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Is there any benefit to investing in an index fund? | Index funds may invest either in index components directly or in other instruments (like ETFs, index options, futures, etc.) which are highly correlated with the index. The specific fund prospectus or description on any decent financial site should contain these details. Index funds are not actively managed, but that does not mean they aren't managed at all - if index changes and the fund includes specific stock, they would adjust the fund content. Of course, the downside of it is that selling off large amounts of certain stock (on its low point, since it's being excluded presumably because of its decline) and buying large amount of different stock (on its raising point) may have certain costs, which would cause the fund lag behind the index. Usually the difference is not overly large, but it exists. Investing in the index contents directly involves more transactions - which the fund distributes between members, so it doesn't usually buy individually for each member but manages the portfolio in big chunks, which saves costs. Of course, the downside is that it can lag behind the index if it's volatile. Also, in order to buy specific shares, you will have to shell out for a number of whole share prices - which for a big index may be a substantial sum and won't allow you much flexibility (like "I want to withdraw half of my investment in S&P 500") since you can't usually own 1/10 of a share. With index funds, the entry price is usually quite low and increments in which you can add or withdraw funds are low too. |
Is investing exlusively in a small-cap index fund a wise investment? | Stock portfolios have diversifiable risk and undiversifiable risk. The market rewards investors for taking undiversifiable risk (e.g. owning an index of oil producing companies) and does not reward investors for assuming diversifiable risk (e.g. owning a single oil producing company). The market will not provide investors with any extra return for owning a single oil company when they can buy an oil index fund at no additional cost. Similarly, the market will not reward you for owning a small-cap index fund when you can purchase a globally diversified / capitalization diversified index fund at no additional cost. This article provides a more detailed description. The Vanguard Total World Stock Index Fund is a much better staring point for an equity portfolio. You will need to make sure that the asset allocation of your overall portfolio (e.g. stocks, bonds, P2P lending, cash) is consistent with your time horizon (5-10 years). |
Giving kids annual tax free gift of $28,000 | If the child is a dependent the question is moot. It is accepted that the parent will pay for some, most, or all of the tuition. There is no tax issue for a current student. The payment of tuition helps them qualify as a dependent. There is no need to transfer the money to the child's account; it can be sent directly to the school. If the money is to be used in the future there are accounts such as 529s pre-paid accounts, and Coverdell savings accounts that can be used. All have pluses and minuses, all can impact taxes, and all can impact financial aid calculations. |
Does dollar cost averaging really work? | If you know with 100% certainty what the market will do, then invest it all at the best time. If not, spread it out over time to avoid investing it all at the worst possible time. |
Is there a widely recognized bond index? | The iShares Barclays Aggregate Bond - ticker AGG, is a ETF that may fit the bill for you. It's an intermediate term fund with annual expenses of .20%. It "seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Barclays Capital U.S. Aggregate Bond Index" |
Do I need a new EIN since I am hiring employees for my LLC? | I called the IRS (click here for IRS contact info) and they said I do not need to get a new EIN. I could have just filed the appropriate employer federal tax return (940/941) and then the filing requirements would have been updated. But while I was on the phone, they just updated the filing requirements for my LLC so I am all good now (I still need to file the correct form and make the correct payments, etc. but I can use this same EIN going forward). Disclaimer: Don't trust me (or this answer) for tax advice (your situation may be different). The IRS person on the phone was very helpful so I recommend calling them if you are in a similar situation. FYI, I have found calling the IRS to always be very helpful. |
Fractional Reserve Banking and Insolvency | A bank is insolvent when it can no longer meet its short-term obligations. In this example, the bank is insolvent when depositors withdraw more cash than the bank can pay out. In this case, it's probably something in the range of $600-700k, because the bank can borrow money from other banks using assets as collateral. In the US, we manage this risk in a few ways. First, FDIC insurance provides a level of assurance that in a worst-case scenario, most depositors will have access to their money guaranteed by the government. This prevents bank panics and reduces the demand for cash. The risk that remains is the risk that you brought up in your scenario -- bad debt or investments that are valued inappropriately. We mitigate this risk by giving the Federal Reserve and in some instances the US Treasure the ability to provide nearly unlimited capital to get over short/mid-term issues brought on by the market. In cases of long-term, structural issues with the bank balance sheets, regulators like the FDIC, Federal Reserve and others have the ability to assume control of the bank and sell off its assets to other, stronger institutions. The current financial regime has its genesis in the bank panics of the 1890's, when the shift from an agricultural based economy (where no capital is available until the crops come in!) to an industrial economy revealed the weakness of the unregulated model where ad hoc groups of banks backed each other up. Good banks were being destroyed by panics until a trusted third party (JP Morgan) stepped in, committed capital and make personal guarantees. |
Tracking my spending, and incoming and outgoing (i.e cashflow) | Systems to research that may help you out: Less Accounting and Wave are great because they can import data from banks / credit cards. I know you said your bank doesn't export it but it seems like something as a small business you would want. |
How to do thorough research into a company to better understand whether to buy stock? | So, first -- good job on making a thorough checklist of things to look into. And onto your questions -- is this a worthwhile process? Even independent of specific investing goals, learning how to research is valuable. If you decided to forgo investing in stocks directly, and chose to only invest in index funds, the same type of research skills would be useful. (Not to mention that such discipline would come in handy in other fields as well.) What other 80/20 'low hanging fruit' knowledge have I missed? While it may not count as 'low hanging fruit', one thing that stands out to me is there's no mention of what competition a company has in its field. For example, a company may be doing well today, but you may see signs that it's consistently losing ground to its competition. While that alone may not dissuade you from investing, it may give you something to consider. Is what I've got so far any good? or am I totally missing the point. Your cheat sheet seems pretty good to me. But a lot depends on what your goals are. If you're doing this solely for your education and experience, I would say you've done well. If you're looking to invest in a company that is involved in a field you're passionate about, you're on the right track. But you should probably consider expanding your cheat sheet to include things that are not 'low hanging fruit' but still matter to you. However, I'd echo the comments that have already been made and suggest that if this is for retirement investments, take the skills you've developed in creating your cheat sheet and apply that work towards finding a set of index funds that meet your criteria. Otherwise happy hunting! |
