weighting of the DJIA is a historical artifact. The DJIA remains share-price weighted today because that's the way it has always been done, and we're talking about an index with more than a hundred years' history. The DJIA was first calculated on May 26, 1896. Perhaps, back then, price-weighting was the most straight-forward & feasible way to calculate it each day. You're right that it doesn't make a lot of sense, and that's why the S&P500 and other indexes are better barometers. |
Average Price of a Stock | I would have to disagree with the other responders. In technical analysis of stock charts, various short and long term moving averages are used to give an indication of the trend of the stock in the short and long term, as compared to the current price. I would prefer to use the term moving average (MA) rather than average as the MA is recalculated every day (or at appropriate frequencies for your data) on the period you are using. I would also expand on the term "moving average". There are two that are commonly used Going back to the question, of the value of this number, For example if the current price is above the 200 day EWMA and also above the 30 day EWMA, then the stock is broadly trending upwards. Conversely if current price is below the 200 day EWMA and also below the 30 day EWMA, then the stock is broadly trending downwards. These numbers are chosen on the basis of the market you are trading in, the volatility and other factors. For another example of how a number of moving averages are used together, please have a read of Daryl Guppy's Multiple Moving Average, though this does not use moving averages as large as 200 days. |
How do markets “factor in” a future event? | At the most fundamental level, every market is comprised of buyers and selling trading securities. These buyers and sellers decide what and how to trade based on the probability of future events, as they see it. That's a simple statement, but an example demonstrates how complicated it can be. Picture a company that's about to announce earnings. Some investors/traders (from here on, "agents") will have purchased the company's stock a while ago, with the expectation that the company will have strong earnings and grow going forward. Other agents will have sold the stock short, bought put options, etc. with the expectation that the company won't do as well in the future. Still others may be unsure about the future of the company, but still expecting a lot of volatility around the earnings announcement, so they'll have bought/sold the stock, options, futures, etc. to take advantage of that volatility. All of these various predictions, expectations, etc. factor into what agents are bidding and asking for the stock, its associated derivatives, and other securities, which in turn determines its price (along with overall economic factors, like the sector's performance, interest rates, etc.) It can be very difficult to determine exactly how markets are factoring in information about an event, though. Take the example in your question. The article states that if market expectations of higher interest rates tightened credit conditions... In this case, lenders could expect higher interest rates in the future, so they may be less willing to lend money now because they expect to earn a higher interest rate in the future. You could also see this reflected in bond prices, because since interest rates are inversely related to bond prices, higher interest rates could decrease the value of bond portfolios. This could lead agents to sell bonds now in order to lock in their profits, while other agents could wait to buy bonds because they expect to be able to purchase bonds with a higher rate in the future. Furthermore, higher interest rates make taking out loans more expensive for individuals and businesses. This potential decline in investment could lead to decreased revenue/profits for businesses, which could in turn cause declines in the stock market. Agents expecting these declines could sell now in order to lock in their profits, buy derivatives to hedge against or ride out possible declines, etc. However, the current low interest rate environment makes it cheaper for businesses to obtain loans, which can in turn drive investment and lead to increases in the stock market. This is one criticism of the easy money/quantitative easing policies of the US Federal Reserve, i.e. the low interest rates are driving a bubble in the stock market. One quick example of how tricky this can be. The usual assumption is that positive economic news, e.g. low unemployment numbers, strong business/residential investment, etc. will lead to price increases in the stock market as more agents see growth in the future and buy accordingly. However, in the US, positive economic news has recently led to declines in the market because agents are worried that positive news will lead the Federal Reserve to taper/stop quantitative easing sooner rather than later, thus ending the low interest rate environment and possibly tampering growth. Summary: In short, markets incorporate information about an event because the buyers and sellers trade securities based on the likelihood of that event, its possible effects, and the behavior of other buyers and sellers as they react to the same information. Information may lead agents to buy and sell in multiple markets, e.g. equity and fixed-income, different types of derivatives, etc. which can in turn affect prices and yields throughout numerous markets. |
How to calculate car insurance quote | On top of the given answers, the type of referral will also factor in. When you're up for renewal and go to a comparison site (in the UK: CompareTheMarket, MoneySupermarket, Confused, GoCompare, ... ) and struggle accurately through all their lists of questions, you see that some of the data differs (e.g., not all the same jobs can be entered; if you have had an accident, not all ask whose fault it was and/or don't leave the option "not yet resolved" --possibly forcing you to guess which way it will be adjudicated,-- and/or what the total repair cost was). So as these referrers feed slightly different data to roughly the same set of insurance providers, you will get slightly different quotes on the same providers. And expect your own provider to offer a slightly better quote than you'll get in reality for renewing: The referrer's (one-time) cut has to be still taken off, but they count it as a new client so somebody gets a bonus for that --- you they disregard as a captive client and give what boils down to a loyalty penalty. [Case in point: I had an unresolved car accident, resolved months later in my favour. With all honest data including unresolved claim and its cost and putting my 'accident-free years' factor at 0 instead of 7, my old provider quoted about 8% more than the previous year on comparison sites; but my renewal papers quoted me 290% more, upon telephone enquiry the promised to refund the difference if court found in my favour though they refused to give this in writing. So: No thanks!] Then the other set of referrals they get is from you directly going to their website asking for a quote. They know what type of link you've followed (banner, or google result, etc), they may know some info from your browser's cookies (time spent where) or other tracking service, and from your data they may guess how tech-savvy and shop-wise you are, and scale your offer accordingly. [Comparison-site shoppers are lumped together at a relatively high savvy-level, of course!]. Companies breaking down your data and their own in a particular way can find advantages and hence offer you better terms, as said in the main answer (this is like Arbitration in stock exchanges, ensuring a certain amount of sanity: if there's something to exploit, somebody will, and everybody will follow). It may be that they find a certain group of people maybe more accident-prone but cheaper to deal with (more flexible in repair-times, or easy to bully in accepting shared-fault when they weren't at fault), or they want a certain client (for women, for civil servants, for sporty drivers, for homeowners --- often for cross-selling other insurance services). Or they claim to want pensioners because the company can offer them 'a familiar voice' (same account manager always contacting them) while they're easier to bamboozle and less likely to shop around when offered a rubbish deal. Also, 100% straight comparison of competing offers isn't possible as the fine details of the T&Cs (terms & conditions) would differ, as well as various little pinpricks in the claims handling process. And depreciation of a car, and various ways of dealing with it: You insure it for the buying prices, but two years later it's worth about 40% less on paper --- so in case of total loss, replacing like-for-like will cost you still at least 80% of the value for which you've been insuring it while they'll probably offer you the 100-40= 60%. Mostly because instead of your trusted car you have something unknown that may have hidden defects, or been mistreated and about to die. [Case in point: My 3-y-old dealer-bought car's gearbox died just outside the 6month warranty period, notwithstanding its "150-item inspection you can rely on". In the end the national brand agreed to refund the parts (15% of what I paid for the car) but not the labour (a few hours).] And any car model's value differs (in descending order) from its "forecourt price", "private selling price", "part exchange price", and "auction price". Depending on your ompanies may happily insure you for forecourt price (=what you paid to dealer) but then point out that the value of that car is the theoretical P/X value, i.e., the car without anybody's profit, far less than you've been paying for. [Conversely, if you crash it after insuring below market value, they can pay you your stupidly low figure.] |
Are credit histories/scores international? | Currently the credit history are not International but are local. Many countries don't have a concept of credit history yet. Having said that, if you are moving to US, depending on your history in your country, you can ask the same bank to provide you with a card and then start building history. For example in India I had a card with Citi Bank and when I moved to US for a short period, I was given a card based on my India Card, with equivalent credit in USD. If you are moving often internationally, it would make sense to Bank with a leading bank that provide services in geographies of your interest [Citi, HSBC, etc] and then in a new country approach these institutions to get you some starting credit for you to build a history. |
How do auto-loan payments factor into taxes for cars that are solely used by dependent(s)? | I don't see how allowing usage of your vehicle is less support than giving money to buy their own vehicle. If that's the only vehicle your mother has - then you're supporting her. Quantifying that support may be difficult though, but if you are providing her all of her needs - it doesn't matter. If she does have income of her own, I do not think that you can put the actual amount you're paying as part of the calculation towards the 50% rule since she would otherwise have bought a much cheaper car. But if you pass the 50% threshold even without the car payments - then you're fine either way. |
