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How much money should I lock up in my savings account? | Lets imagine two scenarios: 1) You make 10.4k (40% of total income) yearly contributions to a savings account that earns 1% interest for 10 years. In this scenario, you put in 104k and earned 5.89k in interest, for a total of 109.9k. 2) You make the same 10.4k yearly contribution to an index fund that earns 7% on average for 10 years. In this scenario you put in the same 104k, but earned 49.7k in interest*, for a total of 153.7k. The main advantage is option 1) has more liquidity -- you can get the money out faster. Option 2) requires time to divest any stocks / bonds. So you need enough savings to get you through that divestment period. Imagine another two scenarios where you stop earning income: 1-b) You stop working and have only your 109.9k principal amount in a 1% savings account. If you withdraw 15.6k yearly for your current cost of living, you will run through your savings in 7 years. 2-b) You stop working and have only 20k (2 years of savings) in savings that earns 1% with 153.7k in stocks that earns 7%. If you withdraw your cost of living currently at 15.6k, you will run through your investments in 15 years and your savings in 2 years, for a total of 17 years. The two years of income in savings is extremely generous for how long it starts the divestment process. In summary, invest your money. It wasn't specified what currency we are talking about, but you can easily find access to an investment company no matter where you are in the world. Keep a small amount for a rainy day. |
Using a Roth IRA instead of a college savings account | One problem with this plan is that the individual must have earned income to contribute to a Roth IRA. If you have an infant, unless she is the new Gerber baby or something like that, there is probably no legitimate way for her to earn income. If you own a business and have kids who are older, you can employ them to do work for you, but they must really do work and earn around the market rate for that work. Otherwise, it is unlikely that they will be able to earn enough to fund an IRA until they are teenagers. When they are old enough to work, you can "match" their earnings by contributing the same amount to a Roth IRA on their behalf, but this will not give you the amount of contributions and growth time that you were counting on. |
What are the best software tools for personal finance? | For iPhone: iExpenseIt |
Will depositing $10k+ checks each month raise red flags with the IRS? | I do not think banks have an obligation to report any deposits to the IRS, however, they probably have an obligation to report deposits exceeding certain threshold amounts to FinCEN. At least that's how it works in Canada, and we're known to model our Big Brother-style activities after our neighbour to the South. |
Is there any reason not to put a 35% down payment on a car? | I somewhat agree to Alex B's post. I was a finance manager for 7 years both prime and sub-prime(special)(in other words bad). The parts he's 100% right on. Hit up you local credit union then your bank. Get your financing done first if you can. Now 690 credit score is one of 3 bureaus, not all banks and lending institutions use all three or the same one. Also the score isn't everything. That could be good or bad. The 2-3% range is normally for the 720+ crowd unless its a manufacture. (GM, Ford, so on) With rates capping out at around 30% depending on state laws. However 690 should not be 19% on a new or late model car. At 690 at 19% you would have be going for a 70,000+ mile 6 year or older car if I had to guess. Assuming you have no BK's and repos. Some times dealerships have to pay banks to get people financed. Its hidden in the cost and they by law are not allowed to tell you about it because it cannot be passed on to you. However the banks don't just fund any crazy amount of money either say like 115% of book and that it. That is where and why they want that big down payment because that is used to off set the finance amount and what you pay. Making the dealership money. and i can go on and on and on... But you should always try to get the funding prior. Your credit union won't charge the hidden fees and they only care about your down payment to see that you are making a commitment. If you are buying used. Save out 1500 for future repairs and tires and such. Don't buy paint protectant and such. If you finance thru the dealership and put less than 20% down DO buy Gap Insurance but thats it. I can go on and on but I won't. Feel free to ask though. And to answer your original only question with not context. "Is there any reason not to put a 35% down payment on a car?" Yes if the money is better served paying off credit cards or long term mortgage, assuming you don't need the write off. |
Why would you elect to apply a refund to next year's tax bill? | Aside from the fear that you or a loved one will spend it frivolously, I'm hard pressed to come up with another reason. If you'll owe money in the next tax year, you have the rest of the year to adjust your withholdings and/or make quarterly payments. As both my fellow PFers state, you're better off getting your money back. Better still, use it to pay off a high interest debt. |
What ways are there for us to earn a little extra side money? | For your girlfriend (congrats to you both on the coming new baby!), full-time mothers often become work-at-home moms using skills that they may have utilized in the outside-the-home workforce before they made the decision to stay home. Etsy can be a place where some do this, but there are many articles out there pointing out that it also doesn't work for many people. I tried to earn some side money there and didn't make a dime. For those with a niche product, though, it can really work. A book on working at home as a mother (from a Christian perspective with specifically religious overtones, so not the right book for someone who would not appreciate that aspect) is Hired @ Home. There are secular resources, such as the website Work From Home. From everything I've ever heard in researching the topic of becoming a WAHM (work at home mother), it's a challenging but rewarding lifestyle. Note that according to one WAHM I know, only contract work is reliable enough to be depended on for family obligations (this is true of any part time work). Freelancing will have so many ups and downs that you can't bank on it to, say, pay the mortgage unless you really get going. Ramit Sethi of I Will Teach You To Be Rich focuses a lot on Earning More Money with ideas that might benefit both of you. His angle is that of working on top of an existing job, so it may specifically help you think of how to take your programming skills (or a hobby you have besides programming) and translate them into a career. |
Entering the stock market in a poor economy | If you have a long enough time horizon, investing in the stock market while in a bad economy can turn out to be a very smart decision. If you need access to your capital in the short-term, 1-2 years, then it is probably a bad decision. If you have the ability to ride out the next few years, then you may be buying securities at an extremely low valuation. Take AAPL and MSFT for example. These are both technology stocks, which is by far the hottest sector in the economy now, and you can buy both of these companies for less than 13x earnings. Historically, you would have had to pay 20x or higher for high tech growth companies, but today you can buy these stocks at discounted valuations. Now AAPL may have a large market capitalization and a high stock price, but the simple fact is they are growing their earnings very quickly, they have best in class management, and they have $100 billion in cash and $50 billion in annual cash flow generation and you can buy the stock for a historically low multiple. |
What happens if a company you hold short merges with another company? | I don't have anything definitive, but in general positions in a company are not affected materially by what is called a corporate action. "Corp Actions" can really be anything that affects the details of a stock. Common examples are a ticker change, or exchange change, IPO (ie a new ticker), doing a split, or merging with another ticker. All of these events do not change the total value of people's positions. If a stock splits, you might have more shares, but they are worth less per share. A merger is quite similar to a split. The old company's stock is converted two the new companies stock at some ratio (ie 10 shares become 1 share) and then converted 1-to-1 to the new symbol. Shorting a stock that splits is no different. You shorted 10 shares, but after the split those are now 100 shares, when you exit the position you have to deliver back 100 "new" shares, though dollar-for-dollar they are the same total value. I don't see why a merger would affect your short position. The only difference is you are now shorting a different company, so when you exit the position you'll have to deliver shares of the new company back to the brokerage where you "borrowed" the shares you shorted. |
What is Fibonacci values? | This is how I've understood this concept. Fibonacci nos/levels/ratios/%s is based on concept of sequential increment. You may find lot of info about Fibonacci on net. In stock market this concept is used to predict psychological level. While a trend is form, usually price tend to accumulate/consolidate at these level. How the percentage/ ratio make impact is - check any long trend...Now draw a fibbo retracement from immediate previous high and connect it's low. You will see new levels of intermediate trend. In broader term you will find after reversal a leg (trend) is formed, then body and then head which is smaller; then price reverses. The first leg that forms if it refuses to break 23.6% or 38.2% then the previous trend may continue. 50% is normal; usually this level is indecision phase. Even 61.8% is seen as indecision but it is crucial level as it is breakout level towards 100%. Now if the stock retraces 100% then it is sign a new big trend is forming. Now for day trader 23.6%,38.2% and 50% level are very crucial from trading purpose. This concept is so realistic that every level is considered and respected. Suppose if a candle or bar starts at 23.6% level and crosses 38.2% and directly hits 50%. Then the next bar or candle will revert and first hit 38.2% and then continue with the trend. It means price comes back, forms it area at this level and then continue whichever direction the force directs it. You never trade fibo alone, you need help of oscillators or other tools to confirm it. |
What are the best software tools for personal finance? | http://www.Mvelopes.com Mvelopes is envelope-style budgeting in an online application. I've tried all of the other applications and I choose to pay for this one for the following reasons: |
Are social media accounts (e.g. YouTube, Twitter, Instagram, etc.) considered assets? | The buyer of such an account is likely treating it as an asset, and if they ever resell it capital gains (or loss) would be realized. I don't see why this would be any different for the person that created the account initially, except that the basis starts at $0 making the entire sale price taxable. How you figure the value of the account before the initial sale would be more difficult, but fortunately you may not ever need to know the value (for tax purposes) until you actually sell it. |
