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How does a bank make money on an interest free secured loan? | In addition to all the points made in other answers, in some jurisdictions (including the UK where I live) the consumer credit laws require the lender to allow the borrower to pay off the loan at any time. If the lender charges interest and the borrower pays off the loan early then the lender loses the interest that would have been paid during the rest of the loan period. However if the actual interest is baked into the sale price of an item and the loan to pay for it is nominally "0%" then the borrower still pays all the interest even if they pay off the loan immediately. If you think this game is being played then you can ask for a "cash discount" (or similar wording: I once had problems with a car salesman who thought I meant a suitcase full of used £20s), meaning you want to avoid paying the interest as you are not taking a loan. |
If I send money to someone on student visa in USA, will he need to pay taxes on that? | First: I am not a tax lawyer. This is just an educated opinion; not a legally verified answer. Taxes are to be paid on income, not on money that you handle for someone. So if the idea is only that he gets and holds the money for you until a later point in time, there should be no tax liability. If the amount is high enough to raise a flag in the bank so the IRS might look at it, and he wants to be sure to not get in trouble, he should keep it separate, and keep a record of 'handing it to you'. Note that if he makes interest on it, or uses it to pay his credit down until you come or such, the situation changes. |
What laws/regulations are there regardings gifts in the form of large sums of money? | This forum is not intended to be a discussion group, but I would like to add a different perspective, especially for @MrChrister, on @littleadv's rhetorical question "... estates are after-tax money, i.e.: income tax has been paid on them, yet the government taxes them again. Why?" For the cash in an estate, yes, that is after-tax money, but consider other assets such as stocks and real estate. Suppose a rich man bought stock in a small computer start-up company at $10 a share about 35 years ago, and that stock is now worth $500 a share. The man dies and his will bequeaths the shares to his son. According to US tax law, the son's basis in the shares is $500 per share, that is, if the son sells the shares, his capital gains are computed as if he had purchased the shares for $500 each. The son pays no taxes on the inheritance he receives. The deceased father's last income tax return (filed by the executor of the father's will) does not list the $490/share gain as a capital gain since the father did not sell the stock (the gain is what is called an unrealized gain), and so there is no income tax due from the father on the $490/share. Now, if there is no estate tax whatsoever, the father's estate tax return pays no tax on that gain of $490 per share either. Would this be considered an equitable system? Should the government not tax the gain at all? It is worth noting that it would be possible for a government to eliminate estate taxes entirely, but instead have tax laws that say that unrealized gains on the deceased's property would be taxed (as capital gains) on the deceased's final tax return. |
Are there any countries where citizens are free to use any currency? | If I understand correctly, you're actually asking why there isn't a society whose members generally accept/use any currency for transactions, and just like, Google the exchange rate or something. The answer is because it's exceptionally inconvenient. Can you imagine having a wallet with 200 pouches for all the different currencies? Why would you want to deal with exchange rates all the time? What if the value of a currency changes? (A single currency at least has the illusion of being stable). Et cetera. |
Supply & Demand - How Price Changes, Buy Orders vs Sell Orders [duplicate] | That is mostly true, in most situations when there are more buy orders than sell orders (higher buy volume orders than sell volume orders), the price will generally move upwards and vice versa, when there are more sell orders than buy orders (higher sell volume orders than buy volume orders), the price will generally move downwards. Note that this does not always happen, but usually it does. You are also correct that for a trade to take place a buyer has to be matched with a seller (or the buy volume matched with the sell volume). But not all orders get executed as trades. Say there are 50 buy orders in the order book with a total volume of 100,000 shares and the highest buy order is currently at $10.00. On the other side there are only 10 sell orders in the order book with total volume of 10,000 shares and the lowest sell order is currently $10.05. At the moment there won't be a trade unless a new buyer or seller enters the market to match the opposing side, or an existing order gets amended upper or lower to match the opposing side. With more demand than supply in the order books what will be the most likely direction that this stock moves in? Most likely the price will move upwards. If a new buyer sees the price moving higher and then looks at the market depth, they would most likely place an order closer to the lowest sell order than the current highest buy order, say $10.01, to be first in line in case a market sell order is placed on the market. As new buy orders enter the market it drives the price higher and higher until the buy orders dry up. |
Is it legal to not get a 1099-b until March 15? | The deadline to mail is February 15. However, if the form is being prepared by a middleman (i.e. Wells Fargo) then they have until March 15th (on page 24). Also, if you haven't received your 1099 form by February 14, you may contact the IRS and they will contact and request the missing form on your behalf. I know that's a lot of information, but to answer your question, yes, there are situations where March 15th is the deadline instead of February 15th. |
What is considered high or low when talking about volume? | Volume is really only valuable when compared to some other volume, either from a historical value, or from some other stock. The article you linked to doesn't provide specific numbers for you to evaluate whether volume is high or low. Many people simply look at the charts and use a gut feel for whether a day's volume is "high" or "low" in their estimation. Typically, if a day's volume is not significantly taller than the usual volume, you wouldn't call it high. The same goes for low volume. If you want a more quantitative approach, a simple approach would be to use the normal distribution statistics: Calculate the mean volume and the standard deviation. Anything outside of 1.5 to 2.0 standard deviations (either high or low) could be significant in your analysis. You'll need to pick your own numbers (1.5 or 2.0 are just numbers I pulled out of thin air.) It's hard to read anything specific into volume, since for every seller, there's a buyer, and each has their reasons for doing so. The article you link to has some good examples of using volume as a basis for strengthening conclusions drawn using other factors. |
How do I figure out the market value of used books? | Regarding the textbooks and technical books, it might be worth checking out sites like Chegg.com or other textbook rental websites. They might buy it from you directly versus trying to sell it on an ebay or amazon. For fiction or nonfiction, amazon and ebay can be tough, but probably worth a look. See what comparables are for your books or similar titles, and if it works, try selling a few. The big problem is that so many sellers are on Amazon these days, that major discounts are commonplace. I've bought hardback 1st editions for less than the cost of economy shipping, so the profit margin is dwindling at best if it's an unpopular or low demand book. |
What are the key facts to research before buying shares of a company? | I have my "safe" money in index funds but like to dabble in individual stocks. My criteria and thought process are usually like this, let's use SBUX as an example: Understand what the company does. Also paraphrased as "buy what you know". A profitable/growing business doesn't need to be complicated. Open stores. Sell coffee. For SBUX, my decision process literally started inside a store: "Rocky, why are you standing in line to overpay for coffee? Wow, look at all these people! Hmmm. I wonder if this is a good stock to buy?" Check out their fundamentals. Are they profitable? P.E.ratio, book value, and PEG are helpful, and I tend to use them as a gauge for whether I think the stock is overpriced or not. I compare those values to others in the industry. SBUX right now has a PE of ~30, which looks about average for its peers (PEP, KKD, GMCR). So far so good. Does it pay a dividend? This isn't necessarily good or bad, just useful to know. I like dividend-paying stocks, even if it means the stock price might not grow as aggressively. Also, a company that pays a dividend is naturally confident in its ability to turn a profit and generate cash. So it's a safer pick, in my opinion. SBUX pays a dividend, a small one, but that's a plus for me. Am I willing to watch the stock? With my index funds, I buy and forget. With my stocks, I keep an eye on the situation, read the news, and have to make a buy/sell decision regularly. With SBUX, I don't watch all that closely, I just keep up with the news. IMO, it's still a buy based on all the above criteria. And I feel less silly now standing in line to overpay for coffee. |
Strategic countermeasures to overcome crisis in Russia | Bitcoins are very liquid. They can be sold or spent very easily. And you don't depend on the banks being solvent to keep your Bitcoin funds, since you can keep them yourself in an offline wallet. I'm not sure what's the legality of Bitcoin in Russia, though. |
Why is being “upside down” on a mortgage so bad? | Sample Numbers: Owe $100k on house. House (after 'crash') valued at: $50K. Reason for consternation: What rational person pays $100k for property that is only worth half that amount? True Story: My neighbor paid almost $250K (a quarter-of-a-million dollars - think about that..) for a house that when he walked (ran!) away from it was sold by the bank for $88K. Unless he declares bankruptcy (and forgoes all his other assets, including retirement savings) he still owes the bank the difference. And even with bankruptcy, he may still owe the bank - this should cause anyone to be a bit concerned about being up-side down in a mortgage loan. |
Should I pay cash or prefer a 0% interest loan for home furnishings? | Two cases: You take the credit and reinvest the cash equivalent (be it a savings account or otherwise), yielding you the x% at virtually zero risk. Unless of course you consider possibility of your own negligence a risk (in case of missed payments, etc.). You pay by cash and have the peace of mind at the cost of that x%. The ultimate decision depends on which you value more - the $ you get from x%, or the peace of mind. |
Is it worth investing in Index Fund, Bond Index Fund and Gold at the same time? | I'd say neither. Index Funds mimic whatever index. Some stocks that are in the index are good investment opportunities, others not so much. I'm guessing the Bond Index Funds do the same. As for Gold... did you notice how much gold has risen lately? Do you think it will keep on rising like that? For which period? (Hint: if your timespan is less than 10 years, you really shouldn't invest). Investing is about buying low, and selling high. Gold is high, don't touch it. If you want to invest in funds, look at 4 or 5 star Morningstar rated funds. My advisors suggest Threadneedle (Lux) US Equities DU - LU0096364046 with a 4 star rating as the best American fund at this time. However, they are not favoring American stocks at this moment... so maybe you should stay away from the US for now. Have you looked at the BRIC (Brazil, Russia, India, China) countries? |
What rules govern when a new option series is issued? | The CBOE Rule Book, Section 5.5 explains exactly what programmes are available, how and when they will start listing and expire. The super-concise summary is: It's a per-underlying decision process, though there's some rules that may provide you with a minimum set of options (e.g. the quarterly programme on highly capitalised stocks trading for more than $75, etc.) For greater detail, for better or worse, you will have to scan the New Listings service regularly. |
Live in Florida & work remote for a New York company. Do I owe NY state income tax? | This question came up again (Living in Florida working remotely - NY employer withholds NYS taxes - Correct or Incorrect?) and the poster on the new version didn't find the existing answers to be adequate, so I'm adding a new answer. NYS will tax this income if the arrangement is for the convenience of the employee. If the arrangement is necessary to complete the work, then you should have no NYS tax. New York state taxes all New York-source salary and wage income of nonresident employees when the arrangement is for convenience rather than by necessity (Laws of New York, § 601(e), 20 NYCRR 132.18). Source: http://www.journalofaccountancy.com/issues/2009/jun/20091371.html Similar text can also be found here: http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/ The NYS tax document governing this situation seems to be TSB-M-06(5)I. I looked at this page from NYS that was mentioned in the answer by @littleadv. That language does at first glance seem to lead to a different answer, but the ruling in the tax memo seems to say that if you're out of state only for your convenience then the services were performed in NYS for NYS tax purpose. From the memo: However, any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of- state duties in the service of his employer. |