Can gold prices vary between two places or country at the same time? | Most of the gold prices at international markets are USD denominated. Hence the prices would be same in international markets where large players are buying and selling. However this does not mean that the prices to the individuals in local markets is same. The difference is due to multiple things like cost of physical delivery, warehousing, local taxation, conversion of Local currency to USD etc. So in essence the price of Gold is similar to price of Crude Oil. The price of Oil is more or less same on all the markets exchanges, though there is small difference this is because of the cost of delivery/shipment which is borne by the buyer. However the cost of Oil to retail individual varies from country to country. |
How risky are penny stocks? | Most penny stocks go to zero because most businesses fail. You stated in your original post that you were wondering specifically about companies with no assets. These are exactly the kind that fail and go to zero. There are many holes within the regulatory structure that allow for many accounting tricks in penny stock land. And even in areas that are adequately regulated, there will be few to no remedies for the optimistic penny stock shareholder speculator. |
What happened to Home Depot's Stock in 1988? | So a major problem with looking at historical stock data on these graphs is that they set the stock price based off of current market volumn. If I was to say look at Majesco Entertainment (COOL) in june of 2016. It would say that the stock as trading between $5-6. In reality it was between .50-$1. But in august there was a 6:1 reverse split. So June's value based on todays current share count would be about $5-6 per one share. 1988 for home depot must have been a really bad year for them, and because of all the splits they've had over the years already screws that estimate of what one share is worth. There's a lot of variance in 1988, but you have to be looking at only 1988. 87 and 89 really screws the the chart's scale. |
What emergencies could justify a highly liquid emergency fund? | I recently drove past Winslow, Arizona and knocked out the fuel pump in my truck. It cost $500 to repair, and the tow would have been another several hundred if I hadn't had a Good Samaritan's club card, since it was the weekend. 2-3 days would not be acceptable in this sort of scenario. And that was just the fuel pump! |
Car Insurance - Black box has broken and insurance company wants me to pay? | First read the fine print. If you have to pay it, pay it and switch company. If you don't have to pay it and there is no proof that you abused the component beyond normal usage, you don't have to sue them, just return the invoice with legal (not so layman) text like "I hereby reject paying invoice number xxxx dated xxx because the black box was used under normal conditions and it stopped working". In this case you wait for them and answer every other letter with the same text until the decide to either sue you, or drop the whole thing. If you choose this path, remember to save all invoice, copies of your rejections, all written/email/phone calls, picutres of the broken item, serial nubmers, contract etc. If they sue you and they loose (can't prove the item was destroied by you), they have to pay you up to one hour of legal advice cost and drop the invoice, if you loose, you do the same (100 pounds) plus the invoice amount according to Swedish law, don't know about your country. Before you follow any advice here, consult your local consumer protection agency, they usually comes up with smart options, they know a bad company with history and give you the right advice. |
Do individual investors use Google to obtain stock quotes? | I won't be able to model stock prices using this information. The pros aren't likely to use Google as much. Even the casual investor is likely to have his own habits. For example, I've come to like how Yahoo permits me to set up a portfolio and follow the stocks I want. And the information that interests me is there, laid out nicely, price, history, insider trades, news etc. But your effort probably still has some discovery value, as it will help you understand when interest in a company suddenly swells above normal. Nothing wrong with a good project like that. Just don't expect to extract too much market-beating success from it. The pros will eat your lunch, take your money, and not even say thanks. Welcome to Money.SE. |
What is the difference between a bond and a debenture? | Investopedia has definitions for both: Debenture: A type of debt instrument that is not secured by physical asset or collateral. Bond: A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Wikipedia's entry for debenture says: In some countries [debenture] is used interchangeably with bond, loan stock or note. Seems to me that there's not much difference. |
I have more than $250,000 in a US Bank account… mistake? | Yes. Although I imagine the risk is small, you can remove the risk by splitting your money amongst multiple accounts at different banks so that none of the account totals exceed the FDIC Insurance limit. There are several banks or financial institutions that deposit money in multiple banks to double or triple the effective insurance limit (Fidelity has an account like this, for example) |
Maintaining “Woman Owned Business” while taking on investor | To qualify as a woman owned business, a woman or group of women must own shares worth 51% of the business. If your investor was a woman, the entire 5% could come from her share of the company without affecting the 51% ownership requirement. Could you find a woman to add as an investor? If you each had your shares diluted 5%, She would be down to 48.45% ownership, and you would be down to 46.55% ownership. The only way for you to get back to a 51% female ownership situation would be to give a 2.55% ownership stake (from your share) to a wife, sister, mom, girlfriend, or any other woman who you think should benefit from this arrangement. This would still put you down at 44% (effectively taking the whole 5% from you) but by giving some of your share to someone else, it does require your partner to make some of the sacrifice, while still benefiting someone you care about (if you have someone you would like to give that benefit to). In summary, this is what it would look like: |
Strategies for putting away money for a child's future (college, etc.)? | (Congratulations on the little one on the way.) I'd recommend saving outside of tax-advantaged accounts. Pay your taxes and be done with them. I'd recommend putting your old-age fund first before shelling out a lot of money for college. I'd recommend not shelling out a lot of money for college. Ideally, none. There are ways today to get a four-year degree for $15,000. Not $15,000 per year. $15,000 total. Check here. (This isn't an affiliate link.) They can pay for this themselves! I'd recommend making sure you hold the hammer. Don't let them party on your nickel. I'd recommend teaching your kids to "fish" as soon as possible. Help them start a business. They could be millionaires by the time they're teenagers. Then they can make their own money. You won't have to give them a dime. |