Formula to determine readiness to retire based on age, networth and annual expense | The standard interpretation of "can I afford to retire" is "can I live on just the income from my savings, never touching the principal." To estimate that, you need to make reasonable guesses about the return you expect, the rate of inflation, your real costs -- remember to allow for medical emergencies, major house repairs, and the like when determining you average needs, not to mention taxes if this isn't all tax-sheltered! -- and then build in a safety factor. You said liquid assets, and that's correct; you don't want to be forced into a reverse mortgage by anything short of a disaster. An old rule of thumb was that -- properly invested -- you could expect about 4% real return after subtracting inflation. That may or may not still be correct, but it makes an easy starting point. If we take your number of $50k/year (today's dollars) and assume you've included all the tax and contingency amounts, that means your nest egg needs to be 50k/.04, or $1,250,000. (I'm figuring I need at least $1.8M liquid assets to retire.) The $1.5M you gave would, under this set of assumptions, allow drawing up to $60k/year, which gives you some hope that your holdings would mot just maintain themselves but grow, giving you additional buffer against emergencies later. Having said that: some folks have suggested that, given what the market is currently doing, it might be wiser to assume smaller average returns. Or you may make different assumptions about inflation, or want a larger emergency buffer. That's all judgement calls, based on your best guesses about the economy in general and your investments in particular. A good financial advisor (not a broker) will have access to better tools for exploring this, using techniques like monte-carlo simulation to try to estimate both best and worst cases, and can thus give you a somewhat more reliable answer than this rule-of-thumb approach. But that's still probabilities, not promises. Another way to test it: Find out how much an insurance company would want as the price of an open-ended inflation-adjusted $50k-a-year annuity. Making these estimates is their business; if they can't make a good guess, nobody can. Admittedly they're also factoring the odds of your dying early into the mix, but on the other hand they're also planning on making a profit from the deal, so their number might be a reasonable one for "self-insuring" too. Or might not. Or you might decide that it's worth buying an annuity for part or all of this, paying them to absorb the risk. In the end, "ya pays yer money and takes yer cherce." |
Advice on preserving wealth in a volatile economic/political country | US Treasury securities are the safest investment. You can buy short term by buying T-Bills. You buy T-bills at a discount to face. For example, to buy a four week T-bill the treasury will take $99.98 out of your account. In four weeks the treasury will deposit $100 into your account. The $0.02 difference is your Intrest on the loan. Compounded over a year (13 four week periods) you get a 0.24% interest. But (presumably) more importantly (to you) you get your original $99.98 back. Your government cannot nationalize money that you have on loan to the United States Government. Edit : oops, I dropped a decimal position in my original calculation of compounded rate of interest. It is now corrected. |
Why should one only contribute up to the employer's match in a 401(k)? | The matching funds are free money, so it is a very good idea to take that money off the table. Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k). (Obviously, I'm keeping things simple. Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k). Typically, your options are more limited then in an IRA. The cost of the 401(k) should be considered, as it isn't trivial for most. (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs. Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds. Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture. This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts. Specific to your question, you have to consider the various types of investment vehicles available to you. It is not just about 401(k) and IRA accounts. You may also consider a straight brokerage account, a savings account, CDs, etc. The costs and returns that you can typically expect are your guides through the available choices. |
Should you always max out contributions to your 401k? | My observations is that this seems like hardly enough to kill inflation. Is he right? Or are there better ways to invest? The tax deferral part of the equation isn't what dominates regarding whether your 401k beats 30 years of inflation; it is the return on investment. If your 401k account tanks due to a prolonged market crash just as you retire, then you might have been better off stashing the money in the bank. Remember, 401k money at now + 30 years is not a guaranteed return (though many speak as though it were). There is also the question as to whether fees will eat up some of your return and whether the funds your 401k invests in are good ones. I'm uneasy with the autopilot nature of the typical 401k non-strategy; it's too much the standard thing to do in the U.S., it's too unconscious, and strikes me as Ponzi-like. It has been a winning strategy for some already, sure, and maybe it will work for the next 30-100 years or more. I just don't know. There are also changes in policy or other unknowns that 30 years will bring, so it takes faith I don't have to lock away a large chunk of my savings in something I can't touch without hassle and penalty until then. For that reason, I have contributed very little to my 403b previously, contribute nothing now (though employer does, automatically. I have no match.) and have built up a sizable cash savings, some of which may be used to start a business or buy a house with a small or no mortgage (thereby guaranteeing at least not paying mortgage interest). I am open to changing my mind about all this, but am glad I've been able to at least save a chunk to give me some options that I can exercise in the next 5-10 years if I want, instead of having to wait 25 or more. |
How to gift money anonymously to an individual after collection thru a donation site? | You mention that "A great friend and couple's family" which makes me think this is a couple. For gift tax concerns, you can give a couple 2 x the gift tax exemption ($28,000 in 2015). Your example of $22k would fit in this amount. To give this money anonymously, I know that people have reached out to a pastor in the area who will deliver an envelope with the gift and not disclose the source. Talking to a pastor who has done this, he said the call came out of the blue and he was happy to be able to help. |
Exercise a put option when shorting is not possible | You are the one lending yourself the shares to sell;you purchase the stock at market price and sell at the strike price of the option to the put seller when you exercise the option. |
Cashing a cheque on behalf of someone else | It's possible to cash cheques by post. When I did this, it involved filling out a "paying-in slip" (I had a book of these provided by the bank) and posting the cheque together with the slip to an address provided by the bank. You could also bring the paying-in slip and the cheque to a branch and deposit them there, and it wasn't necessary that you were the account holder, just that the details on the slip matched the account you were paying into. I Googled "paying-in slip" and found the instructions for HSBC as an example: Paying-In Slips. It explicitly mentions that you don't need to be the account holder to do this, and moreover there are even blank slips in the branch, which you just need to fill in with the correct account details. I think the procedure is much the same for other banks, but presumably you could check the relevant bank's website for specific guidance. |
How can I determine how much my car insurance will cost me? | Don't be afraid to shop around. Every couple of years when it's time to renew my auto insurance I call a couple of places to see if I can get a better deal. It's especially important to do this as you get older (because your rates go down assuming you keep a clean driving record). Also as your life changes, e.g. if you get married, move, buy a home, get a new car, etc. At 30 my rates dropped a lot. When I bought a home, I qualified for a discount by combining my home and auto insurance through the same carrier. My suggestion would be to call 3 insurance companies for quotes, all on the same day. You'll need to be able to identify the car you'll be insuring for the most accurate quote. Do you belong to any organizations that offer insurance discounts? (E.g. my college alumni association had a program with one of the larger carriers that had the best rates on auto+home that I could find.) |
Where does the stock go in a collapse? | If we can agree that 2010 was closer to the low of 2009 than 2007 then the rich did all the buying while the super-rich did all the selling. http://www2.ucsc.edu/whorulesamerica/power/wealth.html Looks like the rich cleaned up during the Tech Crash too, but it looks like the poor lost faith. That limited data makes it look like the best investors are the rich. Market makers are only required by the exchanges to provide liquidity, bids & asks. They aren't required to buy endlessly. In fact, market makers (at least the ones who survive the busts) try to never have a stake in direction. They do this by holding equal inventories of long and shorts. They are actually the only people legally allowed to naked short stock: sell without securing shares to borrow. All us peons must secure borrowed shares before selling short. Also, firms involved in the actual workings of the market like bookies but unlike us peons who make the bets play by different margin rules. They're allowed to lever through the roof because they take on low risk or near riskless trades and "positions" (your broker, clearing agent, etc actually directly "own" your financial assets and borrow & lend them like a bank). http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p004001.pdf This is why market makers can be assumed not to load up on shares during a decline; they simply drop the bids & asks as their bids are hit. |
How did this day trader lose so much? | The day trader in the article was engaging in short selling. Short selling is a technique used to profit when a stock goes down. The investor borrows shares of a stock from someone else and sells them. After the stock price goes down, the investor buys the shares back and returns them, pocketing the difference. As the day trader in the article found out, it is a dangerous practice, because there is no limit to the amount of money you can lose. The stock was trading at $2, and the day trader thought the stock was going to go down to $1. He borrowed and sold 8,400 shares at $2. He hoped to buy them back at $1 and earn $8,400 profit. Instead, the stock went up a lot, and he was forced to buy back the shares at $18.50 per share, or about $155,400. He had had $37,000 with E-Trade, which they took, and he is now over $100,000 in debt. |
How do you determine “excess cash” for Enterprise Value calculations from a balance sheet? | You're not missing anything. Excess cash is somewhat of a nebulous concept. To different people it means different things. The answer is that excess cash varies for each company depending on their business. For instance, some companies need very high amounts of working capital. A company may be increasing their inventories and therefore will require more cash on their balance sheet to fund growth. If a company always needs this extra cash, some investors prefer to leave that cash out of a valuation because the company cannot run profitably without it. Think about what happens to your calculation of Enterprise Value if you subtract excess cash as opposed to cash. Excess cash is always less than cash. Therefore by subtracting excess cash you increase EV. Since one common valuation metric is EV/EBITDA, a higher numerator will make the stock seem more expensive - that is the EV/EBITDA ratio will seem higher when using excess cash as opposed to cash. So using excess cash in your valuation methodology is basically a conservative concept. Depending on the business 20% of revenues seem way too high as a reserve for excess cash. 2% is a much better rule of thumb. |
Who creates money? Central banks or commercial banks? | A central bank typically introduces new money into the system by printing new money to purchase items from member banks. The central bank can purchase whatever it chooses. It typically purchases government bonds but the Federal Reserve purchased mortgage-backed-securities (MBS) during the 2008 panic since the FED was the only one willing to pay full price for MBS after the crash of 2008. The bank, upon receipt of the new money, can loan the money out. A minimum reserve ratio specifies how much money the bank has to keep on hand. A reserve ratio of 10% means the bank must have $10 for every $100 in loans. As an example, let's say the FED prints up some new money to purchase some office desks from a member bank. It prints $10,000 to purchase some desks. The bank receives $10,000. It can create up to $100,000 in loans without exceeding the 10% minimum reserve ratio requirement. How would it do so? A customer would come to the bank asking for a $100,000 loan. The bank would create an account for the customer and credit $100,000 to the customer's account. There is a problem, however. The customer borrowed the money to buy a boat so the customer writes a check for $100,000 to the boat company. The boat company attempts to deposit the $100,000 check into the boat company's bank. The boat company's bank will ask the originating bank for $100,000 in cash. The originating bank only has $10,000 in cash on hand so this demand will immediately bankrupt the originating bank. So what actually happens? The originating bank actually only loans out reserves * (1 - minimum reserve ratio) so it can meet demands for the loans it originates. In our example the bank that received the initial $10,000 from the FED will only loan out $10,000 * (1-0.1) = $9,000. This allows the bank to cover checks written by the person who borrowed the $9,000. The reserve ratio for the bank is now $1,000/$9,000 which is 11% and is over the minimum reserve requirement. The borrower makes a purchase with the borrowed $9,000 and the seller deposits the $9,000 in his bank. The bank that receives that $9,000 now has an additional $9,000 in reserves which it will use to create loans of $9,000 * (1 - 0.1) = $8100. This continual fractional reserve money creation process will continue across the entire banking system resulting in $100,000 of new money created from $10,000. This process is explained very well here. |