Why can't house prices be out of tune with salaries | Your friends are overlooking a couple of problems with house prices and salaries being out of whack: Home 'equity' is a paper gain unless you realize it by selling the house. If you don't, but use the 'home ATM', all you're doing is piling up more debt that's secured on an asset that has downside risk. Ask anybody who's refinanced their house to buy a new boat or SUV in 2006/2007. In other words you're remortgaging the chickens before the eggs hatched. Of course they're also forgetting that all this debt will have to be paid back at some point, and that usually takes income, not equity. In a certain sense the housing market is a pyramid scheme that requires an influx of new buyers to maintain prices. Very simply, if you can't sell your house to buy a bigger one because the first time buyer you're trying to sell it to can't afford the down payment or the payment on the mortgage, then you can't sell your house to buy a bigger/better/nicer one and the next person in the chain can't sell his/hers. Cue the domino effect. House prices are only sustainable if people actually can afford to buy houses and if there's a massive disconnect between house prices and salaries, then house prices will fall eventually. It might just take a little longer depending on the amount of creative financing options that will eventually dry up. |
Why do credit cards have minimum limits? | They have a minimum to discourage applications for that particular card. Every application costs them money because they have to pay the credit agencies to pull the applicant's credit history. So one way they save money and reduce their cost of business is to discourage people from applying if they're not creditworthy enough for that product. Credit card companies tailor their products into different income/credit brackets. Those who have less creditworthiness would be better suited for a different product than what you're referring, similar to those with greater creditworthiness. |
How to correctly track a covered call write (sell to open) in double-entry accounting? | I think the issue you are having is that the option value is not a "flow" but rather a liability that changes value over time. It is best to illustrate with a balance sheet. The $33 dollars would be the premium net of expense that you would receive from your brokerage for having shorted the options. This would be your asset. The liability is the right for the option owner (the person you sold it to) to exercise and purchase stock at a fixed price. At the moment you sold it, the "Marked To Market" (MTM) value of that option is $40. Hence you are at a net account value of $33-$40= $-7 which is the commission. Over time, as the price of that option changes the value of your account is simply $33 - 2*(option price)*(100) since each option contract is for 100 shares. In your example above, this implies that the option price is 20 cents. So if I were to redo the chart it would look like this If the next day the option value goes to 21 cents, your liability would now be 2*(0.21)*(100) = $42 dollars. In a sense, 2 dollars have been "debited" from your account to cover your potential liability. Since you also own the stock there will be a credit from that line item (not shown). At the expiry of your option, since you are selling covered calls, if you were to be exercised on, the loss on the option and the gain on the shares you own will net off. The final cost basis of the shares you sold will be adjusted by the premium you've received. You will simply be selling your shares at strike + premium per share (0.20 cents in this example) |
Do shares purchased on FTSE AIM move with company to other markets? | Any shares you buy when a company is listed on one market will remain yours if the company moves to another market. Markets and exchanges like AIM are just venues for dealing in shares - indeed you can deal in those shares anywhere else that will allow you as well as on the AIM. The benefit of being listed in a market is that trade in the shares will be more "liquid" - there's more likely to be people who want to buy and sell them at any given time. The bigger concern would be what happens if the company does badly and drops out of the AIM entirely. You'd still be able to sell your shares to any willing buyer, but finding that buyer might get harder. |
How can rebuilding a city/large area be considered an economic boost? | It will have some positives, and some negatives. The hardest hit will be the insurance agencies, as well as banks. Manufacturing will also take a short term hit. When insurance payments come out, then there will be a boom in construction, consumer goods, industrial goods, etc. Companies will upgrade their equipment whereas before they might have let it run for another 10-20 years or longer. After all, if you are going to buy something, you aren't going to get it used, you'll get something more modern. Of course, Japan already was one of the most modern countries in the world, so they likely won't see as many gains as other countries, but this would hold more true in a less technologically advanced society. Long term, 10-20 years down the line, when everything is rebuilt, it might have a slight positive increase in productivity, but this will be somewhat offset because Japan already is such a technological powerhouse, and on the cutting edge in many technologies. But I agree, it's quite foolish to say that it'll improve the economy of Japan, some clarification should be done to clear that one up... |
Deductions greater than Income : Traditional IRA to Roth Conversion? | Answering for just the US part, yes, you should be able to do this and it's a good strategy. The only additional gotcha I can think of is that if you've made after-tax contributions to your traditional IRA, you need to prorate the conversion, you can't just convert all the pre-tax or all the after-tax. I'm not familiar with Oregon personal income tax so there may be additional gotchas there. |
Does dividend on 401K have any effect on gains | Adjusting for a market change from day to day, the dividend should have no impact on you. Your X shares time $Y should be nearly identical right after that dividend hits the account. And within the 401(k) or IRA for that matter, the accounting doesn't matter most of the time. Outside a retirement account, you need to pay tax on the dividend, and add the newly purchased shares' cost to your cost basis. |
How long to wait after getting a mortgage to increase my credit limit? | My recommendation is to not ask for a credit increase, but just increase the utilization of one card if you have multiple cards, and decrease the utilization of the others, and continue paying off all cards in full each month. In a few months, you will likely be offered a credit increase by the card that is getting increased use. The card company that is getting the extra business knows that you are paying off big bills each month and keeping your account in good standing, and they will likely offer you a credit increase all by themselves because they want to keep your business. If no offer is forthcoming, you can call the card company and ask for a credit increase. If they refuse, tell them that you will be charging very little on the card in the future (or even canceling your card, though that will cause a hit on your credit score) because of their refusal, and switch your high volume to a different card. |
Free brokerage vs paid - pros and cons | The first consideration for the banking part of your portfolio is safety. In the United States that is FDIC protection, or the equivalent for a Credit Union. The second consideration is does it have the level of service you need. For this I mean the location of branches, ATMs, or its online services meet your needs for speed, accuracy, and ability to access or move the money as you need. The rest are then balanced on the extras. For your situation those extras include the ability to make free trades. For other it might be a discount on their mortgage. For others it is free checking. In your current situation if the first two things are met, and you are using those extra benefits then don't change. For me the free trades wouldn't be a benefit, so any major degradation in the safety and service would cause me to leave. Keep in mind that free services exist to entice you to make a deposit: which they can then make money by lending it out; or they offer a free service to entice you to use a service they can charge you to use. All Free services come with a cost. I earned a completely paltry $3.33 YTD over the last 9 months on my savings at my bank presumably in exchange for these "free" trades. Without knowing how much you had deposited in your savings account there is no way to know how much you could have made at the bank across the street. But with the low rates of the last decade there is not big money to be made off the emergency savings of a typical american family. |
Why is mortgage interest deductible in the USA for a house you live in? | Well quite a few countires have tax breaks on the first house you own ... this is typically to promote people to have atleast one house of their own ... having a house of your own provides lot more stability in the long run ... and without tax breaks it makes it difficult for quite a few to own a house ... the tax breaks form a motiviation as well ... There are at times other effects of this breaks, people buying houses beyond their need [bigger house than required] or capacity [buying in a central / expensive location] by maximizing the breaks ... |
When would one actually want to use a market order instead of a limit order? | You put in a market order when you want to sell to whomever raises their hand first. It results in the fastest possible liquidation of your stock. It's appropriate when you need to sell now, regardless of price. An example of when to use it: It's 3:55 PM, the market's going to close in 5 minutes and you need to sell some stocks to make some kind of urgent payment elsewhere. If instead you have a limit order in place, you might not reach the limit price before the market closes, and you'll still own the stock, which might not be what you want. |
If one owns 75% of company shares, does that mean that he would have to take upon himself 75% of the company's expenses? | A firm is a separate legal person from its shareholders or owners (but doesn't get invited to parties much). Owners invest capital to get shares in the firm or may get shares for investing time, effort etc. but those shares are on a limited liability basis. That means that shareholders are only liable up to the value of their shares and that the firm itself is responsible for any expenses or liabilities. The firm will have working capital from its initial investors (i.e. any capital invested to get shares) and can borrow money on the bond market or issue new shares to cover outgoings. Share ownership simply entitles the owner to a proportion of the residual equity of the company and voting rights (for non-prefered equity). In a firm that I previously worked for, for example, one of the partners owned 51% of the firm but put up 100% of the firm's equity capital. The other partner owned 49% and provided 90% of the intellectual capital of the firm. They both took decisions equally. The distribution of ownership should, therefore, have no bearing on who finances deals. The owners (or managers in larger firms) should decide together how to use the company's capital for spending because it is exactly that; the company's capital; not any one of the investor's. Limited liability of owners is one of the major benefits of forming a company. |
Making $100,000 USD per month, no idea what to do with it | I know your "pain". But don't worry about investing the money right now -- leave it uninvested in the short term. You have other stuff you need to school up on. Investment will come, and it's not that hard. In the short term, focus on taxes. Do some "mock" run-throughs of your expected end-of-year taxes (use last year's forms if this year's aren't available yet). Must you pay estimated tax periodically throughout the year? The tax authorities charge hefty penalties for "forgetting" to do it or "not knowing you have to". Keep an eye out for any other government gotchas. Do not overlook this! This is the best investment you could possibly make. Max out your government sanctioned retirement funds - in the US we have employer plans like 401K or Keogh, and personal plans like the IRA. This is fairly straightforward. Avoid any "products" the financial advisors want to sell you, like annuities. Also if you have the Roth type IRA, learn the difference between that and a normal one. There are some tricks you can do if you expect to have an "off" year in the future. Charitable giving is worth considering at high income levels. Do not donate directly to charities. Instead, use a Donor Advised Fund. It is a charity of its own, which accepts your tax deductible donation, and holds it. You take the tax deduction that year. Then later, when the spirit moves, tell your DAF to donate to the charity of your choice. This eliminates most of the headaches associated with giving. You don't get on the soft-hearted sucker lists, because you tell the DAF not to disclose your address, phone or email. You don't need the charity's acknowledgement letter for your taxes, since your donation was actually to the DAF. It shuts down scams and non-charities, since the DAF confirms their nonprofit status and sends the check to their official address only. (This also bypasses those evil for-profit "fundraising companies".) It's a lot simpler than they want you to know. So-called "financial advisors" are actually salesmen working on commission. They urge you to invest, because that's what they sell. They sell financial products you can't understand because they are intentionally unduly complex, specifically to confuse you. They are trying to psych you into believing all investments are too complex to understand, so you'll give up and "just trust them". Simple investments exist. They actually perform better since they aren't burdened down with overhead and internal complexity. Follow this rule: If you don't understand a financial product, don't buy it. But seriously, do commit and take the time to learn investment. You