Why does Google Finance show the NASDAQ Composite way up but Yahoo! Finance shows it slightly down? | First - Google's snapshot - Then - Yahoo - I took these snapshots because they will not exist on line after the market opens, and without this context, your question won't make sense. With the two snapshots you can see, Yahoo shows the after hours trades and not just the official market close for the day. The amount it's down is exactly tracked from the close shown on Google. Now you know. |
How to handle missing W2 from failed direct deposit only company? | Yes, there's a way. I actually wrote a blog post about it. Its a new service from the IRS which allows you pulling your account online. IRS also has an instruction page just for this case here. |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | Is playing the lottery a wise investment? --Probably not. Is playing the lottery an investment at all? --Probably not though I'll make a remark on that further below. Does it make any sense to play the lottery in order to improve your total asset allocation? --If you follow the theory of the Black Swan, it actually might. Let me elaborate. The Black Swan theory says that events that we consider extremely improbable can have an extreme impact. So extreme, in fact, that its value would massively outweigh the combined value of all impacts of all probable events together. In statistical terms, we are speaking about events on the outer limits of the common probablity distribution, so called outliers that have a high impact. Example: If you invest $2000 on the stock market today, stay invested for 20 years, and reinvest all earnings, it is probable within a 66% confidence interval that you will have an 8 % expected return (ER) per year on average, giving you a total of roughly $9300. That's very much simplified, of course, the actual number can be very different depending on the deviations from the ER and when they happen. Now let's take the same $2000 and buy weekly lottery tickets for 20 years. For the sake of simplicity I will forgo an NPV calculation and assume one ticket costs roughly $2. If you should win, which would be an entirely improbable event, your winnings would by far outweigh your ER from investing the same amount. When making models that should be mathematically solvable, these outliers are usually not taken into consideration. Standard portfolio management (PM) theory is only working within so called confidence intervals up to 99% - everything else just wouldn't be practical. In other words, if there is not at least a 1% probability a certain outcome will happen, we'll ignore it. In practice, most analysts take even smaller confidence intervals, so they ignore even more. That's the reason, though, why no object that would fall within the realms of this outer limit is an investment in terms of the PM theory. Or at least not a recommendable one. Having said all that, it still might improve your position if you add a lottery ticket to the mix. The Black Swan theory specifically does not only apply to the risk side of things, but also on the chance side. So, while standard PM theory would not consider the lottery ticket an investment, thus not accept it into the asset allocation, the Black Swan theory would appreciate the fact that there is minimal chance of huge success. Still, in terms of valuation, it follows the PM theory. The lottery ticket, while it could be part of some "investment balance sheet", would have to be written off to 0 immediately and no expected value would be attached to it. Consequently, such an investment or gamble only makes sense if your other, safe investments give you so much income that you can easily afford it really without having to give up anything else in your life. In other words, you have to consider it money thrown out of the window. So, while from a psychological perspective it makes sense that especially poorer people will buy a lottery ticket, as Eric very well explained, it is actually the wealthier who should consider doing so. If anyone. :) |
401(k) lump sum distribution limited because of highly compensated employees? | It's legal. In fact, they are required to do this, assuming you are in fact a HCE (highly compensated employee) to avoid getting in trouble with the IRS. I'm guessing they don't provide documentation for the same reason they don't explain to you explicitly what the income thresholds are for social security taxes, etc - that's a job for your personal accountant. Here's the definition of a HCE: An individual who: Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2014; $120,000 if the preceding year is 2015, 2016 or 2017), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation. There are rules the restrict distributions from plans like 401ks. For example, treasury reg 1.401a(4)-5(b)(3) says that a plan cannot make a distribution to a HCE if that payment reduces the asset value of the plan to below 110% of the value of the plan's current liabilities. So, after taking account all distributions to be made to HCEs and the asset value of the plan, everyone likely gets proportionally reduced so that they don't run afoul of this rule. There are workarounds for this. But, these are options that the plan administrators may take, not you. I suppose if you were still employed there and at a high enough level, a company accountant would have discussed these options with you. Note, there's a chance there's some other limitation on HCEs that I'm missing which applies to your specific situation. Your best bet, to understand, is simply ask. Your money is still there, you just can't get it all this year. |
Beginning investment | The advice I have is short and sweet. Be an investor, not a speculator. Adopt the philosophy of Warren Buffet which is the 'buy and hold' philosophy. Avoid individual stocks and buy mutual funds or ETFs. Pick something that pays dividends and reinvest those dividends. Don't become a speculator, meaning avoid the 'buy low, sell high' philosophy. EDIT:For some reason I cannot add a comment, so I am putting my response here. @jad The 'buy low, sell high' approach makes money for the stock broker, not necessarily you. As we learn in the movie Trading Places, each buy or sell creates a commission for the broker. It is those commission expenses that eat away at your nestegg. Just don't sell. If a security is trading at $10 a share and pays $0.25 a share each quarter then you are getting 10% ROI if you buy that security (and if it continues to pay $0.25 a share each quarter). If the price goes up then the ROI for new buyers will go down, but your ROI will still be the same. You will continue to get 10% for as long as you hold that security. A mutual fund buys the individual stocks for you. The value of the fund is only calculated at the end of the day. An ETF is like a mutual fund but the value of the ETF is calculated moment by moment. |
Free service for automatic email stock alert when target price is met? | http://finance.yahoo.com/stock-alerts/stock-watch/add/?.done=/stock-alerts/ You will have to have a yahoo account. If you want to provide an alternative delivery email address, visit the URL above. Click "Stocks Watch", enter ticker(s) and price(s) at which you want alerts, then at the bottom select the "email" radio button. If your preferred email address is not listed, click the "Add an email address" link and follow the instructions. I don't know what their limit is, but I currently have three addresses set up -- two to non-@yahoo addresses -- and it works fine. |
How to double-entry bookkeep money incoming from sold items | If you were a business, all your assets would have a dollar value, so when you sold them you'd decrease the amount of assets by that amount and increase in cash, and if there was a profit on the sale it would go in as income, if there was loss it would count as a cost (or a loss)... so if there was a profit it would increase Equity, a loss then it would decrease Equity. Since it's not really worthwhile doing a estimated cost for everything that you have, I'd just report it as income like you are doing and let the amount of equity increase proportionately. So, implicitly you always had roughly that amount of equity, but some of it was in the form of assets, and now you're liquidating those assets so the amount shows up in GnuCash. When you buy new things you might sell later, you could consider adding them as assets to keep track of this explicitly (but even then you have problems-- the price of things changes with time and you might not want to keep up with those price changes, it's a lot of extra work for a family budget) -- for stuff you already have it's better to treat things as you are doing and just treat the money as income-- it's easier and doesn't really change anything-- you always had that in equity, some of it was just off the books and now you are bringing it into the books. |
Why do grocery stores in the U.S. offer cash back so eagerly? | The only card I've seen offer this on credit card purchases is Discover. I think they have a special deal with the stores so that the cash-over amount is not included in the percentage-fee the merchant pays. (The cash part shows up broken-out from the purchase amount on the statement--if this was purely something the store did on its own without some collaboration with Discover that would not happen). The first few times I've seen the offer, I assumed it would be treated like a cash-advance (high APR, immediate interest with no grace period, etc.), but it is not. It is treated like a purchase. You have no interest charge if you pay in full during the grace period, and no transaction fee. Now I very rarely go to the ATM. What is in it for Discover? They have a higher balance to charge you interest on if you ever fail to pay in full before the grace period. And Discover doesn't have any debit/pin option that I know of, so no concern of cannibalizing their other business. And happier customers. What is in it for the grocer? Happier customers, and they need to have the armored car come around less often and spend less time counting drawers internally. |
Borrowing money for a semi-urgent medical expense | The best option would be to have the dental office allow you pay in installments. That would be probably the cheapest and most convenient way. When high amounts are involved - many medical offices are flexible with payments and allow spreading over long period of time, so you should check it out. Otherwise, credit cards would probably be the most expensive loan, but you should shop around and compare the rates offered to you, it is hard to guess would you may get. |
I spend too much money. How can I get on the path to a frugal lifestyle? | There are a lot of great suggestions here on how to get and keep your finances in shape. But I have to say, I disagree with some on the starting point. The first step to living frugal is to convince yourself that it is worth it. That it is the way to go and the way you want to manage your finances. As @DrFredEdison and @fennec stated, the reason we frugal people don't spend wildly is because of what we believe. So I would suggest buying a book or video/audio series from someone like Dave Ramsey who will encourage and motivate you to spend wisely and show you practical ways to get started. With that said I do agree with a lot of the practical suggestions that have been given here. |