Basic mutual fund investment questions | In summary, you are correct that the goal of investing is to maximize returns, while paying low management fees. Index investing has become very popular because of the low fees. There are many actively traded mutual funds out there with very high management fees of 2.5% and up that do not beat the market. This begs the question of why you are paying high management fees and not just investing in index funds. Consider maxing out your tax sheltered accounts (401(k) and ROTH IRA) to avoid even more fees on your returns. Also consider having a growth component of your portfolio which is generally filled with equity, along with a secure component for assets such as bonds. Bonds may not have the exciting returns of equity, but they help to smooth out the volatility of your portfolio, which may help to keep peace of mind when the market dips. |
Should I finance a new home theater at 0% even though I have the cash for it? | Debt creates risk. The more debt you take on, the higher your risk. What happens if you lose your job, miss a payment, or forget to write the final payment check for the exact amount needed, and are left with a balance of $1 (meaning the back-dated interest would be applied)? There is too much risk for little reward? If you paid monthly at 0% and put your money in your savings account like you mentioned, how much interest would you really accrue? Probably not much, since savings account rates suck right now. If you can pay cash for it now, do it. So pay cash now and own it outright. Why prolong it? Is there something looming in the future that you think will require your money? If so, I would put off the purchase. No one can predict the future. Why not pay cash for it now, and pay yourself what would have been the monthly payment? In three years, you have your money back. And there is no risk at all. Also, when making large purchases with cash, you can sometimes get better discounts if you ask. |
Why would anyone want to pay off their debts in a way other than “highest interest” first? | Very good Ben, in a more simplistic form: If debt was about math only, we would not have payday lenders, 21% + credit cards, or sub-prime car loans. Yet these things are prevalent. Debt reduction is often about behavior modification. As such small wins are necessary to keep going much like a 12 step program; or, gamification as Ben pointed out. The funny thing is that if a person becomes and stays intense on a debt reduction program, interest rate "inefficiency" is dwarfed by extra income or increased austerity. |
Should I pay off a 0% car loan? | Mostly to play devil's advocate, I will recommend something different than everybody else. If you can pay off the entire $3,000 balance and are torn between saving that money somewhere that will earn a return and paying it off now to be debt-free, why not a little of both? What if you pay half now and then save the other half and make a big payment at the end. Essentially that becomes two $1,500 payments: one now, one right before the 0% due date. To me, the half up-front significantly reduces the risk, but leaves some cash available to grow. |
Why is a stock dividend considered a dividend? What makes it different from a stock split? | The key difference I've found between a stock split and a stock dividend – of the exact same stock and class, as opposed to a spin-off – seems to be from the company's own accounting perspective. There doesn't appear to be any actual transfer of value to the shareholder with either kind of transaction; i.e. in theory, each transaction would be immaterial to the value of your holdings. With respect to the company's accounting, a stock split affects the par value of the shares, whereas a stock dividend reduces the retained earnings account in order to increase paid-in or contributed capital. I found a good online source which explains the history behind this accounting difference: McGraw-Hill - Intermediate Accounting eBook, 6/e - Chapter 18 - Stock Dividends and Splits. Small quote: [...] Besides being based on fallacious reasoning, accounting for stock dividends by artificially reclassifying “earned” capital as “invested” capital conflicts with the reporting objective of reporting shareholders' equity by source. Despite these limitations, this outdated accounting standard still applies. Since neither the corporation nor its shareholders apparently benefits from stock dividends, why do companies declare them?23 Occasionally, a company tries to give shareholders the illusion that they are receiving a real dividend. Another reason is merely to enable the corporation to take advantage of the accepted accounting practice of capitalizing retained earnings. Specifically, a company might wish to reduce an existing balance in retained earnings—otherwise available for cash dividends—so it can reinvest the earned assets represented by that balance without carrying a large balance in retained earnings. [...] There's a lot more on that page, before and after, worth reading. From another book: Google Books - Comparative Income Taxation, a Structural Analysis - page 314 - Stock Dividends. Small quote: The distribution of dividends in the form of stock or "bonus" shares to existing shareholders typically involves a transfer for corporate law purposes of retained earnings into stated capital. It can been [sic] viewed as a deemed distribution of a cash dividend to the shareholders followed by a corresponding contribution to capital or as solely as an event at the corporate level which has no effect on the shareholders whose economic interest in the corporation is unchanged by the receipt of additional shares. The systems have taken varied approaches to the stock dividend problem. The treatment is in part a function of the rules dealing with distributions of stated capital. [emphases above are mine] [... continues w/descriptions of different countries' tax treatments of the kinds of stock dividends. Includes U.S., Sweden, Japan, Netherlands, Canada, Australia, U.K., France, Germany. ...] As far as why a corporation might want to capitalize earnings and reduce the equity otherwise available for dividends, I can only imagine that, ignoring taxes for a moment, that it may have something to do with capital ratios that need to be maintained for financing or regulatory purposes? Yet, I remain curious. If I discover more on this then I'll update my answer. Additional resources: |
Foreign Earned Income Exclusion - Service vs. Product? | Even though you will meet the physical presence test, you cannot claim the FEIE because your tax home will remain the US. From the IRS: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a "tax home" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. ... You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. ... The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. If your new work assignment is for an indefinite period, your new place of employment becomes your tax home, and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite. If you expect your employment to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. For guidance on how to determine your tax home refer to Revenue Ruling 93-86. Your main place of business is in the US and this will not change, because your business isn't relocating. If you are intending to work remotely while you are abroad, you should get educated on the relevant laws on where you are going. Most countries don't take kindly to unauthorized work being performed by foreign visitors. And yes, even though you aren't generating income or involving anyone in their country, the authorities still well may disapprove of your working. My answer to a very similar question on Expatriates. |
In the stock market, why is the “open” price value never the same as previous day's “close”? | A stock is only worth what someone is willing to pay for it. If it trades different values on different days, that means someone was willing to pay a higher price OR someone was willing to sell at a lower price. There is no rule to prevent a stock from trading at $10 and then $100 the very next trade... or $1 the very next trade. (Though exchanges or regulators may halt trading, cancel trades, or impose limits on large price movements as they deem necessary, but this is beside the point I'm trying to illustrate). Asking what happens from the close of one day to the open of the next is like asking what happens from one trade to the next trade... someone simply decided to sell or pay a different price. Nothing needs to have happened in between. |
200K 10-Year Investment Safest 5% Annual Return? | I don't think there exists a guaranteed 5% investment vehicle. You have to decide how much risk you're willing to take. Splitting your $200k between CD's and stocks (or whatever higher yield investment vehicle you've found) is a way to get a higher rate without risking it all. For example if you've got a CD at 3%, and let's say best case is 10% average annual return on stocks, after 10 years here are potential results using various splits from 100% CD to 100% stock: The best case based on 10% average stock return and 3% CD return is the Total line for each split, the worst-case would be the CD amount only. Reality could be almost anywhere, but not below the CD amount. |
On what time scales are stock support and resistance levels meaningful? | Support and resistance only works as a self-fulfilling prophecy. If everyone trading that stock agrees there's a resistance at so-and-so level, and it is on such-and-such scale, then they will trade accordingly and there will really be a support or resistance. So while you can identify them at any time scale (although as a rule the time scale on which you observed them should be similar to the time scale on which you intend to use them), it's no matter unless that's what all the other traders are thinking as well. Especially if there are multiple possible S/P levels for different time scales, there will be no consensus, and the whole system will break down as one cohort ruins the other group's S/P by not playing along and vice versa. But often fundamentals are expected to dominate in the long run, so if you are thinking of trades longer than a year, support and resistance will likely become meaningless regardless. It's not like that many people can hold the same idea for that long anyhow. |
Should I always hold short term bonds till maturity? | Risk is reduced but isn't zero The default risk is still there, the issuer can go bankrupt, and you can still loose all or some of your money if restructuring happens. If the bond has a callable option, the issuer can retire them if conditions are favourable for the issuer, you can still loose some of your investment. Callable schedule should be in the bond issuer's prospectus while issuing the bond. If the issuer is in a different country, that brings along a lot of headaches of recovering your money if something goes bad i.e. forex rates can go up and down. YTM, when the bond was bought was greater than risk free rate(govt deposit rates) Has to be greater than the risk free rate, because of the extra risk you are taking. Reinvestment risk is less because of the short term involved(I am assuming 2-3 years at max), but you should also look at the coupon rate of your bond, if it isn't a zero-coupon bond, and how you invest that. would it be ideal to hold the bond till maturity irrespective of price change It always depends on the current conditions. You cannot be sure that everything is fine, so it pays to be vigilant. Check the health of the issuer, any adverse circumstances, and the overall economy as a whole. As you intend to hold till maturity you should be more concerned about the serviceability of the bond by the issuer on maturity and till then. |