are the best friend your money will have - or its worst enemy. The only way to protect your money from inflation or financial salesmen is to understand investment yourself. You can have a successful understanding of how to invest from 1 or 2 books. (Certainly not everything; those ingenious salesmen keep making the financial world more complicated, but you don't need any of that junk.) For instance how do you allocate domestic stocks, foreign stocks, bonds, etc. in an IRA if you're under 40? Well... how do smaller universities invest their endowments? They all want the same thing you do. If you look into it, you'll find they all invest about the same. And that's quite similar to the asset mix Suze Orman recommends for young people's IRAs. See? Not that complicated. Then take the time to learn why. It isn't stupid easy, but it is learnable. For someone in your tier of income, I recommend Suze Orman's books. I know that some people don't like her, but that segues into a big problem you'll run into: People have very strong feelings about money. Intense, irrational emotions. People get it from their parents or they get sucked into the "trust trap" I mentioned with so-called financial advisors. They bet their whole savings on whatever they're doing, and their ego is very involved. When they push you toward their salesman or his variable annuity, they want you to agree they invested well. So you kinda have to keep your head low, not listen too much to friends/family, and do your research for yourself. John Bogle's book on mutual funds is a must-read for picking mutual funds and allocating assets. Certain financial advisors are OK. They are "fee only" advisors. They deal with all their customers on a fee-only basis, and are not connected to a company which sells financial products. They will be happy for you to keep your money in your account at your discount brokerage, and do your own trading on asset types (not brands) they recommend. They don't need your password. Here's what not to do: A good friend strongly recommended his financial advisor. In the interview, I said I wanted a fee-only advisor, and he agreed to charge me $2000 flat rate. Later, I figured out he normally works on commissions, because he was selling me the exact same products he'd sell to a commission (free advice) customer, and they were terrible products of course. I fired him fast. |
Stock Dividends & Splits: Are they always applied over night? | I've never seen a dividend, split or other corporate action during the day, but I have seen trade suspended a few times when something big happened. The market opening price is not in general the same as the close of the previous day. It can gap up or down and does frequently. I don't know of an api to find out if the dividend was cash or stock, but stock dividends are a lot less common. |
How do I get rid of worthless penny stocks if there is no volume (so market/limit orders don't work) and my broker won't buy them from me? | Merrill charges $500 flat fee to (I assume purchase) my untraded or worthless security. In my case, it's an OTC stock whose management used for a microcap scam, which resulted in a class action lawsuit, etc. but the company is still listed on OTC and I'm stuck with 1000s of shares. (No idea about the court decision) |
Stocks: do Good Till Cancelled orders get executed during after hours? | You'd have to check the rules for your broker to make sure that the term is being used in its usual sense, but the typical answer to your question is "no." A GTC will execute during market hours. You would need to explicitly specify extended hours if you want to execute outside of market hours (which your broker may or may not support). |
Most common types of financial scams an individual investor should beware of? | Affinity fraud. You see, Madoff really didn't have to sell himself, people recommended him to their friends. In a similar way, it's easy once a scammer reels in one sucker to keep him on the hook long enough to get 10 friends to invest as well. I've written about Mortgage Acceleration scams, and the common thread is that they are first sold to friends, relatives, neighbors. People tell their fellow church goer about it and pretty soon people's belief just takes over as they want it to work. Edit - the scam I referenced above was the "Money Merge Account" and its reincarnated "Wealth Unlimited." It claimed to use sophisticated software to enable one to pay their mortgage in less than half the time while not changing their budget. The sellers of the product weren't able to explain how it was supposed to work, since it was nonsense anyway. You were supposed to be able to borrow against a HELOC at a rate higher than your mortgage, yet come out ahead, enough to cut the time in half or less. The link I posted above leads to a spreadsheet I wrote in a weekend, which was better at the math than their software and free. It also linked to 66 pages of accumulated writing I did over a number of months starting in 2008. In the end, I never saw any prosecution over this scam, I suppose people were too embarrassed once they realized they wasted $3500. How can I get scammed buying S&P ETFs through Schwab? Easy, I can't. |
What is the purpose of the wash sale rule? | In a comment on this answer you asked It's not clear to me why the ability to defer the gains would matter (since you never materially benefit until you actually sell) but the estate step up in basis is a great point! Could you describe a hypothetical exploitive scenario (utilizing a wash sale) in a little more detail? This sounds like you still have the same question as originally, so I'll take a stab at answering with an example. I sell some security for a $10,000 profit. I then sell another security at a $10,000 loss and immediately rebuy. So pay no taxes (without the rule). Assuming a 15% rate, that's $1500 in savings which I realize immediately. Next year, I sell that same security for a $20,000 profit over the $10,000 loss basis (so a $10,000 profit over my original purchase). I sell and buy another security to pay no taxes. In fact, I pay no taxes like this for fifty years as I live off my investments (and a pension or social security that uses up my tax deductions). Then I die. All my securities step up in basis to their current market value. So I completely evade taxes on $500,000 in profits. That's $75,000 in tax savings to make my heirs richer. And they're already getting at least $500,000 worth of securities. Especially consider the case where I sell a privately held security to a private buyer who then sells me back the same shares at the same price. Don't think that $10,000 is enough? Remember that you also get the original value. But this also scales. It could be $100,000 in gains as well, for $750,000 in tax savings over the fifty years. That's at least $5 million of securities. The effective result of this would be to make a 0% tax on capital gains for many rich people. Worse, a poorer person can't do the same thing. You need to have many investments to take advantage of this. If a relatively poor person with two $500 investments tried this, that person would lose all the benefit in trading fees. And of course such a person would run out of investments quickly. Really poor people have $0 in investments, so this is totally impractical. |
Is there a simple strategy of selling stock over a period of time? | The best strategy for RSU's, specifically, is to sell them as they vest. Usually, vesting is not all in one day, but rather spread over a period of time, which assures that you won't sell in one extremely unfortunate day when the stock dipped. For regular investments, there are two strategies I personally would follow: Sell when you need. If you need to cash out - cash out. Rebalance - if you need to rebalance your portfolio (i.e.: not cash out, but reallocate investments or move investment from one company to another) - do it periodically on schedule. For example, every 13 months (in the US, where the long term cap. gains tax rates kick in after 1 year of holding) - rebalance. You wouldn't care about specific price drops on that day, because they also affect the new investments. Speculative strategies trying to "sell high buy low" usually bring to the opposite results: you end up selling low and buying high. But if you want to try and do that - you'll have to get way more technical than just "dollar cost averaging" or similar strategies. Most people don't have neither time nor the knowledge for that, and even those who do rarely can beat the market (and never can, in the long run). |
What percentage of my portfolio should be in individual stocks? | I'm in a remarkably similar situation as yourself. I keep roughly 80% of my portfolio in low-cost ETFs (16% bond, 16% commodities, 48% stock), with about 20% in 6-8 individual stocks. Individual stocks are often overlooked by investors. The benefits of individual stock ownership are that you can avoid paying any holding or management fee (unlike ETFs and mutual funds). As long as you assess the fundamentals (P/B, P/E, PEG etc.) of the company you are buying, and don't over-trade, you can do quite well. I recommend semi-annual re-balancing among asset classes, and an individual stock check up. I've found over the years that my individual stocks outperform the S&P500 the vast majority of the time, although it often accompanied by an increase in volatility. Since you're limiting your stake to only 20%, the volatility is not really an issue. |
If banks offer a fixed rate lower than the variable rate, is that an indication interest rates may head down? | Usually that is the case that when fixed rates are lower than the variable rates, it is an indication that the banks feel the next movement in rates could be down. You also need to look at the fixed rates for different periods, for example 1 year fixed compared to 3 year fixed and 5 year fixed rates. If you find the 3 and 5 year fixed rates are higher than the 1 year fixed rates this could be an indication that the banks feel rates will fall in the short term but the falls won't last long and will continue to rise after a year or so. If the 3 year fixed rates are also low in comparison, then the banks may feel that the economy is heading for a longer term down trend. The banks won't want to lose out, so will change their fixed rates on their perception of where they feel the economy is headed. Since your post in May 2011, the standard variable rate has since dropped twice (in November and December) to be at 7.30%. You will also find that fixed rates have also been dropped further by the banks, indicating additional future cuts in the variable rates. Regards, Victor |
If one owns 75% of company shares, does that mean that he would have to take upon himself 75% of the company's expenses? | It depends on the business entity. If the entity is a sole proprietorship or a general partnership, the individual are considered to be the business. There are no shares, and so yes, the owner would have to take on 75% of the expenses. For example, in the event of a lawsuit, if the claimant were awarded $1,000,000, the 75% partner would be personally liable for $750,000. In the event of a corporation, there are shares, so the responsibility is on the management of the company, not the owners, to come up with money for the expenses of the business. That money can come from the business' capital, which is the money owners have put in. Basically, for a corporate entity, the owner is not responsible for 75% of expenses, for a partnership, yes, they are. |
Questions about government bonds that have already matured | I am assuming that you are talking about US Savings Bonds: Here is a page that talks about maturity dates of US Savings bonds. If They aren'tSavings bonds but are another type ofUS Government Bond Assuming they are Savings bonds, here is information regarding redeeming of bonds. How do I redeem my EE/E Bonds? Electronic bonds: Log in to Treasury Direct and follow the directions there. The cash amount can be credited to your checking or savings account within one business day of the redemption date. Paper bonds You can cash paper EE/E Bonds at many local financial institutions. We don't keep a list of banks that redeem bonds, so check with banks in your area. What will I need to redeem a paper bond? Before taking in the bonds to redeem them, it's usually a good idea to check with the financial institution to find out what identification and other documents you'll need. When you present your paper bonds, you'll be asked to show your identity. You can do this by being a customer with an active account open for at least 6 months at the financial institution that will be paying the bonds, or presenting acceptable identification such as a valid driver's license if the >redemption value of the bonds is less than $1,000. If you are not listed as the owner or co-owner on the bond, you'll have to show that you >are entitled to cash in the bond. The treasury direct website also discusses converting bonds, rules regarding using them for education, how often they are credited with interest |
Why real estate investments are compared via “cap rate”? | Cap rate includes any interest on the mortgage and not the repayments of the mortgage. Cap rate represents the net income which is the gross rent minus all costs, including the interest on the loan. Mortgage repayments form part of your cash flow calculations not your return calculations. ROI is a calculation which works out your net income over the initial investment you made, which is you downpayment plus costs and not the value of the property. |
How long to wait after getting a mortgage to increase my credit limit? | 8 hard inquiries spread over two years is not a negative factor, with a score of 750. Real question #1: How much of your credit limits are you currently using? Less than 30% of your credit limits is good. Less than 15% is even better, 10% is great You don't need to wait X amount of days after applying for a mortgage or a card to increase your chances of getting approved for something else. You do need to be conscious of how many hard pulls you have done in a reporting period though, but again as I said, 8 spread over two years is not a whole lot. Real question #2: What negative things do you have in your credit history? Young age, income, delinquent payments, bankruptcies, low limits? Some of these negative factors are catch-22's (low limits, young age = low limits because of age and young credit history) but these contribute to how much institutions would be willing to lend you |