Currently sole owner of a property. My girlfriend is looking to move in with me and is offering to pay 'rent'. Am I at risk here? | With regard to worries about ownership: I'll point you towards this - The Cohabitants Rights Bill currently in First Reading at the House of Lords. Without a date for even the second reading yet. In short the Bill is attempting to redress is the lack of rights when a non-married relationship ends when compared to married relationships; that is that one of the "cohabitants" can end up with basically nothing that they don't have their name on. So currently you're in the clear and (Part 2) Section 6.2.a says the Bill cannot be used retroactively against you if your relationship is over before it becomes law (I expect with Brexit etc, this Bill isn't a high priority - it's been a year since the first reading). Section 6.2.a: This Part does not apply to former cohabitants where the former cohabitants have ceased living together as a couple before the commencement date; However, if you're still together if/when this Bill becomes Law then basically all of (Part 1) Section 2 may be relevant as it notes the conditions you will fall into this bill: Section 2.1.a: live together as a couple and Section 2.2.d: have lived together as a couple for a continuous period of three years or more. and the "have lived together" at that point counts from the start of your cohabitation, not the start of the Bill being law: Section 2.4.a: For the purposes of subsection (2)(d), in determining the length of the continuous period during which two people have lived together as a couple - any period of the relationship that fell before the commencement date (of the Bill) is to be taken into account If you have kids at some point, you'd also fall under 2.2.a through 2.2.c too. After that, the financial parity decided upon by the court depends on a whole bunch of conditions as outlined in the Bill, but Section 8.1.b is pretty clear: Section 8.1.b: (b)the court is satisfied either— (i)that the respondent has retained a benefit; or (ii)40that the applicant has an economic disadvantage, as a result of qualifying contributions the applicant has made I'm not qualified to say whether your partner helping to pay off your mortgage in lieu of paying rent herself would count as just paying rent or giving you an economic benefit. Sections 12, 13, and 14 discuss opt-outs, also worth a read. The a major disclaimer here in that Bills at this early stage have the potential to be modified, scrapped and/or replaced making this info incorrect. As an additional read, here's an FT article from Feb 2016 discussing this lack of rights of a cohabitant which should alleviate any current concerns. |
Shorting Stocks And Margin Account Minimum | The margin money you put up to fund a short position ($6000 in the example given) is simply a "good faith" deposit that is required by the broker in order to show that you are acting in good faith and fully intend to meet any potential losses that may occur. This margin is normally called initial margin. It is not an accounting item, meaning it is not debited from you cash account. Rather, the broker simply segregates these funds so that you may not use them to fund other trading. When you settle your position these funds are released from segregation. In addition, there is a second type of margin, called variation margin, which must be maintained while holding a short position. The variation margin is simply the running profit or loss being incurred on the short position. In you example, if you sold 200 shares at $20 and the price went to $21, then your variation margin would be a debit of $200, while if the price went to $19, the variation margin would be a credit of $200. The variation margin will be netted with the initial margin to give the total margin requirement ($6000 in this example). Margin requirements are computed at the close of business on each trading day. If you are showing a loss of $200 on the variation margin, then you will be required to put up an additional $200 of margin money in order to maintain the $6000 margin requirement - ($6000 - $200 = $5800, so you must add $200 to maintain $6000). If you are showing a profit of $200, then $200 will be released from segregation - ($6000 + $200 = $6200, so $200 will be release from segregation leaving $6000 as required). When you settle your short position by buying back the shares, the margin monies will be release from segregation and the ledger postings to you cash account will be made according to whether you have made a profit or a loss. So if you made a loss of $200 on the trade, then your account will be debited for $200 plus any applicable commissions. If you made a profit of $200 on the trade then your account will be credited with $200 and debited with any applicable commissions. |
Why does gold have value? | Everything is worth what its purchaser will pay for it. --Publilius Syrus. Gold has value because people want to buy it. Electronics manufacturers like the fact that it's conductive. Jewellers like that its shiny. Glenn Beck likes that he's selling it and his audience will buy it. Proponents of gold claim that it has "real" value, as opposed to fiat currency (which has no commodity backing). Opponents of gold claim that all wealth is illusory, and that gold has no more inherent value than the paper we use now. I'm inclined to agree with the latter (money is only money because we agree that it is, and the underlying material is meaningless), however the issue is hotly debated. |
Relative Strength Index: Yahoo vs Google Finance | Look at the 'as of'. Google's as of is 11:27 whil Yahoo's is 11:19. Given the shape of the Google curve, it looks to me that Yahoo's may well drop that much in the next 8 minutes. In fact, looking at it now, Yahoo's algorithm showed it as about 30 at 11:24, before going back up again some. It may not have been identical to Google's, but it was certainly close. |
What happens to your ability to borrow money based on our joint finances? | It might be worth talking to a mortgage broker, even if you don't actually end up doing business with them. Upfront Mortgage Brokers explained Finding an upfront broker near you In a nutshell, upfront brokers disclose what they are paid for their services openly and transparently. Many brokers don't, and you can't be too careful. But a consultation should be free. An experienced broker can help you to navigate the pros and cons mentioned by the other responders. Personally, I would never do business with a broker who can't/won't show me a rate sheet on the day of the lock. That's my personal acid test. You might be surprised by what the broker has to say regarding your situation. That was my experience, anyway. |
What are the costs to establish an LLC and to maintain it? | The cost will be around $300-$500 if you do it correctly it in Florida and can be over a $1,000 if you do it in New York (New York is more expensive due to a publication requirement that New York has for LLC’s). The price ranges I’ve given include filing, state fees, getting a tax ID number (EIN), operating agreement, membership certificates, registered agent fees and publication fees if done in New York. Each state also have licensing boards and city fees that are applicable, so you would want to also make sure that you are keeping compliant there. Yearly paperwork to keep the LLC running won’t be so expensive, expect the state to charge a yearly fee and require some basic information to be submitted. I had a quick look at Florida, and with someone filing it for you, expect around $200 to $250 a year, plus registered agent fees. If you are late in Florida the penalty is $400 so you definitely would want a service that provides compliance calendar notifications to make sure you are on time with fees. In regards to bookkeeping and taxes, yearly tax filing will start at $250 to $500 for an LLC and move up from there depending on the services being offered and the amount of time of work. I recently referred someone to an accountant that will charge $250 to file an almost zero tax return on an LLC. I think $40 an hour is a little low for a bookkeeper but it all depends on where you are. I know in some major cities bookkeepers expect $75 an hour or higher. So the expectation in Miami and Manhattan will probably be more expensive than Jacksonville and Albany. If you doing a little business don’t expect the cost to be too much on the bookkeeping. So, breakdown: $300-$500 (FL) - $1,000 (NY) Registration of LLC + any business license, city or other registrations $250 Yearly Fee + Yearly Registered Agent + any business licenses, city or other fee $500 Tax Return + Bookkeeping Fee Banks will charge more than a personal account so expect $120 a year plus. In regards to service I would look at companies that specialize in foreigners setting up businesses in the US, because they will have services designed to help you more than services that primarily specialize with US clients. You are going to have some different needs, based on not having a Social Security Number or establishing from overseas. |
Personal Banking using accrual method | You would add your daily earnings every day. For example, you work full time job (8 hours a day) at $20/hour. At the end of the 1st day of the month, you'd add $160 to your salary account. You've earned it, even though its still almost a month till you actually get paid. So its accrued. What if you don't get paid? You've accrued it already, its on your books, but not in your wallet. You might have paid taxes on it, etc. But you don't really have it. This is what is called "bad debt", and eventually, after you can show that the payee is not going to pay, you write it off - remove it from your books (and adjust your taxes etc that you paid on that income already). Generally, it is a very bad idea to use accrual method of accounting for an individual or a small business. For large volume business using accrual mode solves other accounting and revenue recognition problems. |
How can I improve my credit score if I am not paying bills or rent? | An activity which can help improve your credit score and actually make you money is stoozing. It's a little complicated but can be beneficial to do. Using either a credit card which allows fee free money withdrawals from cashpoints or building up debt using your credit card gives you access to your credit amount. You then use a long term 0% balance transfer card to transfer the debt which you pay off at the minimum rate. It's 0% so no costs are associated except for the initial fee paid for the balance transfer amount. The money that would have been used to pay off the credit amount (or money withdrawn from a cashpoint) can then be deposited in a savings account so you are now earning interest on the credit balance. Continuing to make monthly minimum payments via direct debit will help improve your credit rating and the savings money will earn interest. (it is also available if you suddenly need to pay off the 0% card) |