US tax - effectively connected income | ECI is relevant to non-resident aliens who are engaged in trade or business in the US. For that, you have to be present in the US, to begin with, or to own a business or property in the US. So the people to whom it is relevant are non-resident aliens in the US or business/property owners, not foreign contractors. From the IRS: The following categories of income are usually considered to be connected with a trade or business in the United States. You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an "F," "J," "M," or "Q" visa. The taxable part of any U.S. source scholarship or fellowship grant received by a nonimmigrant in "F," "J," "M," or "Q" status is treated as effectively connected with a trade or business in the United States. If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. You usually are engaged in a U.S. trade or business when you perform personal services in the United States. If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. Gains and losses from the sale or exchange of U.S. real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. You must treat the gain or loss as effectively connected with that trade or business. Income from the rental of real property may be treated as ECI if the taxpayer elects to do so. |
Insider trading in another company? | This information is clearly "material" (large impact) and "non-public" according to the statement of the problem. Also, decisions like United States v. Carpenter make it clear that you do not need to be a member of the company to do illegal insider trading on its stock. Importantly though, stackexchange is not a place for legal advice and this answer should not be construed as such. Legal/compliance at Company A would be a good place to start asking questions. |
Net loss not distributed by mutual funds to their shareholders? | When you invest (say $1000) in (say 100 shares) of a mutual fund at $10 per share, and the price of the shares changes, you do not have a capital gain or loss, and you do not have to declare anything to the IRS or make any entry on any line on Form 1040 or tell anyone else about it either. You can brag about it at parties if the share price has gone up, or weep bitter tears into your cocktail if the price has gone down, but the IRS not only does not care, but it will not let you deduct the paper loss or pay taxes on the paper gain. What you put down on Form 1040 Schedules B and D is precisely what the mutual fund will tell you on Form 1099-DIV (and Form 1099-B), no more, no less. If you did not report any of these amounts on your previous tax returns, you need to file amended tax returns, both Federal as well as State, A stock mutual fund invests in stocks and the fund manager may buy and sell some stocks during the course of the year. If he makes a profit, that money will be distributed to the share holders of the mutual fund. That money can be re-invested in more shares of the same mutual fund or taken as cash (and possibly invested in some other fund). This capital gain distribution is reported to you on Form 1099-DIV and you have to report sit on your tax return even if you re-invested in more share of the same mutual fund, and the amount of the distribution is taxable income to you. Similarly, if the stocks owned by the mutual fund pay dividends, those will be passed on to you as a dividend distribution and all the above still applies. You can choose to reinvest, etc, the amount will be reported to you on Form 1099-DIV, and you need to report it to the IRS and include it in your taxable income. If the mutual fund manager loses money in the buying and selling he will not tell you that he lost money but it will be visible as a reduction in the price of the shares. The loss will not be reported to you on Form 1099-DIV and you cannot do anything about it. Especially important, you cannot declare to the IRS that you have a loss and you cannot deduct the loss on your income tax returns that year. When you finally sell your shares in the mutual fund, you will have a gain or loss that you can pay taxes on or deduct. Say the mutual fund paid a dividend of $33 one year and you re-invested the money into the mutual fund, buying 3 shares at the then cost of $11 per share. You declare the $33 on your tax return that year and pay taxes on it. Two years later, you sell all 103 shares that you own for $10.50 per share. Your total investment was $1000 + $33 = $1033. You get $1081.50 from the fund, and you will owe taxes on $1081.50 - $1033 = $48.50. You have a profit of $50 on the 100 shares originally bought and a loss of $1.50 on the 3 shares bought for $11: the net result is a gain of $48.50. You do not pay taxes on $81.50 as the profit from your original $1000 investment; you pay taxes only on $48.50 (remember that you already paid taxes on the $33). The mutual fund will report on Form 1099-B that you sold 103 shares for $1081.50 and that you bought the 103 shares for an average price of $1033/103 = $10.029 per share. The difference is taxable income to you. If you sell the 103 shares for $9 per share (say), then you get $927 out of an investment of $1033 for a capital loss of $106. This will be reported to you on Form 1099-B and you will enter the amounts on Schedule D of Form 1040 as a capital loss. What you actually pay taxes on is the net capital gain, if any, after combining all your capital gains and losses for the year. If the net is a loss, you can deduct up to $3000 in a year, and carry the rest forward to later years to offset capital gains in later years. But, your unrealized capital gains or losses (those that occur because the mutual fund share price goes up and down like a yoyo while you grin or grit your teeth and hang on to your shares) are not reported or deducted or taxed anywhere. It is more complicated when you don't sell all the shares you own in the mutual fund or if you sell shares within one year of buying them, but let's stick to simple cases. |
Is there a standard check format in the USA? | No, there is no standard. I see all kinds of paper sizes, and the amount, date, etc. is all over the place. They are all rectangular, but otherwise there seems to be a lot of freedom. |
Options vs Stocks which is more profitable | More perspective on whether buying the stock ("going long") or options are better. My other answer gave tantalizing results for the option route, even though I made up the numbers; but indeed, if you know EXACTLY when a move is going to happen, assuming a "non-thin" and orderly option market on a stock, then a call (or put) will almost of necessity produce exaggerated returns. There are still many, many catches (e.g. what if the move happens 2 days from now and the option expires in 1) so a universal pronouncement cannot be made of which is better. Consider this, though - reputedly, a huge number of airline stock options were traded in the week before 9/11/2001. Perversely, the "investors" (presumably with the foreknowledge of the events that would happen in the next couple of days) could score tremendous profits because they knew EXACTLY when a big stock price movement would happen, and knew with some certainty just what direction it would go :( It's probably going to be very rare that you know exactly when a security will move a substantial amount (3% is substantial) and exactly when it will happen, unless you trade on inside knowledge (which might lead to a prison sentence). AAR, I hope this provides some perspective on the magnitude of results above, and recognizing that such a fantastic outcome is rather unlikely :) Then consider Jack's answer above (his and all of them are good). In the LONG run - unless one has a price prediction gift smarter than the market at large, or has special knowledge - his insurance remark is apt. |
What options do I have at 26 years old, with 1.2 million USD? | Buy a land and build a house. Then plant wine trees. Hire people after like 5 years and start to do and sell wine. A beautiful business :-) A second opation is to buy a houses in a city and rent rooms. |
How does a financial advisor choose debt funds and equity funds for us? | There are raters of stock and bond funds of which Morningstar's is the best. Standard and Poor's and Value line offer reports that aren't quite as good. If you are able to read and understand these reports yourself, you don't need a professional. Such help is necessary for people who are "rank beginners" in investments. |
Is there a Yahoo Finance ticker for NYMEX Crude Oil Front Month? | Yahoo Finance doesn't offer this functionality; I remember looking for this exact feature a couple of years ago for coffee futures. Your best option is to look at the futures chain. However, Yahoo Finance's future chains aren't always complete, since you'll notice that the futures chain for NYMEX crude oil omit the June contract. The contract still exists, but Yahoo doesn't list it in its own futures chain or in the future chain for May. |
Why would a bank take a lower all cash offer versus a higher offer via conventional lending? | @OP: It's all about risk. With a cash buyer the decision is left up to one person. With a financed buyer it adds another approval process (the lender). It's another opportunity for the deal to fall through. If the bank is the lender then there's even more risk. They've already taken back the property once and incurred cost and they're setting themselves up to do it all over again. The discount price can depend on a lot of factors. Maybe it's a bad area and they need to get rid of it. Maybe the appraisals for the area are low because of foreclosures and they know it will be hard for a Buyer to get a loan. Lots of reasons as to what price they'd take. @Shawn: Every deal has contingencies unless it's a foreclosure bought at auction. Even if you are getting a steal from the bank in terms of price you're always going to have an inspection period. If a Buyer doesn't need an inspection then he will just go to an auction and buy a property for an even cheaper price. |
Received a call to collect on a 17 year old, charged off debt. What do I do? | If they are a debt collector, they must follow the requirements of the Fair Debt Collection Practices Act. In particular, they must provide you with verification of the debt at your written request. If they won't give you a way to do this, they are in violation of the law, and you should contact proper authorities. If they are not a debt collection agency, it does sound like a scam, in which case you should also contact the appropriate law enforcement agency. |
15 year mortgage vs 30 year paid off in 15 | Besides the reason in @rhaskett's answer, it is important to consider that paying off a 30-year mortgage as if it was a 15-year is much more inconvenient than just paying the regular payments of a 15-year mortgage. When you pay extra on your mortgage, some lenders do not know what to do with the extra payment, and need to be told explicitly that the extra needs to be applied toward the principal. You might need to do this every month with every payment. In addition, some lenders won't allow you to set up an automatic payment for more than the mortgage payment, so you might need to explicitly submit your payment with instructions for the lender each month, and then follow up each month to make sure that your payment was credited properly. Some lenders are better about this type of thing than others, and you won't really know how much of a hassle it will be with your lender until you start making payments. If you intend to pay it off in 15 years, then just get the 15-year mortgage. |
Tax withheld by USA working in UK (Form 1042-S and Form 1099) | Why was I sent both 1042-S and 1099. Which amount is the right amount that has been withheld. Generally, each tax form you get will be about a separate income; for instance, you might get a 1099-DIV for dividends you earned from an investment and then a 1099-B for the profit or loss on selling that investment, in which case you'd report them both to the IRS. In this case, you've also had money withheld as a non-resident alien, which is why you've been issued a 1042-S. So you need to report both amounts to the IRS. |