Which type of investments to keep inside RRSP? | Milliondollarjourney.com has a couple of articles on this topic. How Investing Taxes Work part 1 and part 2. The following is a summary of that article. Capital gains and dividends are taxed at a preferred rate, while interest tax is taxed at your regular rate. Interest is taxed at your marginal rate, but capital gains are taxed at only 50% of your marginal rate. That means that it makes sense to place the interest bearing account inside the RRSP but keep stocks outside. Additionally, you can claim your losses on your capital appreciating stocks against your gains if they are outside of your RRSP. Hopefully, your stocks will never go down but that's not very realistic. Dividends from Canadian companies are eligible for a dividend tax credit, but not dividends from foreign companies. [I actually understood that dividends from U.S. companies are treated as a special case] It's not clear to me from reading the article how much of this applies to mutual funds. The summary is as follows: |
How to pay myself as a single person corporation in Ontario? Should I get an accountant? | Get an accountant. Now. There are many subtle things that you do not know especially if you are just starting with your own corporation. There is also an issue of corporate tax return that you will have to face pretty soon. You should be looking for accountant that does accounting for corporations, there are companies specializing in small business. I do not think you can "just" transfer money to your personal account. They have to be treated as dividends and treated as such for income tax purposes. Or, as you described, you may pay yourself a salary, but then you have to pay CPP and EI on top of that. When you pay yourself dividends your corporation will need to issue T5 slip for you (accountant will do that) that you will need to use when preparing personal tax return. If you pay yourself salary, corporation will need to give you T4 In terms of tax treatment, if we do not take RRSP contributions dividend tax treatment will leave little bit more money in your hands. I'd say if you have RRSP room and/or TFSA room, pay yourself dividends and then do contributions as you see fit, if you need RRSP room, pay yourself salary. TFSA room does not depend on the type of income, so if you have room there, consider filling it first. |
How can I improve my credit score if I am not paying bills or rent? | Buy a car. Vehicle loans, like mortgages, are installment loans. Credit cards are revolving lines of credit. In the US, your credit score factors in the different types of credit you have. Note that there are several methods for calculating credit scores, including multiple types of FICO scores. You could buy a car and drive for Uber to help cash flow the car payments and/or save for your next purchase. As others have suggested, you should be very careful with debt and ask critical questions before taking it on. Swiping a credit card is more about your behavior and self-control than it is logic and math. And if you ever want to start a business or make multi-million dollar purchases (e.g. real estate), or do a lot of other things, you'll need good credit. |
Primerica: All it claims to be? | Primerica's primary value proposition is that switching from whole or universal life to term life, and investing the difference is a good idea for most people. However, there are a number of other important factors to consider when purchasing life insurance, and I would also be wary of anyone claiming that one product will be the "best" for you under all circumstances. Best Insurance? Without getting into a much larger discussion on how to pick insurance companies or products, here are a few things that concern me about Primerica: They have a "captive" sales force, meaning their agents sell only Primerica products. This means that they are not shopping around for the best deal for you. Given how much prices on term life have changed in recent years, I would highly recommend taking the time to get alternate quotes online or from an independent broker who will shop around for you. Their staff are primarily part-time employees. I am not saying they are incompetent or don't care, just that you are more likely to be working with someone for whom insurance is not their primary line of work. If you have substantial reason to believe that you may someday need whole life, their products may not suit you well. Primerica does not offer whole life as far as I am aware, which also means that you cannot convert your term life policy through them to whole life should you need to do so. For example, if you experience an accident, are disabled, or have a significant change in your health status in the future and do not have access to a group life policy, you may be unable to renew your individual policy. Above Average Returns? I am also highly skeptical about this claim. The only possible context in which I could find this valid would be if they mean that your returns on average will be better if you invest in the stock market directly as compared to the returns you would get from the "cash value" portion of a life insurance product such as universal life, as those types of products generally have very high fees. Can you clarify if this is the claim that was made, or if they are promising returns above those of the general stock market? If it is the latter, run! Only a handful of superstar investors (think Warren Buffet, Peter Lynch, and Bill Gross) have ever consistently outperformed the stock market as a whole, and typically only for a limited period of time. In either case, I would have the same concerns here as stated in reasons #1 and #2 above. Even more so than with insurance, if you need investment advice, I'd recommend working with someone who is fully dedicated to that type of work, such as a fee-only financial planner (http://www.napfa.org/ is a good place to find one). Once you know how you want to invest, I would again recommend shopping around for a reputable but inexpensive broker and compare their fees with Primerica's. Kudos on having a healthy level of skepticism and listening to your gut. Also, remember that if you are not interested in their offer, you don't have to prove them wrong - you can simply say "no thank you." Best of luck! |
Explanations on credit cards in Canada | If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. I have my back account (i.e. chequing account) and VISA account at/from the same bank (which, in my case, is the Royal Bank of Canada). I asked my bank to set up an automatic transfer, so that they automatically pay off my whole VISA balance every month, on time, by taking the money from my bank account. In that way I am never late paying the VISA so I never pay interest charges. IOW I use the VISA like a debit card; the difference is that it's accepted at some places where a debit card isn't (e.g. online, and for car rentals), and that the money is deducted from my bank account at the end of the month instead of immediately. |