Is it accurate to say that if I was to trade something, my probability of success can't be worse than random? | The previous answers make valid points regarding the risks, and why you can't reasonably compare trading for profit/loss to a roll of the die. This answer looks at the math instead. Your assumption: I have an equal probability to make a profit or a loss. Is incorrect, for the reasons stated in other answers. However, the answer to your question: Can I also assume that probabilistically speaking, a trader cannot do worst than random? Is "yes". But only because the question is flawed. Consequently it's throwing people in all directions with their answers. But quite simply, in a truly random environment the worst case scenario, no matter how improbable, is that you lose over and over again until you have nothing left. This can happen in sequential rolls of the dice AND in trading securities/bonds/whatever. You could guess wrong for every roll of the die AND all of your stock picks could become worthless. Both outcomes result in $0 (assuming you do not gamble with credit). Tell me, which $0 is "worse"? Given the infinite number of plays that "random" implies, the chance of losing your entire bankroll exists in both scenarios, and that is enough by itself to make neither option "worse" than the other. Of course, the opposite is also true. You could only pick winners, with an unlimited upside potential, but again that could happen with either dice rolls or stock picks. It's just highly improbable. my chances cannot be worse than random and if my trading system has an edge that is greater than the percentage of the transaction that is transaction cost, then I am probabilistically likely to make a profit? Nope. This is where it all falls apart. Just because your chances of losing it all are similarly improbable, does not make you more likely to win with one method or the other. Regression to the mean, when given infinite, truly random outcomes, makes it impossible to "have an edge". Also, "probabilistically" isn't a word, but "probably" is. |
What is a negotiable security and how are they related to derivatives? | The price for securities is negotiable. You totally have a right to make a lower offer when buying or ask for a higher price when selling. Securities don't trade at a fixed price, the price goes up and down throughout the day based on the price offers made by buyers and sellers and where they find agreement. If a stock last traded for $10, someone can put out an offer to buy the stock at $9.50, if they find someone who wants to sell and will accept that price, then a deal is made. unless something is falling rapidly in price however, an offer that far below the last price is not terribly likely to be accepted. Now if you want to be assured of making a sale or purchase, you generally trade 'at the market' and for small time players that is very much encouraged as it makes it easier for everyone. |
Auto loan and student loan balance | So, in general, pay to the higher interest rate. Some contrived reasons you would want to pay your auto loan more could be: |
Can stock brokerage firms fail? | Yes, any company can go under. SIPC offers a level of protection. They don't guarantee against stocks dropping, but will replace stocks that you owned, but the broker stole from you. (overgeneralization). There's a $500K limit, with $250K max in cash. |
Should I sell a 2nd home, or rent it out? | I don't see anything in this forum on the leverage aspect, so I'll toss that out for discussion. Using generic numbers, say you make a $10k down payment on a $100,000 house. The house appreciates 3% per year. First year, it's $103,000. Second year, $106090, third it's 109,272.70. (Assuming straight line appreciation.) End of three years, you've made $9,272.70 on your initial $10,000 investment, assuming you have managed the property well enough to have a neutral or positive cash flow. You can claim depreciation of the property over those rental years, which could help your tax situation. Of course, if you sell, closing costs will be a big factor. Plus... after three years, the dreaded capital gains tax jumps in as mentioned earlier, unless you do a 1031 exchange to defer it. |
How do I track 401k rollovers in Quicken? | You definitely should NOT do what you are doing now (#2) since this is not a reflection of what actually is going on. (Unless you actually did transfer the equities themselves and not the cash.) Your first option is correct solution. As noted by mpenrow you need to make sure that the target account is also tax deferred. If that still doesn't work and there is a bug you should still do it this way anyway. If it messes up your tax planner just make sure to include a comment so that everyone knows what is really going on. When I have had issues like this in the past I always try to stick to whatever is the closest indication of what actually occurred. |
Making $100,000 USD per month, no idea what to do with it | You already did the leg work by putting your money in a Schwab account. They have some of the lowest fees on index funds you can buy. I would keep things dead simple. Decide if you want some of it to be an IRA or not, and then plow your funds into a broad stock only index fund such as SCHB, SCHX, or SCHV (you could buy all three, but there would be no need to whatsoever). You will get around 2-2.5 % dividend yield, be diversified, and have extreme low fees. Fees are key to getting good returns in funds. Of course..set tax money aside as well. |
Strategy for accounting personal finance in multiple currency? | How can I correctly account for having money in different currencies, without currency transfers or currency fluctuations ending up as gains or losses? In my view, your spreadsheet should be in multiple currencies. i.e. if you have gained some in specific currency, make a note of it in that specific currency. If you have spent something in a specific currency, then make a note accordingly. You can use an additional column for reporting this in a neutral currency say GBP. If you are transferring the money from account of one currency to account of another; change the balances as appropriate with the actual conversion rate. If you need this record keeping for tax purposes, then get a proper advise from accountant. |
What market conditions favor small cap stocks over medium cap stocks? | Small companies are generally able to adapt quickly to take advantage of changing conditions to enter new markets when the economy is growing. This gives them a lot of growth potential under those circumstances. However, in times of crisis, there may not be a lot of new markets to enter, and financing to expand any operations may be impossible to get. Under these conditions, small-caps will suffer relative to large-caps. |
When to hire an investment professional? | Don't invest in regular mutual funds. They are a rip-off. And, most investment professionals will not do much to help your financial future. Here's the advice: |
Are REIT worth it and is it a good option to generate passive income for a while? | One way is to think of a REIT as a fully managed portfolio of real estate investments. Risks and returns are averaged across the real estate portfolio and managed by experts, possibly industry leading experts. REITs have a well documented track record you can research - most individuals do not. Many individuals have learned a hard lesson or two while attempting to generate passive income with real estate. Conversely, some people derive a great deal of satisfaction from owning real estate and have a true passion to do so. Plus, if you are expecting interest rates to raise and/or rate of inflation to increase in the next 30 years, you may benefit from the financing aspects of the investment as well. There are some regions/ opportunities that seem to do better than the average REIT a majority of the time, but may not be desirable to you or fit into your budget for various reasons. I'm not sure what your level of experience, knowledge or financial situation , but for everyone considering, there are many additional things to know about investment property compared to a primary residence. A good place to start with REITs is the prospectus of one that interests you. Research their holdings, create a model, or otherwise make a connection with the REIT before clicking buy. |
How is stock price determined? | The answer to each of your questions is no. It is important to appreciate that the "quoted" ticker price may be delayed by say 15 minutes, and thus is not "real-time." |
what are the pros and cons of structured deposits? | Say we are in 'normal times.' Passbook rates are 5% or so. Longer rates, 6-7%. I offer you a product with these terms, for $10,000 I will return a "Guaranteed" $10,000 in 6 years and based on the stock market, 1% for every 2% the S&P is up beyond 10% at maturity. As the seller of this product, I take $6666, and buy a fixed investment, 6 years at 7% in treasuries will return the $10000. Really. I then take the $3334 and buy out of the money calls on the S&P each year to capture the gains, if any, and to deliver on my promise. This is one example of a structured deposit offering. They can have nearly any terms one can imagine. Tied to any product. S&P, Crude Oil, Gold. Whatever. |
How will my stock purchase affect my taxes? | Purchasing stock doesn't affect your immediate taxes any more than purchasing anything else, unless you purchase it through a traditional 401k or some other pre-tax vehicle. Selling stock has tax effects; that's when you have a gain or loss to report. |
Can my rent to own equity be used as a downpayment? | I do not think the bank would consider the 52K as equity. Typically, a rent-to-own lease is technically a lease-option contract where you lease for a fixed amount and at some point during the lease you have the option to buy it at a discounted price. I think the bank would consider it a negotiated price. I know that those down payment assistance plans are considered price negotiation by the IRS for the purpose of basis cost and I suspect this would be similar where your basis is $236,800 and not $296,000. |
Are the “debt reduction” company useful? | They are a complete waste of money, see my answer here for more details. |
Determine share price from S-1 for company that was bought before going public | To add to @keshlam's answer slightly a stock's price is made up of several components: the only one of these that is known even remotely accurately at any time is the book value on the day that the accounts are prepared. Even completed cashflows after the books have been prepared contain some slight unknowns as they may be reversed if stock is returned, for example, or reduced by unforeseen costs. Future cashflows are based on (amongst other things) how many sales you expect to make in the future for all time. Exercise for the reader: how many iPhone 22s will apple sell in 2029? Even known future cashflows have some risk attached to them; customers may not pay for goods, a supplier may go into liquidation and so need to change its invoicing strategy etc.. Estimating the risk on future cashflows is highly subjective and depends greatly on what the analyst expects the exact economic state of the world will be in the future. Investors have the choice of investing in a risk free instrument (this is usually taken as being modelled by the 10 year US treasury bond) that is guaranteed to give them a return. To invest in anything riskier than the risk free instrument they must be paid a premium over the risk free return that they would get from that. The risk premium is related to how likely they think it is that they will not receive a return higher than that rate. Calculation of that premium is highly subjective; if I know the management of the company well I will be inclined to think that the investment is far less risky (or perhaps riskier...) than someone who does not, for example. Since none of the factors that go into a share price are accurately measurable and many are subjective there is no "right" share price at any time, let alone at time of IPO. Each investor will estimate these values differently and so value the shares differently and their trading, based on their ever changing estimates, will move the share price to an indeterminable level. In comments to @keshlam's answer you ask if there is enough information to work out the share price if a company buys out the company before IPO. Dividing the price that this other company paid by the relative ownership structure of the firm would give you an idea of what that company thought that the company was worth at that moment in time and can be used as a surrogate for market price but it will not and cannot accurately represent the market price as other investors will value the firm differently by estimating the criteria above differently and so will move the share price based on their valuation. |