How can it be possible that only ~10% of options expire worthless, and only ~10% are exercised? | Consider the futures market. Traders buy and sell gold futures, but very few contracts, relatively speaking, result in delivery. The contracts are sold, and "Open interest" dwindles to near zero most months as the final date approaches. The seller buys back his short position, the buyer sells off his longs. When I own a call, and am 'winning,' say the option that cost me $1 is now worth $2, I'd rather sell that option for even $1.95 than to buy 100 shares of a $148 stock. The punchline is that very few option buyers actually hope to own the stock in the end. Just like the futures, open interest falls as expiration approaches. |
Adding a 180 day expiration to checks | While you can print that on the check, it isn't considered legally binding. If you are concerned about a check not being deposited in a timely manner, consider purchasing a cashier's check instead. This doesn't solve the problem per se, but it transfers responsibility of tracking that check from you to the bank. |
Finance, Social Capital IPOA.U | (See also the question How many stocks I can exercise per stock warrant? and my comments there). Clearly, at the prices you quote, it does not seem sensible to exercise your warrants at the moment, since you can still by "units" (1 stock + 1/3 warrant) and bare stock at below the $11.50 it would cost you to exercise your warrant. So when would exercising a warrant become "a sensible thing to do"? Obviously, if the price of the bare stock (which you say is currently $10.12) were to sufficiently exceed $11.50, then it would clearly be worth exercising a warrant and immediately selling the stock you receive ("sufficiently exceed" to account for any dealing costs in selling the newly-acquired stock). However, looking more closely, $11.50 isn't the correct "cut-off" price. Consider three of the units you bought at $10.26 each. For $30.78 you received three shares of stock and one warrant. For an additional $11.50 ($42.28 in total) you can have a total of four shares of stock (at the equivalent of $10.57 each). So, if the price of the bare stock rises above $10.57, then it could become sensible to exercise one warrant and sell four shares of stock (again allowing a margin for the cost of selling the stock). The trading price of the original unit (1 stock + 1/3 warrant) shouldn't (I believe) directly affect your decision to exercise warrants, although it would be a factor in deciding whether to resell the units you've already got. As you say, if they are now trading at $10.72, then having bought them at $10.26 you would make a profit if sold. Curiously, unless I'm missing something, or the figures you quote are incorrect, the current price of the "unit" (1 stock + 1/3 warrant; $10.72) seems overpriced compared to the price of the bare stock ($10.12). Reversing the above calculation, if bare stock is trading at $10.12, then four shares would cost $40.48. Deducting the $11.50 cost-of-exercising, this would value three "combined units" at $28.98, or $9.66 each, which is considerably below the market price you quote. One reason the "unit" (1 stock + 1/3 warrant) is trading at $10.72 instead of $9.66 could be that the market believes the price of the bare share (currently $10.12) will eventually move towards or above $11.50. If that happens, the option of exercising warrants at $11.50 becomes more and more attractive. The premium presumably reflects this potential future benefit. Finally, "Surely I am misunderstand the stock IPO's intent.": presumably, the main intent of Social Capital was to raise as much money as possible through this IPO to fund their future activities. The "positive view" is that they expect this future activity to be profitable, and therefore the price of ordinary stock to go up (at least as far as, ideally way beyond) the $11.50 exercise price, and the offering of warrants will be seen as a "thank you" to those investors who took the risk of taking part in the IPO. A completely cynical view would be that they don't really care what happens to the stock price, but that "offering free stuff" (or what looks like "free stuff") will simply attract more "punters" to the IPO. In reality, the truth is probably somewhere between those two extremes. |
Owning REIT vs owning real estate - which has a better hypothetical ROI? | REIT's usually invest in larger properties (apartment complexes), individuals usually invest in small properties (single units, duplexes, fourplexes, etc). REIT's also invest in a lot of commercial properties - malls, commercial and business office buildings, etc. These are very different markets. Not to mention the risk spread, geographical spread, research, management and maintenance that someone has to do for REIT and it comes out of the earnings (while your own rentals you can manage yourself, if you want), etc. |
Why does short selling require borrowing? | In order to compare the two, you need to compare your entire portfolio, which is not just how much money you have, but how much stock. In both scenarios, you start with (at least, but let's assume) £20 and 0 stock. In your scenario, you buy 10 shares, leaving you with £0 and 10 shares. You then sell it at £1.50/share to cut your losses, leaving you with £15 and 0 shares. That concludes the first transaction with a net loss of £5. In a second transaction, you then buy 10 shares again at £1/share, leaving you with £5 and 10 shares. You are still down £15 from the start, but you also still have 10 shares. Any further profit or loss depends on what you can get for those 10 shares in the future. In a short sale, you borrow 10 shares and sell them, leaving you with £40 (your initial £20 plus what you just made on the short sale) and -10 shares of stock. At the end of the contract, you must buy 10 shares to return them; you are able to do so at £1.50/share, leaving you with £25 and 0 shares. At this point, your exposure to the stock is complete, and you have a net gain of £5. |
Could the loan officer deny me even if I have the money as a first time home buyer? | There are loan options for those in your situation. It is very common. I am a licensed loan officer nmls 1301324 and have done many loans just like this. Your schooling is counted as your work history Contrary to popular belief. We want to write loans and guidelines are easing. Banks are a different story and their loan officers aren't licensed. If you talk to a bank you aren't getting an educated loan officer. They also have what are called overlays that make guidelines stricter. |
Dealer Financing Fell Through on vehicle purchase: Scam? | There's a good explanation of this type of scam at the following link; It's known as a Spot-Delivery scam. https://www.carbuyingtips.com/top-10-scams/scam1.htm Also, I read this one a while back, and immediately this post reminded me of it: http://oppositelock.kinja.com/when-the-dealership-steals-back-the-car-they-just-sold-1636730607 Essentially, they claim you'll get one level of financing, let you take the car home, and then attempt to extort a higher financing APR out of you or request more money / higher payments. Check your purchasing agreement, it may have a note with something along the lines of 'Subject to financing approval' or something similar. If it does, you might be 'out of luck', as it were. Contact an attorney; in some cases (Such as the 'oppositelock.kinja.com' article above) consumers have been able to sue dealers for this as theft. |
What is your effective tax rate if you work from home in Montreal for a company in Toronto? | Assuming that you don't own the business, it would seem to apply. The CRA says: If you were a resident of Quebec on December 31, 2016, and you did not have a business with a permanent establishment outside Quebec, your refundable Quebec abatement is 16.5% of the basic federal tax on line 55 of Schedule 1. If you had income from a business (including income you received as a limited or non-active partner) and the business has a permanent establishment outside Quebec, or you were not a resident of Quebec on December 31, 2016, and the business has a permanent establishment in Quebec, use Form T2203, Provincial and Territorial Taxes for 2016 - Multiple Jurisdictions, to calculate your abatement. For people whose income isn't coming from businesses they own, this seems quite clear. |
How does a 2 year treasury note work? | Notes and Bonds sell at par (1.0). When rates go up, their value goes down. When rates go down, their value goes up. As an individual investor, you really don't have any business buying individual bonds unless you are holding them to maturity. Buy a short-duration bond fund or ETF. |
Little hazy on how the entire RSU's and etrade works | Is the remaining amount tax free? As in, if the amount shown (which I can sell) on etrade is $5000 then if I sell the entire shares will my bank account be increased by $5000? The stocks they sell are withholding. So let's say you had $7000 of stock and they sold $2000 for taxes. That leaves you with $5000. But the actual taxes paid might be more or less than $2000. They go in the same bucket as the rest of your withholding. If too much is withheld, you get a refund. Too little and you owe them. Way too little and you have to pay penalties. At the end of the year, you will show $7000 as income and $2000 as withheld for taxes from that transaction. You may also have a capital gain if the stock increases in price. They do not generally withhold on stock sales, as they don't necessarily know what was your gain and what was your loss. You usually have to handle that yourself. The main point that I wanted to make is that the sale is not tax free. It's just that you already had tax withheld. It may or may not be enough. |
Should I be worried that I won't be given a receipt if I pay with cash? | There are number of reasons why someone doesn't want to give you a receipt for cash payment. Anything ranging from not wanting to pay taxes, to being able to deny you gave them money for service in the event you're not happy with the service and ask for money back. You won't get in trouble for giving him cash, however you should be worried because any "reputable" person providing any type of service/product will provide a receipt regardless of payment type. |
What happened when the dot com bubble burst? | To add to the already existing answers, most of the dotcom companies used an accounting sheningan so profusely that everything looked rosy. To account for revenues, what dotcom companies did was, get into a barter transaction with another dotcom company by selling advertising space and stuff on each other's website. So the final outcome was each had quite a substantial amount of revenue while in reality there wasn't any revenue earned. This cooked up their books to look quite rosy to investors who then poured in their money, without realizing they were pouring money into a black hole. As someone mentioned Cisco, which sells networking gear and was heavily dependent on the dotcom boost. So when everything went bust, its stock price also crashed heavily. This was for the losers, but some good ones did sail through. Dotcom companies which had substance took a hit, in fact everybody did, during the bust but more than made up for it later on when investors realized they are valuable. |
Is it true that the price of diamonds is based on a monopoly? | De Beers is the company most cited as the near monopoly. They used to own a massive chunk of the diamond supply and intentionally restricted that supply to increase the price. In recent decades, new sources of diamonds have reduced the De Beers' singular grip. They still have a large share though. Video about this from Adam Ruins Everything: https://www.youtube.com/watch?v=N5kWu1ifBGU it turns out this ancient tradition [of giving diamonds rings for engagements] was invented less than a century ago by the De Beers Diamond Corporation... in 1938, the De Beers Diamond cartel launched a massive ad campaign, claiming that the only way for a real man to show his love is with an expensive hunk of crystallized carbon, and we bought that shit. It continues The only reason diamonds are even expensive is that De Beers has a global monopoly on diamond mining and they artificially restrict the supply, to jack the prices up. Because of this artificial supply restriction, the resale value of diamonds are quite low. |