If accepting more than $10K in cash for a used boat, should I worry about counterfeiting? | If you get counterfeit money, then you're dealing with the criminal who is going to be punished by the law for doing that. The portion of the total sum that was paid with the counterfeit currency is considered unpaid and you can claim the money from the criminal and sue him, while he's in jail. He'll work hard on those license plates to pay you off. However, making false statements and assisting in a tax evasion scheme compromises your ability to go to the law enforcement in case of any wrongdoing, and then you should worry about the counterfeit money, because the law won't be on your side to help you. And you don't even get anything out of it... Why on earth are you willing to take this risk? Just so you know, it may also be money laundering, which may get you in trouble even more with the law. |
How to get an ITIN if I don't have passport? | On the IRS site you can find a list of "acceptance agents" in your country. Talk to one of them, they'll deal with the IRS on your behalf. If you don't have any in your country, you can contact the big-4 accounting firms or any other agent elsewhere to provide you service. I'd suggest doing this through an agent. |
Better ways to invest money held by my small, privately-held Canadian corporation? | The issue only arises when the investments grow in size. A small amount won't trigger the higher tax rates. If the amount is large enough, then consider using either: Insurance products that are 'segregated', or RRSPs in your own name after your business pays you wages, or Gifting to other family members. |
Purpose of having good credit when you are well-off? | Credit scores, or at least components of them, can sometimes factor into how much you pay for car insurance. Source: Consumer Reports: How a Credit Score Increases your Premium |
I'm 20 and starting to build up for my mortgage downpayment, where should I put my money for optimal growth? | The highest growth for an investment has historically been in stocks. Investing in mature companies that offer dividends is great for you since it is compound growth. Many oil and gas companies provide dividends. |
A calculator that takes into account portfolio rebalancing? | My answer is Microsoft Excel. Google "VBA for dummies" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea. |
Will getting a second credit card help my credit rating? | Besides your credit score, there are other smart reasons to have a second line of credit. (Your credit score doesn't affect you the majority of your life, but when it does whoooooo boy does it.) Should the first bank you have credit with create or find a clerical error, a second line of credit can provide a cushion while you sort it out with the first Should physically damage a card, or have it stolen, having a second backup at home will be helpful as you wait for a replacement. Getting a second line of credit with a different institution than your first allows you the flexibility to cancel one and move your business should the deal become unfavorable to you. Multiple lines of credit in of itself is a plus to your credit score (albeit a small one) You can organize your finances. One card handles the recurring payments in your life, the second incidentals. The expected activity type might make it easier to detect fraud. When you get your second line of credit, get it from a different institution than where you have any other business now. (A credit union if you can, or a small local bank). Make sure there is no annual fee, and if there is a reward, be certain it is worth it. Cash back is my favorite because I can spend cash where I like, whereas "points" have to come out of product in their catalogs. Lower interest rate is best of all. Even though you always plan on paying it off every month like clockwork, you might one day run into an issue where you cannot. Lower interest rate becomes very important in that plannings scenario. |
Landlord living in rental unit - tax implications? | A tenant is a tenant regardless of your relationship to them, and as long as the property is classified as an investment property, you can claim depreciation and regular business losses just as you would on any property with any tenant. |
What causes a stock to drop in price? | A rising tide lifts all ships Most (but not all) stocks trend along with the general market. Some trend right along with the market (and have a beta at, or very near, one) some follow the Market, but are less sensitive (having a beta of less than one). Some are hypersensitive (and would have a beta of greater than one). Beta defined So most of the day to day movement of a stock is because the general market is moving (in the same direction). Of course, exceptional news about the company would cause its price to move independent of the general market. But more often than not the price of a stock moves just because the rest of the market is moving. |
What are the risks of Dividend-yielding stocks? | Yep, there just is no free lunch. So called high dividend stocks are usually from companies that have stable cash flows but relatively little or moderate growth potential. Utility companies come to mind, let's take telecommunications as an example. Such stocks, usually, indeed are considered more conservative. In a bull market, they won't make high jumps, and in a bear market they shouldn't experience deep falls. I mean, just because the stock market fell by 10%, you're not going to stop using your phone. The stock might suffer a bit but the divided is still yielding you the same. However, fundamental data can have a significant impact. Let's say a recession hits the country of the telco. People might not get the newest iPhone and lock in to an expensive contract anymore, they might use cheaper forms of communication, they might stop paying bills, go bankrupt etc. This will have a severe impact on the company's cash flow and thus hit the stock in a double whammy: One, the dividend is gone. Two, the price will fall even further. There are basically two scenarios after that. Either the recession is temporary and your stock became a regular growth stock that at some point might bounce back and re-establish at the previous levels. Or the economy has contracted permanently but regained stability in which case you will again have a stock with a high dividend yield but based on a lower price. In conclusion: High dividend stocks make sense in a portfolio. But never consider their income to be safe. Reduce your risk by diversifying. |
Can't the account information on my checks be easily used for fraud? | Yes, and there are almost no checks (no pun intended) on people pulling money from your account using a routing number. It is an EXTREMELY insecure system. If you want a real Halloween scare, read this article: Easy Check Fraud Technique Draws Scrutiny. Unfortunately you just have to live with it. If you are curious why this loophole is allowed to continue, consider how hard it is to close it without undermining the convenience of checks. Short of you going to the bank with each person you write a check to and showing ID to validate the transaction, I don't see how you could continue to use a negotiable instrument like this without such a security hole. The ultimate answer is going to have to be replacing checks with other means of payment. |