If I own x% of company A, and A buys company B, do I own x% of B? | No, thanks to the principle of corporate personhood. The legal entity (company C) is the owner and parent of the private company (sub S). You and C are separate legal entities, as are C and S. This principle helps to legally insulate the parties for purposes such as liability, torts, taxes, and so forth. If company C is sued, you may be financially at stake (i.e. your investment in C is devalued or made worthless) but you are not personally being sued. However, the litigant may attach you as an additional litigant if the facts of the suit merit it. But without legal separateness of corporations, then potentially all owners and maybe a number of the employees would be sued any time somebody sued the business - which is messy for companies and messy for litigants. It's also far cleaner for lenders to lend to unified business entities rather than a variety of thousands of ever-shifting shareholders. Note that this is a separate analysis that assumes the companies are not treated as partnerships or disregarded entities (tax nothings) for tax purposes, in which case an owner may for some purposes be imputed to own the assets of C. I've also ignored the consolidated tax return, which would allow C and S to file a type of corporate joint return that for some purposes treats them similarly to common entity. For the simplest variation of your question, the answer is no. You do not own the assets of a corporation by virtue of owning a few of its shares. Edit: In light of your edit to include FB and Whatsapp, and the wrinkle about corporate books. If sub S is 100% owned by company C, then you do not have any inspection rights to S because you are not a shareholder. You also do not have virtual corporation inspection rights through company C. However, if a person has inspection rights to company C, and sub S appears on the books and financial records of C, then your C rights will do the job of seeing S information. However, Facebook is a public company, so they will make regular public filings and disclosures that should at least partly cover Whatsapp. So I hedge and clear my throat by averring that my securities training is limited, but I believe that the SEC filings of a public company will as a practical matter (maybe a matter of law?) moot the inspection rights. At the very least, I suspect you'd need a proper purpose (under DGCL, for example), to demand the inspection, and they will have already made extensive disclosures that I believe will be presumptively sufficient. I defer to more experienced securities experts on that question, but I don't believe inspection rights are designed for public companies. |
How much total salary to allocate to defer $17,500 to 401(k)? | You're on the right track, and yes, that small difference is subject to income taxes. Do you use a payroll service? I do the same thing and use my payroll software to tweak the salary until the paycheck is just a few dollars every month (we run payroll once a month), with the rest going to the 401(k) and payroll taxes. So we're rounding up just a bit just so there's an actual paycheck with a positive number, and a bit does get withheld for fed/state income tax. Also keep in mind you can make a company match. If your plan is a solo 401(k) with just you and your wife as the sole employees, consider the 25% match for both of you. The match is not subject to payroll taxes because it is a company expense. IRS web page: http://www.irs.gov/Retirement-Plans/One-Participant-401(k)-Plans |
I received $1000 and was asked to send it back. How was this scam meant to work? | This is almost certainly a scam or a mistake. This is not good, spendable money: it is not yours to keep. Very simple to handle. Tell the bank, in writing that you were not expecting to receive this money and are a bit surprised to receive it. Preferably in a way that creates a paper trail. And then stop talking. Why? Because you honestly don't know. This puts you at arm's length to the money: disavowing it, but not refusing it. Wildest dreams: nobody wants it back ever. As for the person bugging you for the cash, tell them nothing except work with their own bank. Then ignore them completely. He probably hacked someone else, diverted their money into your account, and he's conning you into transferring it to a third location: him. Leaving you holding the bag when the reversals hit months later. He doesnt want you reversing; that would return the money to the rightful owner! He works this scam on dozens of people, and he wins if some cooperate. Now here's the hard part. Wait. This is not drama or gossip, you do not need to keep people updated. You are not a bank fraud officer who deals with the latest scams everyday, you don't know what the heck you are doing in this area of practice. (In fact, playing amateur sleuth will make you suspicious). There is nothing for you to do. That urge to "do something" is how scammers work on you. And these things take time. Not everyone banks in real time on smartphone apps. Of course scammers target those who'd be slow to notice; this game is all about velocity. Eventually (months), one of two things is likely to happen. The transfer is found to be fraudulent and the bank reverses it, and they slap you with penalties and/or the cops come knockin'. You refer them to the letter you sent, explaining your surprise at receiving it. That letter is your "get out of jail free" card. The other person works with their bank and claws back the money. One day it just disappears. (not that this is your problem, but they'd file a dispute with their bank, their bank talks to your bank, your bank finds your letter, oh, ok.) If a year goes by and neither of these things happens, you're probably in the clear. Don't get greedy and try to manipulate circumstances so you are more likely to keep the money. Scammers prey on this too. I think the above is your best shot. |
What is “beta” for an investment or a portfolio, and how do I use it? | In addition to individual stocks, your entire portfolio will also have a beta. It would be equal to the weighted sum of the individual asset betas So a beta portfolio of 1 would have approximate risk equal to a market index. You would use this to construct a risk level that you were comfortable with, given the expected return of the individual assets. You are also interested in obtaining a high level of "alpha" which means that your portfolio is earning more than what would be expected, given it's level of risk. |
Vanguard ETF vs mutual fund | One reason is that it is not possible (at Vanguard and at many other brokerages) to auto-invest into ETFs. Because the ETF trades like a stock, you typically must buy a whole number of shares. This makes it difficult to do auto-investing where you invest, say, a fixed dollar amount each month. If you're investing $100 and the ETF trades for $30 a share, you must either buy 3 shares and leave $10 unspent, or buy 4 and spend $20 more than you planned. This makes auto-investing with dollar amounts difficult. (It would be cool if there were brokerages that handled this for you, for instance by accumulating "leftover" cash until an additional whole share could be purchased, but I don't know of any.) A difference of 0.12% in the expense ratios is real, but small. It may be outweighed by the psychological gains of being able to adopt a "hands-off" auto-investing plan. With ETFs, you generally must remember to "manually" buy the shares yourself every so often. For many average investors, the advantage of being able to invest without having to think about it at all is worth a small increase in expense ratio. The 0.12% savings don't do you any good if you never remember to buy shares until the market is already up. |
ETF's for early retirement strategy | This is the chart going back to the first full year of this fund. To answer your question - yes, a low cost ETF or Mutual fund is fine. Why not go right to an S&P index? VOO has a .05% expense. Why attracted you to a choice that lagged the S&P by $18,000 over this 21 year period? (And yes, past performance, yada, yada, but that warning is appropriate for the opposite example. When you show a fund that beat the S&P short term, say 5 years, its run may be over. But this fund lagged the S&P by a significant margin over 2 decades, what makes you think this will change? |
What are the options for a 19-year-old college student who only has about $1000? | Put them in Cds. Better than a savings account, you won't lose capital unlike the stock market. |
Should I sell a 2nd home, or rent it out? | Heres what you need to know: This can be prevented by what a previous renter did to us. This is a smart, kind of a jerky way to do it but its VERY SMART, as long as your property is worth it, raise the rent higher. You must have a very nice, clean, everything working, house. You must be willing to have anything fixed. this is all to make up the high rent. You don't want the rent way out of proportion but just a bit higher. This is because, more than likely, people who are going to pay for a higher rent don't usually leave a mess, (higher class families vs lower class people living alone..) What might also help from the risk of damage is create a fee (also what my renter did) of any painting needed done like finger prints on the wall, nails in the wall, carpet stains, etc when the tenant is ready to move out. I would suggest a required professional carpet cleaning as well when lease is up. My renter was very nice, but very strict and did all these things. He has a few properties that are very nice middle class houses. Your home sounds like it could easily pass for this kind of business depending on where you live. If the tenant leaves before his lease is up you could charge a 1-2 month's rent to be able to find a new tenant. Be proactive on finding a tenant before the lease is up. This would be a bit of work to first set up and usually maintain, but its a good thing to think about. |
How to calculate cash loss over time? | If inflation is at 2% per annum, in a year you would need £102 to buy equivalent goods to what you could buy today. So if you keep your money in a drawer the buying power of your £100 in a year will be only 100/102 = 98.039% of what it is currently. |
How to keep control of shared expenses inside marriage? | Call me old fashioned, but that sounds less like a marriage and more like a business partnership. Maybe there are business tools that would be useful. |