Why is the dominant investing advice for individuals to use mutual funds, exchanged traded funds (ETFs), etc | Why is that? With all the successful investors (including myself on a not-infrequent basis) going for individual companies directly, wouldn't it make more sense to suggest that new investors learn how to analyse companies and then make their best guess after taking into account those factors? I have a different perspective here than the other answers. I recently started investing in a Roth IRA for retirement. I do not have interest in micromanaging individual company research (I don't find this enjoyable at all) but I know I want to save for retirement. Could I learn all the details? Probably, as an engineer/software person I suspect I could. But I really don't want to. But here's the thing: For anyone else in a similar situation to me, the net return on investing into a mutual fund type arrangement (even if it returns only 4%) is still likely considerably higher than the return on trying to invest in stocks (which likely results in $0 invested, and a return of 0%). I suspect the overwhelming majority of people in the world are more similar to me than you - in that they have minimal interest in spending hours managing their money. For us, mutual funds or ETFs are perfect for this. |
Is 6% too high to trade stocks on margin? | That seems a little high in my experience. I've used a home equity line of credit instead, as the rates are much lower (~3.5%). |
What can I take from learning that a company's directors are buying or selling shares? | It is not clear when you mean "company's directors" are they also majority owners. There are several reasons for Buy; Similarly there are enough reasons for sell; Quite often the exact reasons for Buy or Sell are not known and hence blindly following that strategy is not useful. It can be one of the inputs to make a decision. |
What should I do with $4,000 cash and High Interest Debt? | This is the kind of scenario addressed by Reddit's /r/personalfinance Prime Directive, or "I have $X, what should I do with it?" It follows a fairly linear flowchart for personal spending beginning with a budget and essential costs. The gist of the flowchart is to cover your most immediate costs and risks first, while also maximizing your benefits. It sounds like you would fall somewhere around steps 1 and 3. (Step 2 won't apply since this is not pretax income.) If you don't already have at least $1000 reserved in an emergency fund, that's a great place to start. After that, you'll want to use the rest to pay down your debt. Your credit card debt is very high interest and should be treated as a financial emergency. Besides the balance of your gift, you may want to throw whatever other funds you have saved beyond one month's expenses at this problem. As far as which card, since you have multiple debts you're faced with the classic choice of which payoff method to use: snowball (lowest balance first) or avalanche (highest interest rate first). Avalanche is more financially optimal but less immediately gratifying. Personally, since your 26% APR debt is so large and so high interest, I would recommend focusing every available penny on that card until it is paid off, and then never use it again. Again, per the flowchart, that means using everything left over after steps 0-2 are fulfilled. |
Can we compare peer-to-peer loans to savings accounts? | That argument is an argument for investing generally, not peer-to-peer lending per se, and the argument as phrased ("thus you should invest your money at a Peer-to-peer loan platform") is a false dichotomy. That said, as soon as one is investing as opposed to just getting a small but guaranteed return, then risk comes into play. In that sense, any savings account is fundamentally different from any investment, and, in that reading, the two shouldn't be compared as different approaches to "investing". Peer-to-peer lending as an investment could be aptly compared with stock market investing, for one. |
How could USA defaulting on its public debt influence the stock/bond market? | The default scenario that we're talking about in the Summer of 2011 is a discretionary situation where the government refuses to borrow money over a certain level and thus becomes insolvent. That's an important distinction, because the US has the best credit in the world and still carries enormous borrowing power -- so much so that the massive increases in borrowing over the last decade of war and malaise have not affected the nation's ability to borrow additional money. From a personal finance point of view, my guess is that after the "drop dead date" disclosed by the Treasury, you'd have a period of chaos and increasing liquidity issues after government runs out of gimmicks like "borrowing" from various internal accounts and "selling" assets to government authorities. I don't think the markets believe that the Democrats and Republicans are really willing to destroy the country. If they are, the market doesn't like surprises. |
How to determine contractor hourly rate and employee salary equivalents? | Here are a few points to consider: Taxes: As a consultant, you will be responsible for the employer portion of the Social Security and Medicare taxes, and you might have to pay for state unemployment insurance and state disability insurance, as well. Office expenses: As a consultant, you may be required to buy your own laptop, pay for your own software licenses and buy other office-related supplies. For higher-end services, you may be setting up a complete office and even hire your own secretary and other support staff. Benefits: As a consultant, you will be responsible for your own health insurance, retirement plan and other benefits that an employer would ordinarily provide. Education: Your employer will likely pay for books and magazine subscriptions and send you to seminars, in order to keep your skills current; your client won't. Liability: Consultants face certain liabilities that employees don't, and have to factor the cost of insuring against those risks into their rate. Let's say you're a software developer, and your faulty code causes a nuclear plant's reactor core to overheat and melt down. As an employee, you'll get fired. As a consultant, you will get sued. Even consultants in low-risk fields can easily shell out thousands of dollars per year for a basic general liability policy. Sales & marketing: Don't forget that when your contract ends, you will have expenses associated with finding your next client, including the opportunity cost of not getting paid for your services during that time. All these factors contribute to your overhead, which you have to roll into your consulting rate. You should also add a margin of profit -- after all, as you're in business for yourself, you should be compensated for taking this entrepreneurial risk. If you're looking for a quick over-the-thumb rule, you can figure that your equivalent consulting rate should be about twice what you would be paid hourly as an employee. Assuming you work 2,000 hours a year, if you would receive a $100,000 salary, your hourly rate should be $100. Of course, this is only a very rough guideline. Ultimately, your rate will mostly be influenced by how established you are and how much your services are in demand. |
How is the time-premium on PUT options calculated | According to Yahoo, AAPL was trading at $113.26 at 1:10 PM on 11/13/15, which is the approximate time of your option quote. You provided a quote for AAPL at 4:15, and the stock happened to keep going down most of the that afternoon. To make a sensible comparison, you need to take contemporary prices on both the stock and the option. The quote on the option also shows the "price" being outside of the bid-ask range, which suggests that the option was trading thinly and that the last price occurred sometime earlier in the day. If you use a price in the bid-ask range ($21.90-$22.30) and use the price of AAPL at the time of the put quote, you'll come up with a price that's much closer to your expectation. |
If a put seller closes early, what happens to the buyer? | The original option writer (seller) can close his short position in the contracts he wrote by purchasing back matching contracts (i.e. contracts with the same terms: underlying, option type, strike price, expiration date) from any others who hold long positions, or else who write new matching contract instances. Rather than buyer and seller settling directly, options are settled through a central options clearing house, being the Options Clearing Corporation for exchange-listed options in the U.S. See also Wikipedia - Clearing house (finance). So, the original buyer of the put maintains his position (insurance) and the clearing process ensures he is matched up with somebody else holding a matching obligation, if he chooses to exercise his put. I also answered a similar question but in more detail, here. |
What is the difference between a check and a paycheck? | There is little difference. A paycheck is a type of check used to pay wages. These days many people opt for direct deposit. So, the term paycheck can also refer to the payment itself: 1: a check in payment of wages or salary 2: wages, salary http://www.merriam-webster.com/dictionary/paycheck |
How to manage household finances (income & expenses) [duplicate] | My wife and I have close to equal incomes, and are not young. What we have is this: Some people would classify our system as a bit draconian as we each have "allowance"; however, it makes sure spending does not get out of wack and we work together to meet our goals. |
Tax implications of exercising ISOs and using proceeds to exercise more ISOs | That is a weird one. Typically one never needs to layout cash to exercise an option. One would only choose to use option 1, if one is seeking to buy the options. This would occur if an employee was leaving a company, would no longer be eligible for the ISO (and thereby forfeit any option grant), and does not want to exercise the options. However, what is not weird is the way income tax works, you are taxed on your income in the US. I assume you are talking about the US here. So if you exercise 10K shares, if under either option, you will be taxed on the profit from those share. Profit = (actual price - strike price) * shares - fees |
Expiring 401(k) Stock Option and Liquidation Implications | It might go down a bit, or it might not. That is nearly impossible to predict, as the relative volumes are unknown, and the exact procedure is also unknown (they might do the selling over a longer period, or as a buy back, or immediately, or...) However, why would you want to wait at all? It is generally not a great idea to put your savings into the company you work for ('all eggs in one basket' - when it goes down, you lose your job and your savings), so the best approach is to pick a good day in the next weeks and sell the stock and invest into something more neutral. |
How to start investing for an immigrant? | I am in a similar situation (sw developer, immigrant waiting for green card, no debt, healthy, not sure if I will stay here forever, only son of aging parents). I am contributing to my 401k to max my employer contribution (which is 3.5%, you should find that out from your HR). I don't have any specific financial goal in my mind, so beside an emergency fund (I was recommended to have at least 6 months worth of salary in cash) I am stashing away 10% of my income which I invest with a notorious robot-adviser. The rate is 80% stocks, 20% bonds, as I don't plan to use those funds anytime soon. Should I go back to my country, I will bring with me (or transfer) the cash, and leave my investments here. The 401K will keep growing and so the investments, and perhaps I will be able to retire earlier than expected. It's quite vague I know, but in the situation we are, it's hard to make definite plans. |
In the stock market, why is the “open” price value never the same as previous day's “close”? | It does sometimes open one day the same as it closed the previous day. Take a look at ESCA, it closed October 29th at 4.50, at opened November 1st at 4.50. It's more likely to change prices overnight than it is between two successive ticks during the day, because a lot more time passes, in which news can come out, and in which people can reevaluate the stock. |
Not paying cash for a house | You could use the money to buy a couple of other (smaller) properties. Part of the rent of these properties would be used to cover the mortgage and the rest is income. |
23 and on my own, what should I be doing? | Okay, since you work hourly there are two substantial changes you can make: 1) Move out of Astoria and closer to Jersey City, such as, to Jersey City. Move out of NYC into Jersey!? Heresy! But that ship sailed when you started working there. 2) Work more hours now that you aren't spending 2 hours and 30 minutes of your life commuting. You can make an extra $125 per day, in theory. Since this is $625 more a week, and $2500 a month, it is a substantial change you can make. Presupposing that your current contract has more hours to work. |