Are services provided to Google employees taxed as income or in any way? | In many countries, giving something free to the employee is considered a taxable income equivalent, and taxes have to be paid on it. As it cannot be assigned to specific employees, the company pays a flat tax on it, so it actually costs the company more. Also, not all employees value it equally, or consider it as a part of their income, so reducing the salary accordingly would not be considered ok by many employees. As a result, the company can only do it as an additional offer, which is too expensive for small businesses. |
Should I early exercise unvested ISOs when the FMV is above the strike price? | In the question you cited, I assumed immediate exercise, that is why you understood that I was talking about 30 days after grant. I actually mentioned that assumption in the answer. Sec. 83(b) doesn't apply to options, because options are not assets per se. It only applies to restricted stocks. So the 30 days start counting from the time you get the restricted stock, which is when you early-exercise. As to the AMT, the ISO spread will be considered AMT income in the year of the exercise, if you file the 83(b). For NQSO it is ordinary income. That's the whole point of the election. You can find more detailed explanation on this website. |
What is the benefit of investing in retirement plan versus investing directly in stocks yourself? | @Victor above has provided a very good answer, I shall try and highlight some differences. The differences are specific to a country, however, it does offer some insight regarding the difference between investing in retirement fund vis-a-vis investing in stock directly: In many countries the retirement fund is mandated by the govt. and has to be invested in (in form of direct deduction from salary) ~ Investing in stock is up to the individual In many cases (if not most) capital gain/interest accrual in retirement funds are not taxable ~ Depending upon current laws capital gain (long term/short term) from stocks are taxable Retirement funds are managed and are (in general) more stable in their returns ~ Returns from direct stock investments are dependent on investment decisions of the investor Retirement funds tend to, (though this is very country specific) return somewhat less than market, as an example, in India Public Provident Fund (PPF)/Employee Provident Fund (EPF) return 8.68% tax free ~ As for direct investment on stocks, Nifty has returned approx. 17% CAGR over 15-20 years. Given the above, if you can invest in stock by taking informed calls and you have a good understanding of the financial markets and their underpinning and (probably) looking at long term investment, then investing directly in stock could fetch returns that might not be paralled by retirement funds. If on the other hand, if you feel investing in stock is not for you, then it probably is better to stick with retirement funds and other low risk investments. Either way, you probably have to (and may be you should) carry some portion of your portfolio as retirement funds. |
Selling on eBay without PayPal? | One option might be to set up a separate bank account and a separate credit card account, which you would use only for your ebay transactions. I have a friend who does a lot of selling on ebay, and this is exactly what she did. It's reasonable to want to protect your personal finances from any complications that might arise with PayPal and/or ebay. But since you definitely have to provide a bank account and c.c. number (there's no way around this), the best solution might be to set up separate "ebay-only" accounts. And be sure not to link them to any of your personal accounts, for added protection. If you're planning to do a lot of selling, this is probably a good idea anyway just for record-keeping purposes. If you do a lot of selling on ebay, you might consider setting up a "merchant account". There are some limitations on international transactions (currently you can't sell to residents of UK, Australia, or France), and payment processing is a few days slower. But there seem to be fewer fees/risks/etc associated with a merchant account. I don't know much more about it, but here's an article from an ebay seller, including pros and cons of PayPal vs. merchant accounts. http://www.ebay.com/gds/Selling-on-eBay-without-PayPal/10000000021351301/g.html |
Is it wise to have plenty of current accounts in different banks? | Another thing to factor in are deals provided by banks. In general, banks care about new customers more than their existing customers. Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only. (Of course, there are occasionally good deals for existing customers, and some banks choose not to discriminate.) If you have many different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates. |
U.S. stock sales- tax on sale for NR Canadian | If you're a non resident then you owe no capital gains tax to Canada. Most banks won't let you make trades if you're a non-resident. They may not have your correct address on file so they don't realize this. This is not tax law but just OSC (or equivalent) regulations. You do have to fill out paperwork for withholding tax on OAS/CPP payments. This is something you probably already do but here's a link . It's complicated and depends on the country you live in. Of course you may owe tax in Thailand, I don't know their laws. |
Can you explain the mechanism of money inflation? | I don't think this can be explained in too simple a manner, but I'll try to keep it simple, organized, and concise. We need to start with a basic understanding of inflation. Inflation is the devaluing of currency (in this context) over time. It is used to explain that a $1 today is worth more than a $1 tomorrow. Inflation is explained by straight forward Supply = Demand economics. The value of currency is set at the point where supply (M1 in currency speak) = demand (actual spending). Increasing the supply of currency without increasing the demand will create a surplus of currency and in turn weaken the currency as there is more than is needed (inflation). Now that we understand what inflation is we can understand how it is created. The US Central Bank has set a target of around 2% for inflation annually. Meaning they aim to introduce 2% of M1 into the economy per year. This is where the answer gets complicated. M1 (currency) has a far reaching effect on secondary M2+ (credit) currency that can increase or decrease inflation just as much as M1 can... For example, if you were given $100 (M1) in new money from the Fed you would then deposit that $100 in the bank. The bank would then store 10% (the reserve ratio) in the Fed and lend out $90 (M2) to me on via a personal loan. I would then take that loan and buy a new car. The car dealer will deposit the $90 from my car loan into the bank who would then deposit 10% with The Fed and his bank would lend out $81... And the cycle will repeat... Any change to the amount of liquid currency (be it M1 or M2+) can cause inflation to increase or decrease. So if a nation decides to reduce its US Dollar Reserves that can inject new currency into the market (although the currency has already been printed it wasn't in the market). The currency markets aim to profit on currency imbalances and in reality momentary inflation/deflation between currencies. |
For young (lower-mid class) investors what percentage should be in individual stocks? | You should only invest in individual stocks if you truly understand the company's business model and follow its financial reports closely. Even then, individual stocks should represent only the tiniest, most "adventurous" part of your portfolio, as they are a huge risk. A basic investing principle is diversification. If you invest in a variety of financial instruments, then: (a) when some components of your portfolio are doing poorly, others will be doing well. Even in the case of significant economic downturns, when it seems like everything is doing poorly, there will be some investment sectors that are doing relatively better (such as bonds, physical real estate, precious metals). (b) over time, some components of your portfolio will gain more money than others, so every 6 or 12 months you can "rebalance" such that all components once again have the same % of money invested in them as when you began. You can do this either by selling off some of your well-performing assets to purchase more of your poorly-performing assets or (if you don't want to incur a taxable event) by introducing additional money from outside your portfolio. This essentially forces you to "buy (relatively) low, sell (relatively) high". Now, if you accept the above argument for diversification, then you should recognize that owning a handful (or even several handfuls) of individual stocks will not help you achieve diversification. Even if you buy one stock in the energy sector, one in consumer discretionary, one in financials, etc., then you're still massively exposed to the day-to-day fates of those individual companies. And if you invest solely in the US stock market, then when the US has a decline, your whole portfolio will decline. And if you don't buy any bonds, then again when the world has a downturn, your portfolio will decline. And so on ... That's why index mutual funds are so helpful. Someone else has already gone to the trouble of grouping together all the stocks or bonds of a certain "type" (small-cap/large-cap, domestic/foreign, value/growth) so all you have to do is pick the types you want until you feel you have the diversity you need. No more worrying about whether you've picked the "right" company to represent a particular sector. The fewer knobs there are to turn in your portfolio, the less chance there is for mistakes! |
After Market Price change, how can I get it at that price? | You can make a purchase at the after market price by sending an order that gets executed in after market. Often times these are called Extended orders, or EXT. With an EXT limit order it will place the bid on the after market hours order book. If you get filled, then you have the shares. This is the answer. |
Buying International Stock | For example, if the Dow, S&P 500, NASDAQ are all down does that necessarily mean the Canadian stock will get negatively impacted? Or is it primarily impacted by the Canadian market? The TWMJF stock makes up a very small part of the Canadian market so it affects the overall market, but this doesn't mean that the overall market affects this stock. So then the answer is: no, the TWMJF stock price will not necessarily follow either US or Canadian market indexes. However, there can be major events which can affect the markets, including the stocks which make up the markets. TWMJF will probably be more sensitive to Canadian events than US events. |
Insurance company sent me huge check instead of pharmacy. Now what? | So: What you do: |
In what ways can a public company ask for money? | There are many different methods for a corporation to get money, but they mostly fall into three categories: earnings, debt and equity. Earnings would be just the corporation's accumulation of cash due to the operation of its business. Perhaps if cash was needed for a particular reason immediately, a business may consider selling a division or group of assets to another party, and using the proceeds for a different part of the business. Debt is money that (to put it simply) the corporation legally must repay to the lender, likely with periodic interest payments. Apart from the interest payments (if any) and the principal (original amount leant), the lender has no additional rights to the value of the company. There are, basically, 2 types of corporate debt: bank debt, and bonds. Bank debt is just the corporation taking on a loan from a bank. Bonds are offered to the public - ie: you could potentially buy a "Tesla Bond", where you give Tesla $1k, and they give you a stated interest rate over time, and principal repayments according to a schedule. Which type of debt a corporation uses will depend mostly on the high cost of offering a public bond, the relationships with current banks, and the interest rates the corporation thinks it can get from either method. Equity [or, shares] is money that the corporation (to put it simply) likely does not have a legal obligation to repay, until the corporation is liquidated (sold at the end of its life) and all debt has already been repaid. But when the corporation is liquidated, the shareholders have a legal right to the entire value of the company, after those debts have been paid. So equity holders have higher risk than debt holders, but they also can share in higher reward. That is why stock prices are so volatile - the value of each share fluctuates based on the perceived value of the entire company. Some equity may be offered with specific rules about dividend payments - maybe they are required [a 'preferred' share likely has a stated dividend rate almost like a bond, but also likely has a limited value it can ever receive back from the corporation], maybe they are at the discretion of the board of directors, maybe they will never happen. There are 2 broad ways for a corporation to get money from equity: a private offering, or a public offering. A private offering could be a small mom and pop store asking their neighbors to invest 5k so they can repair their business's roof, or it could be an 'Angel Investor' [think Shark Tank] contributing significant value and maybe even taking control of the company. Perhaps shares would be offered to all current shareholders first. A public offering would be one where shares would be offered up to the public on the stock exchange, so that anyone could subscribe to them. Why a corporation would use any of these different methods depends on the price it feels it could get from them, and also perhaps whether there are benefits to having different shareholders involved in the business [ie: an Angel investor would likely be involved in the business to protect his/her investment, and that leadership may be what the corporation actually needs, as much or more than money]. Whether a corporation chooses to gain cash from earnings, debt, or equity depends on many factors, including but not limited to: (1) what assets / earnings potential it currently has; (2) the cost of acquiring the cash [ie: the high cost of undergoing a public offering vs the lower cost of increasing a bank loan]; and (3) the ongoing costs of that cash to both the corporation and ultimately the other shareholders - ie: a 3% interest rate on debt vs a 6% dividend rate on preferred shares vs a 5% dividend rate on common shares [which would also share in the net value of the company with the other current shareholders]. In summary: Earnings would be generally preferred, but if the company needs cash immediately, that may not be suitable. Debt is generally cheap to acquire and interest rates are generally lower than required dividend rates. Equity is often expensive to acquire and maintain [either through dividend payments or by reduction of net value attributable to other current shareholders], but may be required if a new venture is risky. ie: a bank/bondholder may not want to lend money for a new tech idea because it is too risky to just get interest from - they want access to the potential earnings as well, through equity. |