A merchant requests that checks be made out to “Cash”. Should I be suspicious? | To put a positive spin on the whole thing, maybe it's a small family shop, and having the check made out to "cash" means that your barber can hand it to someone else without the need to countersign. Or maybe his last name is "Cash" - there was a pretty famous singer who fit that description. Either way, it's not your place to nanny his finances. |
How can I investigate historical effect of Rebalancing on Return and Standard Deviation? | Do not reinvent the wheel! Historical data about stock market returns and standard deviations suffer from number of issues such as past-filling and mostly survivorship bias -- that the current answers do not consider at all. I suggest to read the paper "A Century of Global Stock Markets" by Philippe Jorion (UC Irvine) and William Goetzmann (Yale), here. William Bernstein comments the results here, notice that rebalancing is sometimes a good option but not always, his non-obvious finding where the low SD did not favour from rebalancing: Look at the final page of the paper, "geometric returns -- represent returns to a buy-and-hold strategy" and the "arithmetic averages -- give equal weight to each observation interval.", where you can find your asked "historical effect of Rebalancing on Return and Standard Deviation". The paper nicely summarizes the results to this table: The results in the table are from the interval 1921-1996, it is not that long-time but even longer term data has its own drawbacks. The starting year 1921 is interesting choice because it is around the times of social-economical changes and depressing moments, historical context can be realized from books such as Grapes Of Wrath (short summary here, although fiction to some extent, it has some resonance to the history). The authors have had to ignore some years because of different reasons such as political unrest and wars. Instead of delving into marketed spam as suggested by one reply, I would look into this search here. Look at the number of references and the related papers to judge their value. P.s. I encourage people to attack my open question here, hope we can solve it! |
Short term parking of a large inheritance? | The person who told you "no-load funds" had the right idea. Since you are risk-averse, you tend to want a "value" fund; that is, it's not likely to grow in value (that would be a "growth" fund), but it isn't like to fall either. To pick an example more-or-less at random, Fidelity Blue Chip Value Fund "usually" returns around 8% a year, which in your case would have meant about $20,000 every year -- but it's lost 4.35% in the last year. I like Fidelity, as a brokerage as well as a fund-manager. Their brokers are salaried, so they have no incentive to push load funds or other things that make them, but not you, money. For intermediate investors like you and me, they seem like a good choice. Be careful of "short term". Most funds have some small penalty if you sell within 90 days. Carve off whatever amount you think you might need and keep that in your cash account. And a piece of personal advice: don't be too risk-averse. You don't need this money. For you, the cost of losing it completely is exactly equal as the benefit of doubling it. You can afford to be aggressive. Think of it this way: the expected return of a no-load fund is around 5%-7%. For a savings account, the return is within rounding error of zero. Do you spend that much, $15,000, on anything in your life right now? Any recreation or hobby or activity. Maybe your rent or your tuition. Why spend it for a vague sense of "safety", when you are in no danger of losing anything that you need? |
LLC in states with customers with and without employees in the state | If I hire someone in Utah to do sales for me over the phone, and he works out of his home, am I required to register an LLC or file my current one as a foreign entity in Utah? Yes, since you've established presence in Utah. You'll register your current LLC in Utah, no point creating another one. If my sales guy, or I, call businesses in, say, Florida, and sell a few businesses our services for online work like maybe a website design, etc. Are we required to file our LLC In Florida as either a new LLC or a foreign one? No, you need to register where you (your company, including your employees or physical offices) are physically present. You don't need to register in any state you ship products or provide services to. If no-one of your company's employees is present in Florida and you don't have an office/rent a storage there - then you have no presence in Florida. If you actually go there to provide the services - then you do. |
Why are currency forwards needed? | What is the point of this? Can't I achieve the exact same effect and outcome by exchanging currency now and put that amount of USD in a bank account to gain some interest, then make the payment from one year from now? This is for companies, not individuals. Companies usually take loans, because they think they can make more money (e.g. 10%*) than the interest on the loan (e.g. 5%*). Putting money on a bank account to earn interest there would give them even less (e.g. 1%*). So with your option, instead of earning 10%* interest, they'd earn 1%* interest. If the cost of the currency forward is less than these 9%* difference, the forward saves them money. If they have excess cash and they don't know how to invest that money, your option may be preferable *Simple numbers chosen for simplicity, not accuracy. |
Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? | It depends on the selling price, but if we can assume the property will be sold at a profit, they are getting a pretty sweet deal at your expense. They are both getting about 5.2% interest on their money, plus the lion's share of any property appreciation. I would say that fair would be either of: |
What is the benefit of investing in retirement plan versus investing directly in stocks yourself? | Because retirement account usually are tax effective vehicles - meaning you will pay less tax on any profits from your investments in a retirement account than you would outside. For example, in my country Australia, for someone on say $60,000 per annum, if you make $10,000 profits on your investments that year you will end up paying 34.5% tax (or $3,450) on that $10,000 profits. If you made the same profits in a retirement account (superannuation fund) you would have only paid 15% tax (or $1,500) on the $10,000 profit. That's less than half the tax. And if you are on a higher income the savings would be even greater. The reason why you can't take the money out of a retirement account is purely because the aim is to build up the funds for your retirement, and not take it out at any time you want. You are given the incentive to pay less tax on any investment profits in order for you to save and grow your funds so that you might have a more comfortable retirement (a time when you might not be able to work any more for your money). |
“International credit report” for French nationals? | I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home. In many regions, there are plenty of "owner financed" or "Owner will carry" homes. For these, the previous owner will provide a private mortgage for the balance if you have a large (25%+) downpayment. No strict lending rules, no fancy credit scoring systems, just a large enough downpayment so they know they'll get their money back if they have to foreclose. For the seller, it's a way to shift a house that is hard to sell plus get a regular income. Often this mortgage is for only 3-10 years, but that gives you the time to establish more credit and then refinance. Maybe the interest rate is a little higher also, but again it's just until you can refinance to something better (or sell other assets then pay the loan off quick). For new homes, the builders/developers may offer similar finance. For both owner-will-carry and developer finance, a large deposit will trump any credit rating concerns. There is usually a simplified foreclosure process, so they're not really taking much of a risk, so can afford to be flexible. Make sure the owner mortgage is via a title company, trust company, or escrow company, so that there's a third party involved to ensure each party lives up to their obligations. |
Why do stocks gap up after a buyout is announced? | The "random walk" that you describe reflects the nature of the information flow about the value of a stock. If the flow is just little bits of relatively unimportant information (including information about the broader market and the investor pool), you will get small and seemingly random moves, which may look like a meander. If an important bit of information comes out, like a merger, you will see a large and immediate move, which may not look as random. However, the idea that small moves are a meander of search and discovery and large moves are immediate agreements is incorrect. Both small moves and large moves are instantaneous agreements about the value of a stock in the form of a demand/supply equilibrium. As a rule, neither is predictable from the point of view of a single investor, but they are not actually random. They look different from each other only because of the size of the movement, not because of an underlying difference in how the consensus price is reached. |
I'm in the U.S. What are vehicles to invest in international stocks? | You can look into specific market targeted mutual funds or ETF's. For Norway, for example, look at NORW. If you want to purchase specific stocks, then you'd better be ready to trade on local stock exchanges in local currency. ETrade allows trading on some of the international stock exchanges (in Asia they have Hong Kong and Japan, in Europe they have the UK, Germany and France, and in the Americas they have the US and Canada). Some of the companies you're interested in might be trading there. |
What's the most conservative split of financial assets for my portfolio in today's market? | This is a somewhat complicated question because it really depends on your personal situation. For example, the following parameters might impact your optimal asset allocation: If you need the money before 3 years, I would suggest keeping almost all of it in cash, CDs, Treasuries, and ultra safe short-term corporate bonds. If however, you have a longer time horizon (and since you're in your 30s you would ideally have decades) you should diversify by investing in many different asset classes. This includes Australian equity, international equity, foreign and domestic debt, commodities, and real estate. Since you have such a long time horizon market timing is not that important. |
At what point does it become worth it to file an insurance claim? | An article linked from cnn.com has some great advice, which I think are good rules of thumb. Also, at least my insurance gives a premium price for those who haven't filed a claim in 5 or more years for homeowners or rental insurance. See if you have a similar discount, will loose it, and guess how much that will cost you over 5 years. My rule of thumb: Your premium might go up quite a bit, possibly as much as triple, especially for a large claim. But, it is certainly worth it if you are going to get more than triple your premium through your claim. The worst case: Mortgage mandated insurance, which will be about triple your current cost. |