Would I ever need credit card if my debit card is issued by MasterCard/Visa? | Skimmers are most likely at gas station pumps. If your debit card is compromised you are getting money taken out of your checking account which could cause a cascade of NSF fees. Never use debit card at pump. Clark Howard calls debit cards piece of trash fake visa/mc That is because of all the points mentioned above but the most important fact is back in the 60's when congress was protecting its constituents they made sure that the banks were responsible for fraud and maxed your liability at $50. Debit cards were introduced much later when congress was interested in protecting banks. So you have no protection on your debit card and if they find you negligent with your card they may not replace the stolen funds. I got rid of my debit card and only have an ATM card. So it cannot be used in stores which means you have to know the pin and then you can only get $200 a day. |
New car price was negotiated as a “cash deal”. Will the price change if I finance instead? | There is no rule that says the dealer has to honor that deal, nor is there any that says he/she won't. However, if you are thinking of financing through though the dealership they are likely to honor the deal. They PREFER you finance it. If you finance it through the dealer the salesman just got TWO sales (a car and a loan) and probably gets a commission on both. If you finance it through a third party it makes no difference to the dealer, it is still a cash deal to them because even though you pay off the car loan over years, the bank pays them immediately in full. |
How can I invest in an index fund but screen out (remove) certain categories of socially irresponsible investments? | It would involve manual effort, but there is just a handful of exclusions, buy the fund you want, plug into a tool like Morningstar Instant X Ray, find out your $10k position includes $567.89 of defense contractor Lockheed Martin, and sell short $567.89 of Lockheed Martin. Check you're in sync periodically (the fund or index balance may change); when you sell the fund close your shorts too. |
Meaning of capital market | Just to clarify, In wikipedia when it says It is defined as a market in which money is provided for periods longer than a year They are referring to the company which is asking for money. So for example the stock market provides money to the issuing company of an IPO, indefinitely. Meaning the company that just went public is provided with money for a period longer than a year. The definition in Investopedia basically says the same thing Wikipedia does it is just phrased slightly different and leaves out the "for periods longer than a year". For example Wikipedia uses the term "business enterprises" and "governments" while Investopedia uses the term private sector and public sector, in this context "business enterprise" is "private sector" and "governments" is "public sector" So in the sense of the length debt is issued yes, money market would be the opposite of a capital market but both markets still offer a place for governments and companies to raise money and both are classified as financial markets. |
What are the risks of Dividend-yielding stocks? | The risk in a divident paying stock can come from 2 sources. The business of the company, or the valuation of the stock at the time you buy. The business of the company relates to how they are running things, the risks they are taking with the company, innovations in their pipeline, and their competitive landscape. You can find all sorts of examples of companies that paid nice dividends but didn't end so well... Eastman Kodak, Enron, Lehman brothers, all used to pay very nice dividends at some point... On the other hand you have the valuation. The company is running great, but the market has unrealistic expectations about it. Think Amazon and Yahoo back in 2001... the price was way too high for the company's worth. As the price of a stock goes up, the return that you get from its future cash flows (dividends) goes down (and viceversa). If you want to go deep into the subject, check out this course from Chicago U they spend a lot of time talking about dividends, future returns from stocks and the risk rewards of finding stocks by methods such as these. |
Making enquiries about shares | Is anything possible, and if so, how? Because of the circumstances, there is nothing you can do. You do not have the ISIN, nor are you a part-owner of the account. The information you would need is: As always, good luck. |
How and why does the exchange rate of a currency change almost everyday? | The basic idea is that money's worth is dependent on what it can be used to buy. The principal driver of monetary exchange (using one type of currency to "buy" another) is that usually, transactions for goods or services in a particular country must be made using that country's official currency. So, if the U.S. has something very valuable (let's say iPhones) that people in other countries want to buy, they have to buy dollars and then use those dollars to buy the consumer electronics from sellers in the U.S. Each country has a "basket" of things they produce that another country will want, and a "shopping list" of things of value they want from that other country. The net difference in value between the basket and shopping list determines the relative demand for one currency over another; the dollar might gain value relative to the Euro (and thus a Euro will buy fewer dollars) because Europeans want iPhones more than Americans want BMWs, or conversely the Euro can gain strength against the dollar because Americans want BMWs more than Europeans want iPhones. The fact that iPhones are actually made in China kind of plays into it, kind of not; Apple pays the Chinese in Yuan to make them, then receives dollars from international buyers and ships the iPhones to them, making both the Yuan and the dollar more valuable than the Euro or other currencies. The total amount of a currency in circulation can also affect relative prices. Right now the American Fed is pumping billions of dollars a day into the U.S. economy. This means there's a lot of dollars floating around, so they're easy to get and thus demand for them decreases. It's more complex than that (for instance, the dollar is also used as the international standard for trade in oil; you want oil, you pay for it in dollars, increasing demand for dollars even when the United States doesn't actually put any oil on the market to sell), but basically think of different currencies as having value in and of themselves, and that value is affected by how much the market wants that currency. |
Frequency of investments to maximise returns (and minimise fees) | Okay, I think I managed to find the precise answer to this problem! It involves solving a non-linear exponential equation, but I also found a good approximate solution using the truncated Taylor series. See below for a spreadsheet you can use. Let's start by defining the growth factors per period, for money in the bank and money invested: Now, let S be the amount ready to be invested after n+1 periods; so the first of that money has earned interest for n periods. That is, The key step to solve the problem was to fix the total number of periods considered. So let's introduce a new variable: t = the total number of time periods elapsed So if money is ready to invest every n+1 periods, there will be t/(n+1) separate investments, and the future value of the investments will be: This formula is exact in the case of integer t and n, and a good approximation when t and n are not integers. Substituting S, we get the version of the formula which explicitly depends on n: Fortunately, only a couple of terms in FV depend on n, so we can find the derivative after some effort: Equating the derivative to zero, we can remove the denominator, and assuming t is greater than zero, we can divide by the constant ( 1-G t ): To simplify the equation, we can define some extra constants: Then, we can define a function f(n) and