A debt collector will not allow me to pay a debt, what steps should I take? | You say your primary goal is to clean up your credit report, and you're willing to spend some cash to do it. OK. But beware: the law in this area is a funhouse mirror, everything works upside down and backwards. To start, let's be clear: Credit reports are not extortion to force you into paying. They are a historical record of your creditworthiness, and almost impossible to fix without altering history. Paying on this debt will affirm the old data was correct, and glue it to your report. Here's how credit reporting works for R-9 (sent to collections) amounts. The data is on your credit report for 7 years. The danger is in this clock being restarted. What will not restart the clock? Ignoring the debt, talking casusally to collectors, and the debt being sold from one collector to another. What will restart the clock? Acknowledging the debt formally, court judgment, paying the debt, or paying on the debt (obviously, paying acknowledges the debt.) Crazy! You could have a debt that's over 7 years old, pay it because you're a decent person, and BOOM! Clock restarts and 7 more years of bad luck. Even worse-- if they write-off or forgive any part of the debt, that's income and you'll need to pay income tax on it. Ugh! Like I say, the only way to remove a bad mark is to alter history. Simple fact: The collector doesn't care about your bad credit mark; he wants money. And it costs a lot of money, time and/or stress for both of you to demand they research it, negotiate, play phone-tag, and ultimately go to court. So this works very well (this is just the guts, you have to add all the who, what, where, signature block, formalities etc.): 1 Company and Customer absolutely disagree as to whether Customer owes Company this debt: (explicitly named debt with numbers and amount) 2 But Company and Customer both eagerly agree that the expense, time, and stress of research, negotiation, and litigation is burdensome for both of us. We both strongly desire a quick, final and no-fault solution. Therefore: 3 Parties agree Customer shall pay Company (acceptable fraction here). Payment within 30 days. To be acknowledged in writing by Company. 4 This shall be absolute and final resolution. 5 NO-FAULT. Parties agree this settlement resolves the matter in good faith. Parties agree this settlement is done for practical reasons, this bill has not been established as a valid debt, and any difference between billed and settled amount is not a canceled nor forgiven debt. 6 Neither party nor its assigns will make any adverse statements to third parties relating to this bill or agreement. Parties agree they have a continuous duty to remove adverse statements, and agree to do so within seven days of request. 7 Parties specifically agree no adverse mark nor any mark of any kind shall be placed on Customer's credit report; and in the event such a mark appears, Parties will disavow it continuously. Parties agree that a good credit report has a monetary value and specific impacts on a customer's life. 8 Jurisdiction of law shall be where the effects are felt, and that shall be (place of service) regarding the amounts of the bill proper. Severable, inseparable, counterparts, witness, signature lines blah blah. A collector is gonna sign this because it's free money and it's not tricky. What does this do? 1, 2 and 5 alter history to make the debt never have existed in the first place. To do this, it must formally answer the question of why the heck would you pay a debt that isn't real and you don't owe: out of sheer practicality; it's cheaper than Rogaine. This is your "get out of jail free" card both with the credit bureaus and the IRS. Of course, 3 gives the creditor motivation to go along with it. 6 says they can't burn your credit. 7 says it again and they're agreeing you can sue for cash money. 8 lets you pick the court. The collector won't get hung up on any of these since he can easily remove the bad mark. (don't be mad that they won't do it "for free", that's what 3 is for.) The key to getting them to take a settlement is to be reasonable and fair. Make sure the agreement works for them too. 6 says you can't badmouth them on social media. 4 and 5 says it can't be used against them. 8 throws them a bone by letting them sue in their home court for the bill they just settled (a right they already had). If it's medical, add "HIPAA does not apply to this document" to save them a ton of paperwork. Make it easy for them. You want the collector to take it to his boss and say "this is pretty good. Do it." Don't send the money until their signed copy is in your hands. Then send promptly with an SASE for the receipt. Make it easy for them. This is on you. As far as "getting them to send you an offer", creditors are reluctant to mail things especially to people they don't think will pay, because it costs them money to write and send. So you may need to be proactive about running them down with your offer. Like I say, it's a funhouse mirror. |
Why would a company have 2 listings on the same exchange? | Some companies like Royal Dutch Shell have multiple share classes to suit the tax regimes in Holland and the UK the A shares have dutch withholding tax applied and the B shares dont. Also some split capital investment trusts have multiple share classes http://www.trustnet.com/Education/Split.aspx?ms=1 |
Do stocks give you more control over your finances than mutual funds? | The issue with trading stocks vs. mutual funds (or ETFs) is all about risk. You trade Microsoft you now have a Stock Risk in your portfolio. It drops 5% you are down 5%. Instead if you want to buy Tech and you buy QQQ if MSFT fell 5% the QQQs would not be as impacted to the downside. So if you want to trade a mutual fund, but you want to be able to put in stop sell orders trade ETFs instead. Considering mutual funds it is better to say Invest vs. Trade. Since all fund families have different rules and once you sell (if you sell it early) you will pay a fee and will not be able to invest in that same fund for x number of days (30, 60...) |
Why should one only contribute up to the employer's match in a 401(k)? | If you exceed the income limit for deducting a traditional IRA (which is very low if you are covered by a 401(k) ), then your IRA options are basically limited to a Roth IRA. The Cramer person probably meant to compare 401(k) and IRA from the same pre-/post-tax-ness, so i.e. Traditional 401(k) vs. Traditional IRA, or Roth 401(k) vs. Roth IRA. Comparing a Roth investment against a Traditional investment goes into a whole other topic that only confuses what is being discussed here. So if deducting a traditional IRA is ruled out, then I don't think Cramer's advice can be as simply applied regarding a Traditional 401(k). (However, by that logic, and since most people on 401(k) have Traditional 401(k), and if you are covered by a 401(k) then you cannot deduct a Traditional IRA unless you are super low income, that would mean Cramer's advice is not applicable in most situations. So I don't really know what to think here.) |
Most common types of financial scams an individual investor should beware of? | Investing in a business can be daunting and risky, so it is not for everyone. The most common pitfalls are mentioned here: Beyond that: It all sounds a bit like "Don't trust anyone" and sadly, this is true when there's a lot of money involved. So be prepared and do your homework, this sometimes will save you more money than you gain with your investments :) Good luck! |
Should I participate in a 401k if there is no company match? | With a match, the 401(k) becomes the priority, up to that match, often ahead of other high interest debt. Without the match, the analysis is more about the cost within the 401(k). The 401(k) is a tax deferred account (let's not go on a tangent to Roth 401(k)) so ideally, you'd be skimming off money at 25% and saving it till you retire, so some of it is taxed at 0, 10, 15%. If the fees in the 401(k) are say 1.5% between the underlying funds and management fee, it doesn't take long to wipe out the potential 10 or 15% you are trying to gain. Yes, there's a risk that cap gain rates go away, but with today's tax law, the long term rate is 15%. So that money put into a long term low cost ETF will have reinvested dividends taxed at 15% and upon sale, a 15% rate on the gains. There are great index ETFs with sub - .1% annual cost. My simple answer is - If the total cost in that 401(k) is .5% or higher, I'd pass. Save the money in an outside account, using IRAs as best you can. (The exact situation needs to be looked at very carefully. In personal finance, there's a lot of 'grey'. For example, a frequent job changer can view the 401(k) as a way of saving pretax, knowing the fee will only last 2 years, and will end with a transfer to the IRA) |
Is freelance income earned by a U.S. citizen while living abroad subject to state income tax? | New York will want to you to pay taxes on income from "New York sources". I'm not sure what this means to a freelance web developer. If your wife is doing freelance web development under the same business entity as she did in New York (ie. a New York sole proprietor, corporation, etc), you probably do need to file. From nonresident tax form manual: http://tax.ny.gov/pdf/2011/inc/it203i_2011.pdf If you were a nonresident of New York State, you are subject to New York State tax on income you received from New York State sources in 2011. If you were a resident of New York State for only part of 2011, you are subject to New York State tax on all income you received while you were a resident of the state and on income you received from New York State sources while you were a nonresident. To compute the amount of tax due, use Form IT-203, Nonresident and Part-Year Resident Income Tax Return. You will compute a base tax as if you were a full-year resident, then determine the percentage of your income that is subject to New York State tax and the amount of tax apportioned to New York State. |
Are credit cards not viewed as credit until you miss one payment? | There's a difference between missing a payment and "carrying a balance" (making an on-time payments that are less than the full balance due). I have heard mortgage brokers claim that, if you have no other credit history, carrying a small balance here and there on a credit card may improve your score. ("Small" is in relation to your available credit and your ability to pay it off.) But actually missing a payment will probably hurt your score. Example: You have a card with a credit limit of $1000. In July you charge $300 worth of stuff. You get the next statement and it shows the balance due of $300 and a minimum payment of $100. If you pay the entire $300 balance in that cycle, most cards won't charge you any interest. You are not carrying a balance, so the credit scores may not reflect that you actually took a $300 loan and paid it off. If you instead pay $200, you'll be in good standing (because $200 is greater than the minimum payment). But you'll be carrying a $100 balance into the next statement cycle. Plus interest will accrue on that $100. If you do this regularly, your credit score will probably take into account that you've taken a small loan and made the payments. For those with no other credit history, this may be an appropriate way to increase your credit score. (But you're paying interest, so it's not free.) And if the average balance you carry is considered high relative to your ability to pay or to the total credit available to you, then this could adversely affect your score (or, at least, the amount of credit another provider is willing to extend to you). If you instead actually miss a payment, or make a payment that's less than the minimum payment, that will almost certainly hurt your credit score. It will also incur penalties as well as interest. You want to avoid that whenever possible. My guess is that, in the game of telephone from the banker to you, the "carrying a balance" was misinterpreted as "missing a payment." |