What am I actually buying when trading in CFDs | The product itself is a derivative as it derives its value from another stock or commodity. It's similar to a US option, which offers (in the case of a 'call') the right, but not the obligation to buy a stock at a predetermined price before a certain date. But, unlike the US option, instead of buying the stock, the contract is only closed out in cash. I've made the analogy to betting, so I believe it to be a fair comparison. I hope this question is theoretical. You should never buy a financial instrument with no clue how it works. |
I'm 13. Can I buy supplies at a pet store without a parent/adult present? | As long as your money is green and you aren't buying something prohibited to youngsters (booze, cigarettes, etc.) I doubt any store is going to refuse your business. |
What forms of payment am I compelled to accept? | The confusion comes from ambiguity in popular belief -- that businesses are required to accept x_y_x as payment. In reality, a business can state the terms of a transaction to their pleasure. On the other hand, debt is different -- no lender can refuse cash or other legal tender for repayment of debt. Sometimes, people try to split hairs and argue "Well, if I eat a steak and I owe the restaurant $100, they should have to accept my $100 as tender for the debt of my meal." Not true. The restaurant isn't giving you a line of credit, they're billing you after services rendered, and your payment is due on their terms. |
Putting borrowed money into an SIPP | If it were possible to take a loan out for a SIPP investment in the future .. I would suggest having an equivalent invested amount already in an ISA .. simply to cover you in the event of a job loss including additional cash in a deposit account. Secondly .. to increase your chances of success with this strategy I would also suggest doing this when the odds are more in your favour during the bottoming out cycle of a market crash. Thirdly .. it depends on how knowledgeable you are about investment , I would suggest being invested globally & in many different sectors to take advantage of various price movements. |
If I'm cash-flow negative, should I dollar-cost-average the money from my bonus over the entire year? | Essentially, your question is "lump sum vs DCA" and your tags reflect that. In the long run, lump sum, say a Jan 2 deposit each year, will beat DCA by about 1/2 the average annual market return. $12,000 will see a 10% return, vs, $1,000/month over the year seeing 6%. What hurts is when the market tanks in the first half of the year and you think DCA would have helped. This is a 'feeling' issue, not a math problem. But. By the time you have $100K invested, the difference of DCA vs lump sum with new money fades, as new deposits are small compared to the funds invested. By then, you need to know your target allocation and deposit to keep that allocation with new money. |
Are the “debt reduction” company useful? | From what I understand, they basically hold on to your money while you stop paying your debt. They keep it in an account and negotiate on your behalf. The longer you go without paying, the less the debt collector is willing to take and at some point, they will settle. So they take the money you've been putting into their "account" and pay it down. Repeat the process for all your accounts. I basically did this, without using a service. I had $17,000 on one card and they bumped the interest rate to 29%, and I had lost my job. I didn't pay it for 7 months. I just planned on filing bankruptcy. They finally called me up and said, if you can pay $250 a month, until it's paid off, we will drop the interest to 0% and forgive all your late fees. I did that, and five years later it was paid off. Similar situation happened on my other cards. It seems once they realize you can't pay, is when they're willing to give you a break. It'd be nice they just never jacked up your rate to 30% though. So, forget the service, just do it yourself. Call them up and ask, and if they don't budge, don't pay it. Of course your credit will be shot. But I'm back in the 700s, so anything is possible over time. |
What does a high operating margin but a small but positive ROE imply about a company? | The operating margin deals with the ability for a company to make a profit above the costs of running the company and generating sales. While ROE is how much money the company makes relative to the shareholders equity. I'd be willing to bet that if a company has a small ROE then it also has a quite large P/E (price to earnings) ratio. This would be caused by the company's stock being bid up in relation to its earnings and may not necessarily be a bad thing. People expect the high operating margin to help drive increased revenues in the future, and are willing to pay a higher price now for when that day comes. |
How to share income after marriage and kids? | I won't answer in a detailed manner because most people at this site like answers with certain bias' on these questions, like pool resources always relative to which partner is asking. If you follow the above advice, you are hoping things work out. Great! What if they don't? It will be very messy. Unlike most of my peers, I did NOT follow the above advice and had a very clean exit with both of us feeling very good (and no lawyers got involved either; win-win for both of us with all the money we saved). One assumption people make is the person with the lowest income has the strictest limits. This is not always true; I grew up in poverty, but have a very high income and detest financial waste. I can live on about €12,000 a year and even though my partner made a little less, my partner liked to spend. Counter intuitive, right? I was supposed to be the spender because I had a large income, but I wasn't. Also, think about an example with food - sharing expenses. Is it fair for one partner to split whey protein if one partner consumes it, but the other doesn't (answer: in my view, no)? My advice based on your questions: Balance the frugal vs. spendthrift mentality rather than income ratios. If you're both frugal, then focus on income ratios - but one may be more frugal than the other and the thought of spending €300 a month on housing is just insane to a person like me, whereas to most it's too little. Are you both exactly the same with this mentality - and be honest? Common costs that you both agree on can be easily split 50-50 and you can often benefit from economies of scale (like internet, cell phone). Both of us feel very strongly about being financially independent and if possible we both don't want to take money from each other. This is so healthy for a relationship. My partner and I split and we both still really love each other. We're headed in different directions, but we did not want to end bitterly. What you wrote is part of why we ended so well; we both were very independent financially. Kids are going to be a challenge because they come with expenses that partners don't always agree on. What do you and her think of childcare, for instance? You really want to know all this upfront; again a frugal vs. spendthrift mindset could cause some big tensions. |
Using property to achieve financial independence | I wrote this in another thread but is also applicable here. In general people make some key mistakes with property: Not factoring in depreciation properly. Houses are perpetually falling down, and if you are renting them perpetually being trashed by the tenants as well - particularly in bad areas. Accurate depreciation costs can often run in the 5-20% range per year depending on the property/area. Add insurance to this as well or be prepared to lose the whole thing in a disaster. Related to 1), they take the index price of house price rises as something they can achieve, when in reality a lot of the house price 'rise' is just everyone having to spend a lot of money keeping them standing up. No investor can actually track a house price graph due to 1) so be careful to make reasonable assumptions about actual achievable future growth (in your example, they could well be lagging inflation/barely growing if you are not pricing in upkeep and depreciation properly). Failure to price in the huge transaction costs (often 5%+ per sale) and capital gains/other taxes (depends on the exact tax structure where you are). These add up very fast if you are buying and selling at all frequently. Costs in either time or fees to real estate rental agents. Having to fill, check, evict, fix and maintain rental properties is a lot more work than most people realise, and you either have to pay this in your own time or someone else’s. Again, has to be factored in. Liquidity issues. Selling houses in down markets is very, very hard. They are not like stocks where they can be moved quickly. Houses can often sit on the market for years before sale if you are not prepared to take low prices. As the bank owns your house if you fail to pay the mortgage (rents collapse, loss of job etc) they can force you to fire sale it leaving you in a whole world of pain depending on the exact legal system (negative equity etc). These factors are generally correlated if you work in the same cities you are buying in so quite a lot of potential long tail risk if the regional economy collapses. Finally, if you’re young they can tie you to areas where your earnings potential is limited. Renting can be immensely beneficial early on in a career as it gives you huge freedom to up sticks and leave fast when new opportunities arise. Locking yourself into 20 yr+ contracts/landlord activities when young can be hugely inhibiting to your earnings potential. Without more details on the exact legal framework, area, house type etc it’s hard to give more specific advise, but in general you need a very large margin of safety with property due to all of the above, so if the numbers you’re running are coming out close (and they are here), it’s probably not worth it, and you’re better of sticking with more hands off investments like stocks and bonds. |
Are Index Funds really as good as “experts” claim? | Simply put, you cannot deterministically beat the market. If by being informed and following all relevant news, you can arrive at the conclusion that company A will likely outperform company B in the future, then having A stocks should be better than having B stocks or any (e.g., index based) mix of them. But as the whole market has access to the very same information and will arrive at the same conclusion (provided it is logically sound), "everybody" will want A stocks, which thus become expensive to the point where the expected return is average again. Your only options of winning this race are to be the very first to have the important information (insider trade), or to arrive at different logical conclusions than the rest of the world (which boils down do making decisions that are not logically sound - good luck with that - or assuming that almost everybody else is not logically sound - go figure). |