My bank wants to lower my credit limit on my credit card. Will this impact me negatively? | No, it will have no negative impact on getting a mortgage. You are building up a history with regular payments and are not carrying a balance on the card each month. Your ability to get a mortgage will ultimately be based on other things. Money Saving Expert has a good guide on what will affect your credit score. A further discussion on the topic that backs up that what a mortgage company is interested in is affordability and a stable history. They really don't care about utilisation ratios. (Though might be spooked by almost maxed out cards - sign of poor spending control, or large unused limits - too easy to go into bad debt.) |
mortgage vs car loan vs invest extra cash? | Without knowing actual numbers it's tough to say. Personally, I would pay off the car then, going forward, use the money that would have been paid on your car note toward your mortgage. I always think of things in the worst possible scenario. It's easier, and faster, to repossess a car than to foreclose on real estate. Also, in an emergency situation, depleting your fund for your car loan and your mortgage would be significantly more detrimental than only paying a mortgage with a car owned outright. Fewer obligations means fewer things to draw down your funds in an emergency. Whether the tax deductability of the mortgage interest outweighs the lower rate on your car loan will depend on a lot of factors that haven't been shared. I think it's safe to assume with only 1% of separation the real difference isn't significant. I think when determining which credit cards to pay off, choosing the one with the highest rate is smart. But that's not the situation you're in. If you don't have foreclosure concerns I'd still pay off the car then start investing. |
why do I need an emergency fund if I already have investments? | My take on this is that this reduces your liquidity risk. Stocks, bonds and many other investment vehicles on secondary markets you may think of are highly liquid but they still require that markets are open and then an additional 3-5 business days to settle the transaction and for funds to make their way to your bank account. If you require funds immediately because of an emergency, this 3-5 business days (which gets longer as week-ends and holidays are in the way) can cause a lot of discomfort which may be worth a small loss in potential ROI. Think of your car breaking down or a water pipe exploding in your home and having to wait for the stock sale to process before you can make the payment. Admittedly, you have other options such as margin loans and credit cards that can help absorb the shock in such cases but they may not be sufficient or cause you to pay interest or fees if left unpaid. |
How to make money from a downward European market? | If you want to make money while European equities markets are crashing and the Euro itself is devaluing: None of these strategies are to be taken lightly. All involve risk. There are probably numerous ways that you can lose even though it seems like you should win. Transaction fees could eat your profits, especially if you have only a small amount of capital to invest with. The worst part is that they all involve timing. If you think the crash is coming next week, you could, say, buy a bunch of puts. But if the crash doesn't come for another 6 months, all of your puts are going to expire worthless and you've lost all of your capital. Even worse, if you sell short an index ETF this week in advance of next week's impending crash, and some rescue package arrives over the weekend, equity prices could spike at the beginning of the week and you'd be screwed. |
Interest charges on balance transfer when purchases are involved | The 'common sense' in it is that they want the maximum money from you while still suggesting to a quick read that you get away free. Their target is not to make you happy, but to make money of you. |
Does inflation equal more loans? | In terms of operations, banks are indifferent to inflation. Short rates except right before a recession or near-recession are always lower than long rates, regardless of inflation level, assuming no quotas or price controls. Banks produce credit by borrowing short to lend long, so as long as short rates are lower than long rates, they can be expected to produce loans, again assuming no quotas or price controls. In short, from the banks' perspective, inflation does not affect their desire to produce credit. |
What are the financial advantages of living in Switzerland? | The lake is beautiful. The Swiss people are really good educated The companies want to be a part of these great reputation. We have low taxes We are political stable Our currency is stable We are company-friendly |
Financing a vehicle a few months before I expect to apply for a mortgage? | Buy a modest vehicle with a manageable payment. Keep the payment low enough ($200-300/month) to keep your DTI (Debt-To-Income) ratio clear. The short-term ding to your credit for new credit should disappear in 3-6 months (your time horizon). Having a mix of credit is part of the credit scoring model, so having an installment loan is not a bad thing. Relax. |
Why is company provided health insurance tax free, but individual health insurance is not? | During World War II, the United States (US) instituted wage and price controls. To attract better employees, companies would offer benefits to get around salary limits. Health insurance was one of the more successful benefits. At that time, income taxes were newer and there were many ways to evade them. Companies could generally deduct expenses. So at that time, health care was deductible because everything was. And at that time, only wages were taxable compensation from employer to employee. Since that time, many other benefits have become non-deductible for employers, e.g. housing or the reduced deduction for meals and entertainment. But health care is generally regarded as different, as a necessity. While everyone needs to eat, not everyone needs to eat at a $100 a meal restaurant. People who need expensive health care really need it. People who eat expensive food just prefer it. And of course, health care is more intermittent where food is relatively consistent. You don't need ten thousand calories one day and zero the next. But some families have no health care expenses in a year while another might have cancer or a pregnancy. Note that medical care expenses can be deducted for individuals if they are large enough in aggregate and you itemize. And of course both businesses and workers have incentives to maintain the current system with deductibility. Health insurance is a common benefit. Housing is not (although it's worth noting that travel housing and meals are deductible). So there have been few people impacted by making housing taxable while many people would be impacted by taxable health insurance. You can deduct health insurance costs if self-employed. It's also not true that health insurance is the only benefit with preferential tax treatment. Retirement and child care are also deductible. Even meals and housing can be deducted in certain circumstances. The complex rules about what and how much is deductible. There have been rumbles about normalizing the tax treatment of health insurance and medical care, but there is a lot of opposition. Insurance companies oppose making all healthcare expenses deductible, as that reduces their effective benefit. They would prefer only insurance premiums be deductible. Traditionally employed individuals oppose making health insurance taxable, as that would increase their taxes. So the situation persists. There isn't quite enough support to move in either direction, although the current compromise is economically silly. |
Should I keep most of my banking, credit, and investment accounts at the same bank? | I've had all my account with the same bank for all my life. Generally, the disadvantage is that if I want some kind of product like a credit extension or a mortgage, I have the one bank to go to and if they don't want to help me I'm out of luck. However, occasionally there are also perks like the bank spontaneously offering you increased credit or even a whole line of credit. They can do this because they have your whole history and trust you. |
How to help a financially self destructive person? | Back in the day, they had a highly effective solution for this type of crap, but it is frowned upon in modern society. The second-best solution would be to get your lawyer to put together a case that she is unfit to be around the children and that visitation rights should be revoked. Unfortunately, this will most likely not solve her problems, and she will probably become far worse as she feels more alone, alienated, miserable, and embarrassed. |
Are stories of turning a few thousands into millions by trading stocks real? | It's possible to make money in the market - even millions if you "play your cards right". Taking the course being offered can be educational but highly unlikely to increase your chances of making millions. Experience and knowledge of the game will make you money. The stock market is a game. |
What is a good way to save money on car expenses? | The obvious answer for savings costs with a car is not to have a car. Of course that must be balanced against other expenses (bicycle, taxi, public transport) to do things. Generally speaking, if you need a car, ways to contain expense are to buy the least expensive vehicle with the most economical engine that meets your needs, keep it undercover (reduces damage or wear due to exposure), proactively maintain it (maintenance is cheaper in the long run than the costs of dealing with a breakdown and cost of repairs, and lack of maintenance accelerates depreciation), and shop around for a good mechanic who will maintain it at a fair price. If you do a lot of milage, or do a lot of towing, or drive under load, consider a diesel. A diesel engine often costs more each service, sometimes has a shorter service interval, but it also gets greater milage. There may be a differential cost of fuel (diesel is often a bit more expensive per volume). For towing, a diesel is often more economical, due to low end power (greater torque at lower revs) which does result in better fuel economy. It is no accident that most large transport vehicles consume diesel. Do the sums based on your usage before you buy. Accelerate as gently as possible to get to speed within traffic conditions (less fuel to get to a speed). Change up to higher gears as soon as possible as - at a given speed - economy will be better, as long as the engine has enough oomph to handle it (so don't try to start from stationary in a high gear). Don't drive faster than necessary, as drag increases with speed, and hurts economy. Similarly, reduce speed gradually, to reduce undue wear on breaks and reduce fuel consumption (sharp breaking with power assisted breaks does affect fuel economy). Drive close to legal limits if conditions permit. This reduces chances of annoying other drivers (who if they get impatient may throw rocks at your car, or collide, or subject you to road rage - which contribute to damage and insurance costs). It also reduces chances of being pulled over by police and fined for obstructing other traffic. Don't tailgate. This both consumes fuel in keeping up, and means needing to slow sharply. And increases chance of accident. Don't idle more than necessary. Allow stop/start systems on your car to operate - particularly if you're in stop/start traffic. However, there is a break-even point where stopping and restarting consumes more fuel than idling, so get to know your vehicle. That depends on how much the engine needs cranking to restart - which is affected both by engine design and maintenance. Maintain it yourself if you have the skills, but account for the cost of parts and equipment, to be sure it is cost effective (modern cars are software driven, so equipment to diagnose and maintain can be expensive). Combine trips (don't get into the car for every little thing - wait until you can do a few things during a single drive) and car pool. If fuel prices vary (e.g some places have regular cycles) try to refuel near the bottom of a pricing cycle. Take unnecessary weight out of the vehicle. Don't load it up with tools unless you need them frequently. |