How secure is my 403(b)? Can its assets be “raided”? | The simple answer is that with the defined contribution plan: 401k, 403b, 457 and the US government TSP; the employer doesn't hold on to the funds. When they take your money from your paycheck there is a period of a few days or at the most a few weeks before they must turn the money over to the trustee running the program. If they are matching your contributions they must do the same with those funds. The risk is in that window of time between payday and deposit day. If the business folds, or enters bankruptcy protection, or decides to slash what they will contribute to the match in the future anything already sent to the trustee is out of their clutches. In the other hand a defined a benefit plan or pension plan: where you get X percent of your highest salary times the number of years you worked; is not protected from the company. These plans work by the company putting aide money each year based on a formula. The formula is complex because they know from history some employees never stick around long enough to get the pension. The money in a pension is invested outside the company but it is not out of the control of the company. Generally with a well run company they invest wisely but safely because if the value goes up due to interest or a rising stock market, the next year their required contribution is smaller. The formula also expects that they will not go out of business. The problems occur when they don't have the money to afford to make the contribution. Even governments have looked for relief in this area by skipping a deposit or delaying a deposit. There is some good news in this area because a pension program has to pay an annual insurance premium to The Pension Benefit Guaranty Corporation a quai-government agency of the federal government. If the business folds the PBGC steps in to protect the rights of the employees. They don't get all they were promised, but they do get a lot of it. None of those pension issues relate to the 401K like program. Once the money is transferred to the trustee the company has no control over the funds. |
Is stock trading based more on luck than poker playing? | I assert not so. Even if we assume a zero sum game (which is highly in doubt); the general stock market curves indicate the average player is so bad that you don't have to be very good to have better that 50/50 averages. One example: UP stock nosedived right after some political mess in Russia two years ago. Buy! Profit: half my money in a month. I knew that nosedive was senseless as UP doesn't have to care much about what goes on in Russia. Rising oil price was a reasonable prediction; however this is good for railroads, and most short-term market trends behave as if it is bad. |
Why does money value normally decrease? | It is in circles. Today Money is fiat money. From economic stand point a moderate inflation is good. It there is near zero inflation or deflation, then economy would come to standstill and would stagnate. Hence everything has to becomes expensive. This keeps the economy in motion. House or Gold does increase in value otherwise one would not have purchased them. If you are saying on buying a house, you keep it with someone and after a period of time you get one extra room or keep an ounce of gold and after some years it becomes 2 ounce, well it does increase but differently. There reason there aren't many such schemes is because quantifying it is difficult. It would normally fetch more money than one had bought it for. |
Why would preferred shares have less potential for capital gain compared to common stock? | True blue preferred shares are considered loose hybrids of credit and equity. They are more senior than common equity in bankruptcy liquidation but pay out a dividend which is not mandatory. Financial institutions issue the bulk of genuine preferred shares because of their need for more flexibility than a bond but not so much that they can afford the cost to shareholders by diluting common equity. Since it is a credit-like security that receives none of the income from operations but merely pays out a potentially unpredictable yet fixed amount of income, it will perform much more like a bond, rising when interest rates fall and vice versa, and since interest rates do not move to the extent of common equity valuations, preferreds' price variances will correspond much more to bonds than common equities. If the company stops paying the preferred dividend or looks to become in financial trouble, the price of the preferred share should be expected to fall. There are more modern preferred however. It has now become popular to fund intermediate startups with convertible preferred shares. Because these are derivatives based upon the common equity, they can be expected to be much more variant. |
Why do deep in the money options trade below their intrinsic value? | You made 94$ on an investment of 554.80 *100 = 55480$ for an approx holding period of 1 year. So the % return is ~0.16%, which is not much better than the short term us treasury rate. The current 1 year treasury rate is 0.27%: http://ycharts.com/indicators/1_year_treasury_rate So yes, you have a risk free portfolio, so you make the risk free rate. Remember this is an European option, so you are stuck for 1 year. if you found the same mispricing in an American option, then you found an arbitrage. |
Are the “debt reduction” company useful? | They are a complete waste of money, see my answer here for more details. |
First time home buyer. How to negotiate price? | Do some homework to determine what is really a fair price for the house. Zillow helps. County tax records help, including last sale price and mortgage, if any (yes, it's public). Start at the low end of fair. Don't rely on the Realtor. He gets paid only if a sale occurs, and he's already coaxing you closer to a paycheck. He might be right with the numbers, though, so check for yourself. When you get within a thousand or two of acceptance, "shut up". I don't mean that in a rude way. A negotiating class I took taught me how effective silence can be, at the right time. The other side knows you're close and the highest you've offered. If they would be willing to find a way to come down to that, this is the time. The awkward silence is surprisingly effective. |
How much house can I afford, waiting around 3 years or so | On $4K/mo gross about $1000/mo can go to the mortgage, and at today's rates, that's about $200K of mortgage the bank might lend you. Income is qualified based on gross, not net, so if $48,000/yr is wrong, please scale my guesstimate down a bit. In the end, today's rates allow a mortgage of nearly 4X one's gross income. This is too high, in my opinion. I'm answering what the bank would approve you at, not what I think is wise. Wise, in my opinion is 2.5-3X one's income, tops. |
is the bankruptcy of exchange markets possible? | You seem to think that stock exchanges are much more than they actually are. But it's right there in the name: stock exchange. It's a place where people exchange (i.e. trade) stocks, no more and no less. All it does is enable the trading (and thereby price finding). Supposedly they went into mysterious bankruptcy then what will happen to the listed companies Absolutely nothing. They may have to use a different exchange if they're planning an IPO or stock buyback, that's all. and to the shareholder's stock who invested in companies that were listed in these markets ? Absolutley nothing. It still belongs to them. Trades that were in progress at the moment the exchange went down might be problematic, but usually the shutdown would happen in a manner that takes care of it, and ultimately the trade either went through or it didn't (and you still have the money). It might take some time to establish this. Let's suppose I am an investor and I bought stocks from a listed company in NYSE and NYSE went into bankruptcy, even though NYSE is a unique business, meaning it doesn't have to do anything with that firm which I invested in. How would I know the stock price of that firm Look at a different stock exchange. There are dozens even within the USA, hundreds internationally. and will I lose my purchased stocks ? Of course not, they will still be listed as yours at your broker. In general, what will happen after that ? People will use different stock exchanges, and some of them migth get overloaded from the additional volume. Expect some inconveniences but no huge problems. |
Should I overpay to end a fixed-rate mortgage early? [duplicate] | The simplest argument for overpayment is this: Let's suppose your fixed rate mortgage has an interest rate of 4.00%. Every £1 you can afford to overpay gives you a guaranteed effective return of 4.00% gross. Yes your monthly mortgage payment will stay the same; however, the proportion of it that's paying off interest every month will be less, and the amount that's actually going into acquiring the bricks and mortar of your home will be greater. So in a sense your returns are "inverted" i.e. because every £1 you overpay is £1 you don't need to keep paying 4% a year to continue borrowing. In your case this return will be locked away for a few more years, until you can remortgage the property. However, compared to some other things you could do with your excess £1s, this is a very generous and safe return that is well above the average rate of UK inflation for the past ten years. Let's compare that to some other options for your extra £1s: Cash savings: The most competitive rate I can currently find for instant access is 1.63% from ICICI. If you are prepared to lock your money away until March 2020, Melton Mowbray Building Society has a fixed rate bond that will pay you 2.60% gross. On these accounts you pay income tax at your marginal rate on any interest received. For a basic rate taxpayer that's 20%. If you're a higher rate taxpayer that means 40% of this interest is deducted as tax. In other words: assuming you pay income tax at one of these rates, to get an effective return of 4.00% on cash savings you'd have to find an account paying: Cash ISAs: these accounts are tax sheltered, so the income tax equation isn't an issue. However, the best rate I can find on a 4 year fixed rate cash ISA is 2.35% from Leeds Building Society. As you can see, it's a long way below the returns you can get from overpaying. To find returns such as that you would have to take a lot more risk with your money – for example: Stock market investments: For example, an index fund tracking the FTSE 100 (UK-listed blue chip companies) could have given you a total return of 3.62% over the last 3 years (past performance does not equal future returns). Over a longer time period this return should be better – historical performance suggests somewhere between 5 to 6% is the norm. But take a closer look and you'll see that over the last six months of 2015 this fund had a negative return of 6.11%, i.e. for a time you'd have been losing money. How would you feel about that kind of volatility? In conclusion: I understand your frustration at having locked in to a long term fixed rate (effectively insuring against rates going up), then seeing rates stay low for longer than most commentators thought. However, overpaying your mortgage is one way you can turn this situation into a pretty good deal for yourself – a 4% guaranteed return is one that most cash savers would envy. In response to comments, I've uploaded a spreadsheet that I hope will make the numbers clearer. I've used an example of owing £100k over 25 years at an unvarying 4% interest, and shown the scenarios with and without making a £100/month voluntary overpayment, assuming your lender allows this. Here's the sheet: https://www.scribd.com/doc/294640994/Mortgage-Amortization-Sheet-Mortgage-Overpayment-Comparison After one year you have made £1,200 in overpayments. You now owe £1,222.25 less than if you hadn't overpaid. After five years you owe £6,629 less on your mortgage, having overpaid in £6,000 so far. Should you remortgage at this point that £629 is your return so far, and you also have £6k more equity in the property. If you keep going: After 65 months you are paying more capital than interest out of your monthly payment. This takes until 93 months without overpayments. In total, if you keep up £100/month overpayment, you pay £15,533 less interest overall, and end your mortgage six years early. You can play with the spreadsheet inputs to see the effect of different overpayment amounts. Hope this helps. |
Are solar cell panels and wind mills worth the money? | To answer the investment aspect takes a bit of math. First, solar insolation numbers: This represents the average sun-hours per day for a given area. You can see the range from 4 to 6, or 1460 hrs to about 2190 hrs of sun per year depending on location. I believe electricity also has a range of cost, but 15 cents per KWH is a good average. So, a 1KW panel will produce as much as $328 per year of electricity in a high sun-hrs area, but only $219 in a lower sun-hrs area. If we agree to ignore the government subsidies and look for the stable price unaffected by outside influence, an installed price of even $2500 would produce a return of 13% and a reasonable full payback over an 8 year period. I call this installed price a tipping point, the price where this purchase provides a decent return. Some would accept a lower return, and therefore a higher price. As duff points out, this should be treated as the post rebate/tax credit price. Those help to push the price below this point. At the price point where the energy cost per panel is below, the government intervention may be unnecessary. The power companies may find consumer owned panels are the cheapest way to clip the peak consumption which tends to be the most expensive power demand.) One can take the insolation numbers and cost of local power to produce a grid showing the return for a 1KW panel in $$/year. (At this point the cost of money kick in. The present value of $100/yr is far higher today than if short term rates were say, 8%) Once panels drop to where they are compelling for the higher return areas, I'd expect volume to drive continued improvements in cost and better economies of scale. Initially, the need for storage isn't there, as the infrastructure is in place to drive your meter backwards if you produce more than you use. The peek sun coincides with peek demand and the electric companies are happy to have your demand go negative during those times. Update - the conversation with Duff led me to research 'demand charge' a bit more. You see, the utility company has to have equipment to generate the peak demand, usually occurring in the early afternoon, say 12N-2PM as the sun is brightest and AC use in particular, highest. I found that Austin energy has a PDF describing the fee for this. Simply put, the last kW of demand will cost you $14.03 in summer months and $12.65 in winter. This adds to $160/yr that a 1kW panel might save the owner. Even if one does capture the full power at peak every month, $100 is still non-trivial. This factor alone justifies $1000 worth of panel cost, and as Duff points out, the government may find it cheaper to use this method to clip peak demand than by funding bigger power generators. To summarize, the question isn't so much "are they worth it" as "what is a xKW panel worth?" (A function of annual savings and time value of money.) The ever decreasing installed cost for a given system makes solar an inevitable part of the future power technology. I am not a green tree hugging guy, but I do like to breathe fresh air as much as anyone. I'm happy with whatever role solar plays in cutting down pollution. |