write the equation as: Note that α, β, γ, G, and R are all constant. From here there are two options: Use Newton's method or another numerical method for finding the positive root of f(n). This can be done in a number of software packages like MATLAB, Octave, etc, or by using a graphics calculator. Solve approximately using a truncated Taylor series polynomial. I will use this method here. The Taylor series of f(n), centred around n=0, is: Truncating the series to the first three terms, we get a quadratic polynomial (with constant coefficients): Using R, G, α, β and γ defined above, let c0, c1 and c2 be the coefficients of the truncated Taylor series for f(n): Then, n should be rounded to the nearest whole number. To be certain, check the values above and below n using the formula for FV. Using the example from the question: For example, I might put aside $100 every week to invest into a stock with an expected growth of 9% p.a., but brokerage fees are $10/trade. For how many weeks should I accumulate the $100 before investing, if I can put it in my high-interest bank account at 4% p.a. until then? Using Newton's method to find roots of f(n) above, we get n = 14.004. Using the closed-form approximate solution, we get n = 14.082. Checking this against the FV with t = 1680 (evenly divisible by each n + 1 tested): Therefore, you should wait for n = 14 periods, keeping that money in the bank, investing it together with the money in the next period (so you will make an investment every 14 + 1 = 15 weeks.) Here's one way to implement the above solution with a spreadsheet. StackExchange doesn't allow tables in their syntax at this time, so I'll show a screenshot of the formulae and columns you can copy and paste: Formulae: Copy and paste column A: Copy and paste column B: Results: Remember, n is the number of periods to accumulate money in the bank. So you will want to invest every n+1 weeks; in this case, every 15 weeks. |
Creating a Limited company while still fully employed | Can I apply for limited company now, while fully time employed, and not take any business until I get a contract? Some employment contracts may include non-compete clauses or similar which expressly forbid you engaging in other employment or becoming self-employed while simultaneously working for your current employer. You may want to check this out before making any moves to register as a limited company. You may forfeit long-term benefits (such as a pension) you have built up at your present employer if they catch wind of a conflict of interest. As noted in an earlier answer, the setup process for a limited company is extremely simple in the UK, so there is no reason you need to take these steps in advance of leaving your current employment. During my resignation period scout for contracts... Should I wait weeks before actually deciding to search for contracts? Depending on the type of IT work you intend to be contracting for, you may find yourself shut out from major work if you are not VAT registered. It is a requirement to register for VAT when you breach certain earnings limits (see HMRC's website) but you can voluntarily register with HMRC before these limits if you wish. Being VAT registered increases your bookkeeping and oversight requirements, which makes you appear more attractive to larger enterprises / corporations than a non-VAT registered firm. It also suggests some degree of stability and a plan to stick around for the long haul. This might be a catch-22 situation - if you want to get noticed and land the sizable contracts, you will almost certainly require a VAT registration regardless of your overall yearly earnings. It would be advisable to engage the services of a professional advisor before becoming VAT registered, but this and the subsequent professional advice you may require for putting in VAT claims may not be a fee you wish to pay upfront if you are only attracting a small volume of work. |
Does a stay at home mom need term life insurance? | Absolutely! Just because a spouse doesn't have a taxable income, doesn't mean they aren't providing real, tangible benefit to the family economy with an important job. As tragic as it is to consider losing your spouse, are you truly in a position to replace everything they do you for you? Knowing what they do for you and appreciating the effort your spouse gives is important, but don't sell short the dollar amount of what they provide. Your life insurance policy should be to keep you whole. Without your spouse, you will need childcare. You might need domestic services to the home. What about a nanny or similar service? Would $50K cover that until your child is an adult? There are a number of added expenses in the short and long term that would occur if a spouse died. How much for a funeral? Obviously you know the amount and term depends on the age of your kid. But I think you should really try to account for the number of daily hours you spouse puts in, and try to attach a cost to those hours. Then buy insurance for them just as you would for a wage earning. For example, buy a policy that is 10x the annual cost for services it would take to compensate for your spouse. Your tolerance for risk and cost can adjust it up and down from there. |
Is 401k as good as it sounds given the way it is taxed? | If you pay 20% tax now and none later or if you pay no tax now and 20% later, it doesn't make a difference. Mathematically, it's the same. You have to guess about which tax rate (now vs later) will be higher for you in order for you to make the best choice. Predicting tax rates 40 years in advance is hard. Everybody pretends like they can do this accurately. I would suggest going half and half. If you have 20k and put half in pre-tax (10k in) and half in post-tax (only 8k in) you end up with 18k total in which is right in the middle of where you would be if you went with the whole 20k in either extreme. It would also leave you owing 2k in tax rather than the possible 4k in tax if you had gone with all pre-tax. When you split down the middle, you are guaranteed to have 50% in the "right" side, the side with the best outcome. Being guaranteed to be 50% on the right side is pretty good compared to maybe being 100% on the wrong side. |
What are the top “market conditions” to follow? | If you're investing for the long term your best strategy is going to be a buy-and-hold strategy, or even just buying a few index funds in several major asset classes and forgetting about it. Following "market conditions" is about as useful to the long term trader as checking the weather in Anchorage, Alaska every day (assuming that you don't live in Anchorage, Alaska). Let me suggest treating yourself to a subscription to The Economist and read it once a week. You'll learn a lot more about investing, economics, and world trends, and you won't be completely in the dark if there are major structural changes in the world (like gigantic housing bubbles) that you might want to know about. |