What factors would affect the stock price of a sports team? | Costs are almost entirely salaries Apart from all the usual costs incurred by running a large, complex, business, ManU are servicing debt that is getting up around the GBP500M mark. This is debt racked up by the Glazer family since purchasing the team, as well as debt they took with them to the team. What sort of factors would affect their share price? Product endorsements, ticket prices, attendance, and merchandise sales are all important contributors. But also, performance in the domestic league and in domestic and European cups are also factors. Should their participation falter for any reason, that ripples through everything (decrease in brand exposure) - and this is, along with the debt problem, the biggest risk. Edit: By the way, you are aware that this is an NYSE IPO; you can see how they have done on the FTSE over the past 10 years or so. |
How much should I be contributing to my 401k given my employer's contribution? | You can only contribute up to 5% of your salary? Odd. Usually 401(k) contributions are limited to some dollar amount in the vicinity of $15,000 or so a year. Normal retirement guidelines suggest that putting away 10-15% of your salary is enough that you probably won't need to worry much when you retire. 5% isn't likely to be enough, employer match or no. I'd try to contribute 10-15% of my salary. I think you're reading the rules wrong. I'm almost certain. It's definitely worth checking. If you're not, you should seriously consider supplementing this saving with a Roth IRA or just an after-tax account. So. If you're with Fidelity and don't know what to do, look for a target date fund with a date near your retirement (e.g. Target Retirement 2040) and put 100% in there until you have a better idea of what going on. All Fidelity funds have pretty miserable expense ratios, even their token S&P500 index fund from another provider, so you might as let them do some leg work and pick your asset allocation for you. Alternatively, look for the Fidelity retirement planner tools on their website to suggest an asset allocation. As a (very rough) rule of thumb, as you're saving for retirement you'll want to have N% of your portfolio in bonds and the rest in stocks, where N is your age in years. Your stocks should probably be split about 70% US and 30% rest-of-world, give or take, and your US stocks should be split about 64% large-cap, 28% mid-cap and 8% small-cap (that's basically how the US stock market is split). |
If stock price drops by the amount of dividend paid, what is the use of a dividend | There are many reasons for buying stock for dividends. You are right in the sense that in theory a stock's price will go down in value by the amount of the dividend. As the amount of dividend was adding to the value of the company, but now has been paid out to shareholder, so now the company is worth less by the value of the dividend. However, in real life this may or may not happen. Sometimes the price will drop by less than the value of the dividend. Sometimes the price will drop by more than the dividend. And other times the price will go up even though the stock has gone ex-dividend. We can say that if the price has dropped by exactly the amount of the dividend then there has been no change in the stockholders value, if the price has dropped by more than the value of the dividend then there has been a drop to the stockholder's value, and if the price has gone up or dropped by less than the value of the dividend then there has been a increase to the stockholder's value. Benefits of Buying Stocks with Good Dividends: What you shouldn't do however, is buy stocks solely due to the dividend. Be aware that if a company starts reducing its dividends, it could be an early warning sign that the company may be heading into financial troubles. That is why holding a stock that is dropping in price purely for its dividend can be a very dangerous practice. |
Short term investing vs Leaving money alone? | There are three basic concepts finance (as far as I'm concerned). Liquidity is basically an asset's spendability. Assets range in liquidity from cash (very liquid) to real estate (not very liquid). You can spend cash immediately, while real estate must first be converted to cash. Another important concept is your time horizon. When do you need your money. Money you need in the near term should be kept in very liquid assets, while money you won't need for a significantly long time can be tied in to something much less liquid. Volatility is the degree to which an assets value is predictable from day to day. Cash and guaranteed savings accounts have very low volatility, while a stock portfolio will fluctuate in value from day to day, sometimes a lot and sometimes you can lose your initial investment. So really, you need to determine what you need or want this money for, and depending on when you'll need it you can make decisions about whether or not to invest it, or keep it in a savings account, or keep it in literal actual cash. Your TFSA is maxed for the year, so that's out. Do you have an emergency fund? Do you want to travel or have other more near term desires that cost money? If you have a solid financial foundation and already have an emergency fund, you may want to set up a brokerage account and invest in an index fund. You should not invest money in the stock market unless you are ready to leave it there for at least a few years. Stocks are volatile but over a long enough period the market generally goes up. In your search for the right index fund, watch out for fees. Most big brokers will have a list of funds you can invest in with no up front fees and no commission. The fund itself will charge an expense ratio, look for an index fund with an expense ratio around 0.10%. This means you'll pay 0.10% of your holdings each year to the fund manager. No matter how much money we're talking about, I wouldn't put more than half in the market. Dip your toe in, get used to the value fluctuating. Don't start reading about technical analysis and derivative trading. Just put your money in a very low fee big market index and let it ride. |
Book or web site resources for an absolute beginner to learn about stocks and investing? | The Winning Investor http://winninginvestor.quickanddirtytips.com/ This is a blog and a podcast. Load a bunch of these onto your iPod and start listening. Stikky Stock Charts http://www.amazon.com/Stikky-Stock-Charts-professionals-smart/dp/1932974008 This is a beginner's guide on how to read charts. Lots of charts, not too many words. |
Can saving/investing 15% of your income starting age 25, likely make you a millionaire? | Millionaire, Shmillionaire! Let's do this calculation Bruno Mars style (I wanna be a Billionaire...) If my calculations are correct, in the above scenario, at age 80, you would have more than a billion in the bank, after taxes. |
person on loan with cosigner | This will probably require asking the SO to sign a quitclaim and/or to "sell" him her share of the vehicle's ownership and getting it re-titled in his own name alone, which is the question you actually asked. To cancel the cosigner arrangement, he has to pay off the loan. If he can't or doesn't want to do that in cash, he'd have to qualify for a new loan to refinasnce in his name only, or get someone else (such as yourself) to co-sign. Alternatively, he might sell the car (or something else) to pay what he still owes on it. As noted in other answers, this kind of mess is why you shouldn't get into either cosigning or joint ownership without a written agreement spelling out exactly what happens should one of the parties wish to end this arrangement. Doing business with friends is still doing business. |
I need a car for 2 years. Buy or lease (or something else)? | Your short-term time frame makes buying used the best option, but it seems you already are aware of that. Look into a certified pre-owned model if you are concerned about lemons. You will usually get some sort of warranty. However, be aware that any car can be a headache with repairs. I would not recommend a lease because basically you are still paying for the depreciation on the car plus interest. Generally, this is the most expensive way to drive a car. You may find the numbers look good for a lease but beware of the 'gotchas' in the terms that can put you way over budget (over mileage, wear and tear, etc.). My best recommendation is to buy gently used with cash. This gives you the most flexibility and best resale value. If you finance a late-model vehicle, be aware that depreciation can leave you upside-down on your loan. That would put you in the position of having to shell out cash just to get rid of the car. |
Calculating theoretical Present Value | If you are using an Excel, the Function PV should be able to easily calculate this. Excel Formulae PV = (Rate,Nper,Pmt,Fv,Type) Where Rate: Rate of return. In this case you can use Inflation or assumed rate that would cost you. Say 3-5%. Note the Rate has to be for Nper. i.e. in Nper if you are counting yearly payments, then rate is yearly, if you are counting as monthly, then the rate should be monthly. NPer: Number of periods. If yearly in your case it would be 20. If Monthly 20*12, if Quarterly 20*4 etc. Pmt: Expected Payments for Nper. If you are saying 20 million over 20 years, it would be 1 million per year. Fv and Type can be blank So assuming a rate of 3%, and yearly payments of 1 million over 20 years. PV = $14,877,474.86 [It would show negative, just ignore the sign] |
Stock spread: wide vs. narrow? | The point is that the bid and ask prices dictate what you can buy and sell at (at market, at least), and the difference between the two, or spread, contributes implicitly to your gains or losses. For example, say your $1 stock actually had a bid of $0.90 and an ask of $1.10; i.e. say that $1 was the last price. You would have to buy the stock at the ask price of $1.10, but now you can only sell that stock at the bid price of $0.90. Thus, you would need to make at least that $0.20 spread before you can make a profit. |
Withdrawing large sums of money | This is determined by each banking institution. In general, if making the withdrawal in person, the limit is based on what you have in your account, but many ask for advance notice when withdrawing more than $5000. They may still allow a larger withdrawal without notice, but usually have a policy in place and will tell you over the phone. You should also be aware that the bank is required to report withdrawals totaling $10,000 or more in a day to the treasury department and may require extra paper work (businesses are often exempted or at least have higher amounts). For very large withdrawals, you would definitely have to wait, but you may not be able to get an answer over the phone as to how long unless you actually have $600K on deposit at that bank. They will have some kind of protocol to handle such a request, i.e. teller will talk to a manager, who may have to make a call to a regional or national office and make special arrangements. Most branches don't want to have their regular stash of cash plus an extra $600K lying around. There are insurance and security concerns. The increased potential for theft can put employees and other customers at risk. They may also not feel comfortable unloading bags of money from their vault or armored truck into the back of your car. While this is a very uncommon scenario, it has actually happened before. It took 'weeks' and when funds were available, additional security and police escorts were called in. Edit: You can find summaries of the regulations here and here and more complete info here. In general, the money should be available within 1-8 business days after it is deposited depending on the nature and amount of the deposit, but the regulations are really designed for more ordinary transactions. For a $600K withdrawal, the bank can cite security issues and decline to honor the request in cash. If you ask, your bank should provide their standard policy, which could include language such as this: We require prior notice for large cash withdrawals. We can refuse an order to withdraw funds in cash or to cash an item if we believe that the request is a security risk or possesses a hardship on the Bank. We may require you to accept an Official Check or electronic transfer to receive the funds. If we agree to a large cash withdrawal, you may be required to employ a courier service acceptable to us and at your risk and expense. If a large cash withdrawal is completed at a branch you will be required to sign a cash withdrawal agreement. Refusal to sign the agreement is grounds for us to revoke the cash withdrawal and require an alternate delivery for the funds. You might also find this question interesting. |
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