Why is retirement planning so commonly recommended? | 1) People aren't always going to be able to do their occupation, or their desired hobby. 2) Government assistance, or whatever you want to call it, is available at a certain age. Some people look forward to this and plan to rely on it, but it isn't really sufficient for living off of and keeping the standard of living you will be used to. Therefore, such situations require you to plan using a variety of other institutions to help you in that time. Finally, more is more: if your retirement funds exceed what you need, you can leave something for your family to help them start at a more stable financial place after you are gone. |
What is the difference between speculating and investing? | Classic investing guru Benjamin Graham defines "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return." He contrasts this with speculation which is anything else (no thorough analysis, no safety of principal, or no adequate return). The word "adequate" is important, since it contrasts adequate returns with those that are either lower than needed or higher than necessary to reach your goals. |
Why are credit cards preferred in the US? | There are two things I can think of that might be different in other countries: Until 2013, American Express, Visa and MasterCard prevented businesses from charging extra for credit card usage, and credit card surcharges still illegal in several states. Since credit card companies add a surcharge to credit card purchases, and merchants can't pass that onto credit card users, they just make everyone pay extra instead. Since everyone gets charged the credit card surcharge, you might as well use a credit card and recoup some of that via "rewards" points. Almost all credit cards here have grace periods, where you won't be charged interest if you pay back your loans in full within some period of time (at least 21 days). This makes credit cards attractive to people who don't need a loan, but like the convenience that credit cards provide (not carrying cash, extra insurance, better fraud protection). Apparently grace periods aren't required by law here, so this might be common in other countries as well. |
Working on a tax free island to make money? | According to Wikipedia, import duties on goods range from 5-22% on everything but cars (30-100%) and a handful of other goods (no import duties). Since almost everything must be imported, you will still be paying the taxman, just on the consumption side. |
How are people able to spend more than what they make, without going into debt? | That's just his base salary for last year. Keep reading in the article: He also received $1.6 million worth of securit[ies]. Plus, he's probably earned plenty in salary, bonuses, and other compensation in previous years to more than keep up his lifestyle. He can also sell (relatively) small amounts of the stock he already owns to get millions in cash without raising an eyebrow. how are people able to spend more than what they make, without going into debt? Well, people can't spend more than they have without going into debt. Certainly money can be saved, won, inherited, whatever without being "earned". Other than that, debt is the only option. That said, MANY "wealthy" people will spend WAY more than they have by going into debt. This can be done through huge mortgages, personal loans using stock, real estate, or other assets as collateral, etc. I don't know about Bezos specifically, but it's not uncommon for "wealthy" people to live beyond their means - they just have more assets behind them to secure personal loans, or bankers are more willing to lend them unsecured money because of the large interest rates they can charge. Their assumption is presumably that the interest they'll pay on these loans is less than the earnings they'll get from the asset (e.g. stock, real estate). While it may be true in some cases, it can also go bad and cause you to lose everything. |
Definition of equity | The word equity always refers to the ownership of something, whether it be a company or a home. The wikipedia article is differentiating companies by how they raised money for operations. Equity companies, by their definition are those that sold an interest in the company in exchange for capital. Debt based companies, again by their definition, are those that borrow money from investors, but instead of an ownership stake they promise to pay back the money presumably with interest. |
How does giving to charity work? | I'll answer your second question: it depends what your charity is for. There are two types: i) Emergency (i.e. to respond to environmental or social disasters where it acts a bit like an insurance policy); ii) Development (i.e. where the intention is to subsidise something missing in the local economy); A lack of insurance is certainly a problem for people who lose their homes and livelihoods to disaster. Your donations can go far. As for development aid: "We find little evidence of a robust positive correlation between aid and growth," write two ex-IMF economists, Raghuram Rajan, who stepped down as IMF chief economist at the end of 2006, and Arvind Subramanian, who left the IMF this year. "One of the most enduring and important questions in economics is whether foreign aid helps countries grow ... There is a moral imperative to this question: it is a travesty for so many countries to remain poor if a relatively small transfer of resources from rich countries could set them on the path to growth ... But if there is no clear evidence that aid boosts growth, then handing out more money makes little sense," they conclude. I do somewhat further in declaring that charity is equivalent to trade dumping. By artificially lowering the real cost of a particular good it ensures that there will be no local investment in that good. Free clothes to Africa has destroyed the local textiles industry. Free doctors has resulted in more African doctors in New York than in the whole of Africa. So decide where your charity is going: emergencies or development? Then decide what you can afford. But your first investment should always be in yourself. If by making use of that investment you can benefit the economy and keep others around you employed and productive you will achieve far more. |
Getting started in stock with one special field of activity | You are always best off investing in things you understand. If you have a deep understanding of the aeronautical industry, say, you are a Vice President at Boeing and have been working at Boeing for 40 years, then that would be a reason for investing in that sector: because you may be able to better evaluate different companies in that sector. If you are a novice in the sector, or just have an amateur interest in it, then it may not be a good idea, because your knowledge may not be sufficient to give you much of an advantage. Before focusing on one investment of any type, industry sector based, or otherwise, you want to ask yourself: am I an expert in this subject? The answer to that question will have a big impact on your success. |
Confused about google portfolio chart | You bought 1 share of Google at $67.05 while it has a current trading price of $1204.11. Now, if you bought a widget for under $70 and it currently sells for over $1200 that is quite the increase, no? Be careful of what prices you enter into a portfolio tool as some people may be able to use options to have a strike price different than the current trading price by a sizable difference. Take the gain of $1122.06 on an initial cost of $82.05 for seeing where the 1367% is coming. User error on the portfolio will lead to misleading statistics I think as you meant to put in something else, right? |
Where do short-term traders look for the earliest stock related news? | I work for a fund management company and we get our news through two different service providers Bloomberg and Thomson One. They don't actually source the news though they just feed news from other providers Professional solutions (costs ranging from $300-1500+ USD/month/user) Bloomberg is available as a windows install or via Bloomberg Anywhere which offers bimometric access via browser. Bloomberg is superb and their customer support is excellent but they aren't cheap. If you're looking for a free amateur solution for stock news I'd take a look at There are dozens of other tools people can use for day trading that usually provide news and real time prices at a cost but I don't have any direct experience with them |
Transferred Stocks in 1993, sold 2017 taxes | Assuming the stock was worth more at the time she gave it to you than when she bought it, the cost basis would be the amount that she bought it for. You would then pay tax on the increase in value from that time. Generally it's better to inherit assets than receive them as gifts, since the cost basis of inherited assets is raised to the value at the time of the death of the one leaving the inheritance. You will probably need to find some record of the original amount paid so you can determine the right cost basis. |
Are there any ETFs that follow the “Dogs of the Dow” allocation? | Google is your friend. If you buy me a beer, I might be as well. By the way DOD is the ticker. Dogs of the Dow ETF |
Stocks: Where can I find a list of bankrupt/diluting stocks in the US? | The only recommendation I have is to try the stock screener from Google Finance : https://www.google.com/finance?ei=oJz9VenXD8OxmAHR263YBg#stockscreener |
How much time would I have to spend trading to turn a profit? | Very subjective question. some may do it in the first year, some lose money all their life. Some make a fortune and then lose it. Investing time is only a small part of it. some people can never do it just because investing is not for everyone. Just like any other business. or you can invest into t-bill and CDs, you'll be profitable from day one. |
Are there any viable alternatives to Paypal for a small site? | I found out about Google checkout today, it looks like it may meet my needs, but I'd still be interested to find out about other options. |
How does “taking over payments” work? | The phrase doesn't mean anything specifically. Your SO could start paying the payments, but the title and lien would remain in your name. If you wanted to change the title or lien to be in her name, you would have to sell the car to her (sales tax would be involved but the process would be relatively painless). You could sell her the car for a pretty cheap price, but not $1. (unless the depreciated value of the car was less than the rest of the loan amount). You could draft up an agreement that if you break up or something, she agrees to buy the car from you for $x dollars minus all the payments she has made on the car. |
Does keeping 'long-term' safety net in bonds make sense? | I am understanding the OP to mean that this is for an emergency fund savings account meant to cover 3 to 6 months of living expenses, not a 3-6 month investment horizon. Assuming this is the case, I would recommend keeping these funds in a Money Market account and not in an investment-grade bond fund for three reasons: |
Debit cards as bad as credit cards? | If your goal is to make it harder for you to use to make impulse purchases then YES. Having to always have cash for purchases will make you less likely to make impulse purchases you don't really need. |
Insider Trading? | I am a flight attendant on a private jet and I hear a bank CEO discussing a merger or a buyout. I proceed to purchase that stock before the announcement. The CEO did not tell me to buy it, I just overheard him. If you are a flight attendant on a private jet that is operated by one of the principals, probably including a bank, attorney, consultant, broker, etc., in the merger or buyout, then you probably have a fiduciary duty to safeguard the information and are prohibited from trading. Please see: http://www.kiplinger.com/article/investing/T052-C008-S001-would-you-be-guilty-of-insider-trading.html You’re a janitor at a major company. You hear members of the company’s board convening outside the room you’re cleaning and decide to hide in the closet. The board okays a deal to sell the company for a fat premium to the current share price. You load up on the shares. Illegal insider trading? Definitely. This is not a public place, and “you’d be in a position to understand that confidential information was being disclosed, which changes the calculus,” says Andrew Stoltmann, a Chicago-based securities lawyer. Also see: http://meyersandheim.com/how-to-win-an-insider-trading-case/ However, between these two extremes of a bystander with no duty to the corporation and a corporate officer with a clear duty to the corporation stood a whole group of people such as printers, lawyers and others who were involved in non-public transactions that did not necessarily have a duty to the company whose securities they traded. To address this group of people the courts developed the misappropriation theory. The misappropriation theory covers people who posses inside information and who are prohibited from trading on such information because they owe a duty to a third party and not the corporation whose securities are traded. Yours is the perfect example. You owe a duty to your employer to operate in its best interests. As for the broader, more common example, where you overhear information in an elevator, restaurant, in line at the coffee shop, etc., trading on such information was found not to be insider trading in SEC v. Switzer: http://law.justia.com/cases/federal/district-courts/FSupp/590/756/2247092/ In this case, Mr. Switzer overheard information at a track meet and traded on it with profits. The court found: The information was inadvertently overheard by Switzer at the track meet. Rule 10b-5 does not bar trading on the basis of information inadvertently revealed by an insider. On the basis of the above findings of fact and conclusions of law, the court orders judgment in favor of defendants. |