Using 2 different social security numbers | While I agree with keshlam@ that the gym had no reason (or right) to ask for your SSN, giving false SSN to obtain credit or services (including gym membership) may be considered a crime. While courts disagree on whether you can be charged with identity theft in this scenario, you may very well be charged with fraud, and if State lines are crossed (which in case of store cards is likely the case) - it would be a Federal felony charge. Other than criminal persecution, obviously not paying your debt will affect your credit report. Since you provided false identity information, the negative report may not be matched to you right away, but it may eventually. In the case the lender discovers later that you materially misrepresented information on your mortgage application - they may call on your loan and either demand repayment in full at once or foreclose on you. Also, material misrepresentation of facts on loan application is also a criminal fraud. Again, if State lines are crossed (which in most cases, with mortgages they are), it becomes a Federal wire fraud case. On mortgage application you're required to disclose your debts, and that includes lines of credits (store cards and credit cards are the same thing) and unpaid debts (like your gym membership, if its in collection). |
Are precious metals/collectibles a viable emergency fund? | If it were me, I would convert it to cash and keep it in a liquid account. The assumption that silver will increase in value is misguided. From 1985 to 2002, it was flat. It's gone up and been far more volatile since then, and there has been significant declines which could eat at the stability of an emergency fund. Precious metals are speculation, not investing. They do not create wealth. Investing is typically considered too volatile for an emergency fund, more so keeping the money in metals. Making it more difficult to get to, like keeping it in a separate account might also fight against frivolous or accidental spending. Also there tends to be high transaction costs when liquidating metals. I found the best way is to use eBay. After some further comments and clarification here I suspect you are dealing with something else. Namely, the "white picket fence". Again, this is supposition, but perhaps she envisions the two of you married and hosting a dinner party using the passed down silver. This could be a strong emotional bond, and as such it could trump the logical arguments. Keeping it as an emergency fund: foolish. You helping her keep it because you are planning a life together: smart. |
Good way to record currency conversion transactions in personal accounting software? | Here's what the GnuCash documentation, 10.5 Tracking Currency Investments (How-To) has to say about bookkeeping for currency exchanges. Essentially, treat all currency conversions in a similar way to investment transactions. In addition to asset accounts to represent holdings in Currency A and Currency B, have an foreign exchange expenses account and a capital gains/losses account (for each currency, I would imagine). Represent each foreign exchange purchase as a three-way split: source currency debit, foreign exchange fee debit, and destination currency credit. Represent each foreign exchange sale as a five-way split: in addition to the receiving currency asset and the exchange fee expense, list the transaction profit in a capital gains account and have two splits against the asset account of the transaction being sold. My problems with this are: I don't know how the profit on a currency sale is calculated (since the amount need not be related to any counterpart currency purchase), and it seems asymmetrical. I'd welcome an answer that clarifies what the GnuCash documentation is trying to say in section 10.5. |
Why are American-style options worth more than European-style options? | Differences in liquidity explain why American-style options are generally worth more than their European-style counterparts. As far as I can tell, no one mentioned liquidity in their answer to this question, they just introduced needlessly complex math and logic while ignoring basic economic principles. That's not to say the previous answers are all wrong - they just deal with periphery factors instead of the central cause. Liquidity is a key determinant of pricing/valuation in financial markets. Liquidity simply describes the ease with which an asset can be bought and sold (converted to cash). Without going into the reasons why, treasury bills are one of the most liquid securities - they can be bought or sold almost instantly at any time for an exact price. The near-perfect liquidity of treasuries is one of the major reasons why the price (yield) of a t-bill will always be higher (lower yield) than that of an otherwise identical corporate or municipal bond. Stated in general terms, a relatively liquid asset is always worth more than an relatively illiquid asset, all else being equal. The value of liquidity is easy to understand - we experience it everyday in real life. If you're buying a house or car, the ability to resell it if needed is an important component of the decision. It's the same for investors - most people would prefer an asset that they can quickly and easily liquidate if the need for cash arises. It's no different with options. American-style options allow the holder to exercise (liquidate) at any time, whereas the buyer of a European option has his cash tied up until a specific date. Obviously, it rarely makes sense to exercise an option early in terms of net returns, but sometimes an investor has a desperate need for cash and this need outweighs the reduction in net profits from early exercise. It could be argued that this liquidity advantage is eliminated by the fact that you can trade (sell) either type of option without restriction before expiration, thus closing the long position. This is a valid point, but it ignores the fact that there's always a buyer on the other side of an option trade, meaning the long position, and the right/restriction of early exercise, is never eliminated, it simply changes hands. It follows that the American-style liquidity advantage increases an options market value regardless of one's position (call/put or short/long). Without putting an exact number on it, the general interest rate (time value of money) could be used to approximate the additional cost of an American-style option over a similar European-style contract. |
What happens when a company stops trading? (pink sheets) | What will happen if the stock price just continues to decline? Nothing. What would happen if folks just stop trading it? Nothing. What if the company goes private? Then they will have to buy you out based on some agreed upon price, as voted by the board and (potentially) approved by the shareholders. Depending on the corporation charter, the board may not be required to seek the shareholders' approval, but if the price the board agreed upon is unreasonable you can sue and prevent the transaction. How do they decide the fair value of the outstanding stocks? Through a process called "valuation", there are accounting firms which specialize in this area of public accounting. |
Why can't you just have someone invest for you and split the profits (and losses) with him? | On reflection there are financial products that do what you want, whole-life insurance policies that guarantee an annual dividend calculation on some index with a ceiling and floor. So you will have a return within a defined minimum and maximum range. There are a lot of opinions on the internet on this. This Consumer Reports article is balanced These have a reputation for being bad for the consumer compared to buying term life and investing in a mutual fund separately, but if you want the guarantee (or are a "moral hazard" for a life insurance policy, closer to death than you appear on paper) it may be a product for you. If you're very wealthy, there is an estate tax exploit in insurance death benefits that can make this an exceptional shield on assets for your heirs, with the market return just the gravy. |