Can I get a dumbed down explanation of risk measures used for evaluating stocks? | Standard deviation from Wikipedia : In statistics and probability theory, the standard deviation (represented by the Greek letter sigma, σ) shows how much variation or dispersion from the average exists.1 A low standard deviation indicates that the data points tend to be very close to the mean (also called expected value); a high standard deviation indicates that the data points are spread out over a large range of values. In the case of stock returns, a lower value would indicate less volatility while a higher value would mean more volatility, which could be interpreted as high much change does the stock's price go through over time. Mean would be interpreted as if all the figures had to be the same, what would they be? So if a stock returns 10% each year for 3 years in a row, then 10% would be the mean or average return. Now, it is worth noting that there are more than a few calculations that may be done to derive a mean. First, there is the straight forward sum and division by the number of elements idea. For example, if the returns by year were 0%, 10%, and 20% then one may take the sum of 30% and divide by 3 to get a simple mean of 10%. However, some people would rather look at a Compound Annual Growth Rate which in this case would mean multiplying the returns together so 1*(1+.1)*(1+.2)=1.1*1.2=1.32 or 32% since there is some compounding here. Now, instead of dividing a cubic root is taken to get approximately 9.7% average annual return that is a bit lower yet if you compound it over 3 years it will get up to 32% as 10% compounded over 3 years would be 33.1% as (1.1)^3=1.331. Sharpe Ratio from Investopedia: A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. Thus, this is a way to think about given the volatility how much better did the portfolio do than the 10 year bond. R-squared, Alpha and Beta: These are all around the idea of "linear regression" modelling. The idea is to take some standard like say the "S & P 500" in the case of US stocks and see how well does the portfolio follow this and what if one were to use a linear model are the multipliers and addition components to it. R-squared can be thought of it as a measure as to how good is the fit on a scale of 0 to 1. An S & P 500 index fund may well have an R-squared of 1.00 or 0.99 to the index as it will track it extremely closely while other investments may not follow that well at all. Part of modern portfolio theory would be to have asset classes that move independently of each other and thus would have a lower R-squared so that the movement of the index doesn't indicate how an investment will do. Now, as for alpha and beta, do you remember the formula for a line in slope-intercept form, where y is the portfolio's return and x is the index's return: y=mx+b In this situation m is beta which is the multiple of the return, and b is the alpha or how much additional return one gets without the multiple. Going back to an index fund example, m will be near 1 and b will be near 0 and there isn't anything being done and so the portfolio's return computed based on the index's return is simply y=x. Other mutual funds may try to have a high alpha as this is seen as the risk-free return as there isn't the ups and downs of the market here. Other mutual funds may go for a high beta so that there is volatility for investors to handle. |
Should I stockpile nickels? | The question I think is not: "What is a certain material worth in a coin" but "What is a certain material worth in a coin and how much does it cost to get it out of there". Just because something contains a certain element doesn't mean that you can get to it cheaply. Also as George Marian said: I don't think that it is legal to melt coins. So if the time comes you would first have to find a company willing to process the coins etc. Also you should not only compare what it is worth now and at a later time but also what that money would be worth if you put it into a high yielding savings account or something like that. |
Where can I find a good online fundamental data provider for Hong Kong stocks? | Check out WorldCap.org. They provide fundamental data for Hong Kong stocks in combination with an iPad app. Disclosure: I am affiliated with WorldCap. |
What does it mean for issuing corporations to “crank out expensive shares when markets are frothy … and issue debt when markets are cheap”? | crank out expensive shares when markets are frothy Corporations go public (sell their shares for the first time) in market conditions that have a lot of liquidity (a lot of people buying shares) and when they have to make the fewest concessions to appease an investing public. When people are greedy and looking to make money without using too much due diligence. Think Netscape's IPO in 1995 or Snapchat's IPO in 2017. They also issue more shares after already being public in similar circumstances. Think Tesla's 1 billion dollar dilution in 2017. Dilution results in the 1 share owning less of the company. So in a less euphoric investing environment, share prices go down in response to dilution. See Viggle's stock for an example, if you can find a chart. issue debt Non-financial companies create bonds and sell bonds. Why is that surprising to you? Cash is cash. This is called corporate bonds or corporate debt. You can buy Apple bonds right now if you want from the same brokers that let you buy stocks. mutual fund investor Bernstein is making a cynical assessment of the markets which carries a lot of truth. Dumping shares on your mom's 401k is a running gag amongst some financial professionals. Basically mutual fund investors are typically the least well researched or most gullible market participants to sell to, influenced by brand name more than company fundamentals, who will balk at the concept of reading a prospectus. Financial professionals and CFOs have more information than their investors and can gain extended advantages because of this. Just take the emotions out of it and make objective assessments. |
Child is on the way, invest for college and car fund options - opinions | Look at your options with a 529 program. If the money is used for education expenses: that currently includes tuition, room & board (even if living off campus), books, transportation; it grows tax free. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible. If it is a 529 associated with your state you can also save on state taxes. You can make contributions on a regular basis, or ad hoc. Accounts can even be setup by other relatives. I have used a 529 to fund two kids education. It takes care of most of your education expenses. 529 programs are available from most states, and even some of the big mutual fund companies. Many have the option of shifting the risk level of the investments to be more conservative as the kids hit high school. Some states have an option to have you pay a large sum when the child is small to buy semesters of college. The deal is worth considering if you know they will be going to a state school, the deal is less good if they will go out of state or to a private college. The IRS does limit the maximum amount that you can contribute in a year an amount that exceeds the 14,000 annual gift limit: If in 2014, you contributed more than $14,000 to a Qualified Tuition Plan (QTP) on behalf of any one person, you may elect to treat up to $70,000 of the contribution for that person as if you had made it ratably over a 5-year period. The election allows you to apply the annual exclusion to a portion of the contribution in each of the 5 years, beginning in 2014. You can make this election for as many separate people as you made QTP contributions One option at the end is to take any extra money at graduation and give it to the child so that it can be used for graduate school, or if the taxes and penalties are paid it can be used for that first car. It can even be rolled over to another relative. |
Working for recruiter on W-2 vs. working for client on 1099? | I don't think anyone can give you a definitive answer without knowing all about your situation, but some things to consider: If you are on a 1099, you have to pay self-employment tax, while on a W-2 you do not. That is, social security tax is 12.4% of your income. If you're a 1099, you pay the full 12.4%. If you're W-2, you pay 6.2% and the employer pays 6.2%. So if they offer you the same nominal rate of pay, you're 6.2% better off with the W-2. What sort of insurance could you get privately and what would it cost you? I have no idea what the going rates for insurance are in California. If you're all in generally good health, you might want to consider a high-deductible policy. Then if no one gets seriously sick you've saved a bunch of money on premiums. If someone does get sick you might still pay less paying the deductible than you would have paid on higher premiums. I won't go into further details as that's getting off into another question. Even if the benefits are poor, if there are any benefits at all it can be better than nothing. The only advantage I see to going with a 1099 is that if you are legally an independent contractor, then all your business expenses are deductible, while if you are an employee, there are sharp limits on deducting employee business expenses. Maybe others can think of other advantages. If there is some reason to go the 1099 route, I understand that setting up an LLC is not that hard. I've never done it, but I briefly looked into it once and it appeared to basically be a matter of filling out a form and paying a modest fee. |
How to avoid getting back into debt? | Draw up a budget and see where most of you expenses go to. See if you can cut any not essential expenses. If this doesn't help much you will need to increase your income. Ways to do this without going into debt may be to get a job, ask your parents for money, sell some of your non essential things, tutor fellow students or students in earlier years, just to name a few. Basically, if you want to stay out of debt you income needs to be higher than your expenses. So you either need to reduce your expenses, increase your income, or both. Without further information from yourself it would be quite hard to direct you in the right direction. |
Tax withheld by USA working in UK (Form 1042-S and Form 1099) | Why was I sent both 1042-S and 1099. Which amount is the right amount that has been withheld. Generally, each tax form you get will be about a separate income; for instance, you might get a 1099-DIV for dividends you earned from an investment and then a 1099-B for the profit or loss on selling that investment, in which case you'd report them both to the IRS. In this case, you've also had money withheld as a non-resident alien, which is why you've been issued a 1042-S. So you need to report both amounts to the IRS. |
For Federal Crimes, where does the money collected from penalties go? | The SFGate had an article on this a few years ago: http://www.sfgate.com/business/networth/article/When-government-fines-companies-who-gets-cash-3189724.php "Civil penalties, often referred to as fines, usually go to the U.S. Treasury or victims." Short answer in the case you references it would be the US Treasury. In cases where there is a harmed party then they would get something to account for their loss. But it can get complicated depending on the crime. |
How do I find a good mutual fund to invest 5K in with a moderately high amount of risk? | Just find a low cost S&P 500 index fund, and spend your time reading The Great Mutual Fund Trap instead of wasting your time and money picking actively managed funds. |
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