Put-Call parity - what is the difference between the two representations? | Well, the first one is based on the "Pert" formula for continuously-compounded present value, while the second one is the periodically-compounded variant. Typically, the continuously-compounded models represent the ideal; as the compounding period of time-valued money shrinks towards zero, and the discount rate (or interest rate if positive) stays constant over the time period examined, the periodic equation's results approach that of the continuously-compounded equation. Those two assumptions (a constant rate and continuous balance adjustment from interest) that allow simplification to the continuous form are usually incorrect in real-world finance; virtually all financial institutions accrue interest monthly, for a variety of reasons including simpler bookkeeping and less money paid or owed in interest. They also, unless prohibited by contract, accrue this interest based on a rate that can change daily or even more granularly based on what financial markets are doing. Most often, the calculation is periodic based on the "average daily balance" and an agreed rate that, if variable, is based on the "average daily rate" over the previous observed period. So, you should use the first form for fast calculation of a rough value based on estimated variables. You should use the second form when you have accurate periodic information on the variables involved. Stated alternately, use the first form to predict the future, use the second form in retrospect to the past. |
Advice on what to do with my equity? | How will 45K-60K "end up in your pocket"? Are you selling your home? Where are you going to live? You talk about moving to Arizona, what is so magical about that place? Congratulations on making a wise purchase. Some people with new found money use it to correct past mistakes. However, if they do not change their behavior they end up in the same situation just less them money they once had. While 50K income is respectable at your age, it is below the national average for households. One factor in having a college education is those with them tend to experience shorter and fewer periods of unemployment especially for males. Nothing will ever replace hustle, however. I'd ask you to have a plan to raise your income. Can you double it in 5 years? You need to get rid of the revolving debt. Do that out of current income. No need to touch the house proceeds for something so small. Shoot for 9 months. Then you need to get rid of the speeding fines and the vehicle loan. That is a lot of vehicle for your income. Again, I would do that out of current income or by selling the vehicle and moving to something more inline with your income. As far as to moving or flipping foreclosures that is more of a question that has to do with your hopes and dreams. Do you want to move your children every 3 years? What if you move to Arizona and it turns out to be quite horrible? You and your wife need to sit down and discuss what is best for your family. |
Is it a good practice to keep salary account and savings account separate? | I can't immediately think of a reason to keep your paycheck and spending account separate, unless it be because you want to keep your savings in a money market or savings account and you deposit your paycheck into a checking account. However, I do have one reason from my experience to keep the bulk of your savings away from accounts that you transfer stuff out of. I used to keep all my cash savings in an account from which I transferred money into my brokerage account (my paycheck was also deposited there). A couple of years back a state that I haven't lived in since I was a child took $40,000 out of my account. The broker mistakenly told the state I lived there and the state made some mistakes about how much tax I would owe. Without either one telling me, the state helped themselves to my checking account to cover the bill. When I called, both acknowledged that they were wrong, but it still took a long time (many months) and lots of letters and threats (I was close to paying a lawyer) before they returned my money. It was worse because this was my savings for a down payment on a home and having it taken and not returned affected my ability to buy the house I wanted. If I hadn't had my money in that account, they would have tried to garnish my wages, and would have immediately stopped their attempt once they found out they were in the wrong. Now I keep cash savings in an account that I never pay taxes out of and do not use to transfer money directly to any broker or anyone who might give my account number to an inept government. |
How much accounting knowledge is needed to read financial statements of publicly traded companies? | From my experience you don't need knowledge of accounting to pick good stocks. The type of investing you are referring to is fundamental. This is finding out about the company, this websites should help you start off: http://en.tradehero.mobi/how-to-choose-a-stock-fundamental-analysis/ Investopedia will also be a useful website in techniques. A bit of knowledge in economics will be helpful in understanding how current affairs will affect a market, which will affect stock prices. However you need neither economics or accounting knowledge if you were to learn technical analysis, many doubt the workings of this technique, but in my experience it is easier to learn and practise. For example looking at charts from previous years it shows the last time there was a huge recession the dollar did well and commodities didn't. In this recession we are entering you can see the same thing happening. Read about the different techniques before limiting yourself to just looking at financial statements you may find a better technique suited to you, like these technical analysts: http://etfhq.com/blog/2013/03/02/top-technical-analysts/ Hope this helps. |
Selling mutual fund and buying equivalent ETF: Can I 1031 exchange? | You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF. |
How to shop for mortgage rates ? | You can shop for a mortgage rate without actually submitting a mortgage application. Unfortunately, the U.S. Government has made it illegal for the banks to give you a "good faith estimate" of the mortgage cost and terms without submitting a mortgage application. On the other hand, government regulations make the "good faith estimates" somewhat misleading. (For one thing, they rarely are good for estimating how much money you will need to "bring to the closing table".) My understanding is that in the United States, multiple credit checks within a two-week period while shopping for a mortgage are combined to ding your credit rating only once. You need the following information to shop for a mortgage: A realistic "appraisal value". Unless your market is going up quickly, a fair purchase price is usually close enough. Your expected loan amount (which you or a banker can estimate based on your down payment and likely closing costs). Your middle credit score, for purposes of mortgage applications. (If you have a co-borrower, such as a spouse, many banks use the lower of the two persons' middle credit score). The annual property tax cost for the property, taking into account the new purchase price. The annual cost of homeowners' insurance. The annual cost of homeowners' association dues. Your minimum monthly payments on all debt. Banks tend to round up the minimum payments. Also, banks care whether any of that debt is secured by real estate. Your monthly income. Banks usually include just the amount for which you can show that you are currently in the job, with regular paychecks and tax withholding, and that you have been in similar jobs (or training for such jobs) for the last two full years. Banks usually subtract out any business losses that show up on tax returns. There are special rules for alimony and child support payments. The loan terms you want, such as a 15-year fixed rate or 30-year fixed rate. The amount of points you are willing to pay. Many banks are willing to lower your "note rate" by 0.125% if you pay 0.5% up-front. The pros and cons of paying points is a good topic for another question. Whether you want a so-called "no-fee" or "no-closing cost" loan. These loans cost less up-front, but have a higher "note rate". Unless you ask for a "no-fee" or "no-closing cost" loan, most banks have similar charges for things like: So the big differences are usually in: As discussed above, you can come up with a simple number for (roughly) comparing fixed-rate mortgage loan offers. Take the loan origination (and similar) fees, and divide them by the loan amount. Divide that percentage by 4. Add that percentage to the "note rate" for a loan with "no points". Use that last adjusted note rate to compare offers. (This method works because you have the choice of using up-front savings to pay "points" to lower the "note rate".) Notice that once you have your middle credit score, you can ask other lenders to estimate the information above without actually submitting another loan application. Because the mortgage market fluctuates, you should compare rates on the same morning of the same day. You might want to check with three lenders, to see if your real estate agent's friend is competitive: |
Should I get a personal loan to pay on my mortgage to go “above water” to qualify for a refinance? | If you have a mortgage backed by FHA, Fannie, or Freddie I would hold off. There is talk of a new plan that would allow refi's on mortages that were underwater. I would expect rates to stay about the same for the forseeable future. Take that money you would spend each month on the personal loan and stick it into your mortgage payment to bring down your debt on it. Your home may be underwater on paper but once the economy comes back, or hyperinflation sets in (one of the 2 will happen) you will have equity in your home again soon after. |
Hiring freelancers and taxes | You need to clarify with Bob what your agreement is. If you and Bob are working together on these jobs as partners, you should get a written partnership agreement done by a lawyer who works with software industry entity formation. You can legally be considered a partnership if you are operating a business together, even if there is nothing in writing. The partnership will have its own tax return, and you each will be allocated 50% of the profits/losses (if that's what you agree to). This amount will be reported on your own individual 1040 as self-employment income. Since you have now lost all the expense deductions you would have taken on your Schedule C, and any home office deduction, it's a good idea to put language in the partnership agreement stating that the partnership will reimburse partners for their out-of-pocket expenses. If Bob is just hiring you as a contractor, you give him your SSN, and he issues you a 1099, like any other client. This should be a situation where you invoice him for the amount you are charging. Same thing with Joe - figure out if you're hiring him as an independent contractor, or if you have a partnership. Either way, you will owe income and self-employment tax on your profits. In the case of a partnership, the amount will be on the K-1 from the partnership return. For an independent contractor who's operating as a sole proprietor, you report the income you invoiced for and received, and deduct your expenses, including independent contractors that you hired, on your Schedule C. Talk to your tax guy about quarterly estimated payments. If you don't have a tax guy, go get one. Find somebody people in your city working in your industry recommend. A good tax person will save you more money than they cost. IRS Circular 230 Notice: Please note that any tax advice contained in this communication is not intended to be used, and cannot be used, by anyone to avoid penalties that may be imposed under federal tax law. |
Where I am I liable for taxes? | You will have to pay your taxes in the UK not USA. For tax purposes it is the company's tax residency not where the server is located. You are just hiring a server in USA. Take for example a CDN being used for your same service then would you pay taxes in 300 different countries if you use Akamai? Does not work that way. |
Are stock index fund likely to keep being a reliable long-term investment option? | Stock index funds are likely, but not certainly, to be a good long-term investment. In countries other than the USA, there have been 30+ year periods where stocks either underperformed compared to bonds, or even lost value in absolute terms. This suggests that it may be an overgeneralization to assume that they always do well in the long term. Furthermore, it may suggest that they are persistently overvalued for the risk, and perhaps due for a long-term correction. (If everybody assumes they're safe, the equity risk premium is likely to be eaten up.) Putting all of your money into them would, for most people, be taking an unnecessary risk. You should cover some other asset classes too. If stocks do very well, a portfolio with some allocation to more stable assets will still do fairly well. If they crash, a portfolio with less risky assets will have a better chance of being at least adequate. |
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