How splits and dividends affect option prices | Investopedia explains how a stock split impacts the stock's options: Each option contract is typically in control of 100 shares of an underlying security at a predetermined strike price. To find the new coverage of the option, take the split ratio and multiply by the old coverage (normally 100 shares). To find the new strike price, take the old strike price and divide by the split ratio. Say, for example, you own a call for 100 shares of XYZ with a strike price of $75. Now, if XYZ had a stock split of 2 for 1, then the option would now be for 200 shares with a strike price of $37.50. If, on the other hand, the stock split was 3 for 2, then the option would be for 150 shares with a strike price of $50. So, yes, a 2 for 1 stock split would halve the option strike prices. Also, in case the Investopedia article isn't clear, after a split the options still control 100 shares per contract. Regarding how a dividend affects option prices, I found an article with a good explanation: As mentioned above, dividends payment could reduce the price of a stock due to reduction of the company's assets. It becomes intuitive to know that if a stock is expected to go down, its call options will drop in extrinsic value while its put options will gain in extrinsic value before it happens. Indeed, dividends deflate the extrinsic value of call options and inflate the extrinsic value of put options weeks or even months before an expected dividend payment. Extrinsic value of Call Options are deflated due to dividends not only because of an expected reduction in the price of the stock but also due to the fact that call options buyers do not get paid the dividends that the stock buyers do. This makes call options of dividend paying stocks less attractive to own than the stocks itself, thereby depressing its extrinsic value. How much the value of call options drop due to dividends is really a function of its moneyness. In the money call options with high delta would be expected to drop the most on ex-date while out of the money call options with lower delta would be least affected. If a stock is expected to drop by a certain amount, that drop would already have been priced into the extrinsic value of its put options way beforehand. This is what happens to put options of dividend paying stocks. This effect is again a function of options moneyness but this time, in the money put options raise in extrinsic value more than out of the money put options. This is because in the money put options with delta of close to -1 would gain almost dollar or dollar on the drop of a stock. As such, in the money put options would rise in extrinsic value almost as much as the dividend rate itself while out of the money put options may not experience any changes since the dividend effect may not be strong enough to bring the stock down to take those out of the money put options in the money. So, no, a dividend of $1 will not necessarily decrease an option's price by $1 on the ex-dividend date. It depends on whether it's a call or put option, and whether the option is "in the money" or "out of the money" and by how much. |
Should I pay off my credit card online immediately or wait for the bill? | If you carried a balance from the last month, then pay the card off as soon as possible. Otherwise I agree with @mbhunter that you should wait until close to time for the bill to become due. Then always pay the credit card off in full and you will borrowing Chase's money interest free for up to 30 days. |
What assets would be valuable in a post-apocalyptic scenario? | Guns. Without them, any other conceivable asset would be taken from you. By someone with guns. |
Does it make any sense to directly contribute to reducing the US national debt? | I think it would have the same effect as paying off a compulsive gambler's debts. Until Congress and the people who vote for them can exercise some fiscal responsibility sending more money to Washington is pointless. In fact, I'd argue that if you were a multi-trillionaire and could pay off the whole thing through a donation, we'd be back to deficits within a decade (or less). |
Recognizing the revenue on when virtual 'credits' are purchased as opposed to used | I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct. Also, I preface this with the caveat that I am neither a lawyer nor an accountant. However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time. This is because the customer has pre-paid and purchased a service (i.e. the "credits", which are units of time available in the application). This is clearly a complete transaction. The use of the credits is irrelevant. This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used). This mirrors many online service providers (say, NetFlix) in business model. This is different from the case in which a customer purchases a "gift card" or "reloadable debit card". In this case, sales tax is NOT collected (because this is technically not a purchase). Revenue is also not booked at this time. Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card). To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently? Suppose the gift card is used to purchase a tax-exempt item?) For justification, see bankruptcy consideration of the two cases. In the former, the customer has "ownership" of an asset (the credits), which cannot be taken from him (although it might be unusable). In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment. Consider also the case where the cost of the "credits" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free). The customer has a "tangible" item (one credit) which gets the same functionality regardless of price. This would be different if instead of "credits" you instead maintain an "account" where the user deposited $1000 and was billed for usage; in this case you fall back to the "gift card" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service. For this model to work, the "credit" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of "services". You may have particular responsibility in the handling of this "deposit" as well. |
Investing using leverage | Step 2 is wrong. Leverage is NOT necessary. It increases possible gain, but increases risk of loss by essentially the same amount. Those two numbers are pretty tightly linked by market forces. See many, many other answers here showing that one can earn "market rate" -- 8% or so -- with far less risk and effort, if one is patient, and some evidence that one can do better with more effort and not too much more risk. And yes, investing for a longer time horizon is also safer. |
Analyst estimates for an insurance company | Something to consider is how broad is Yahoo! Finance taking in their data for making some comparisons. For example, did you look at the other companies in the same industry? On the Industry page, the Top Life Insurance Companies by Market Cap are mostly British companies which could make things a bit different than you'd think. Another point is how this is just for one quarter which may be an anomaly as the data could get a bit awkward if some companies are just coming back to being profitable and could have what appears to be great growth but this is because their earnings grow from $.01/share to $1/share which is a growth of $10,000 percent as this is an increase of 100 times but really this may just be from various accounting charges the company had that hit its reserves and caused its earnings to dip temporarily. |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | I'm pretty sure it's merchant-dependent. If a credit card transaction doesn't go through, PayPal will automatically charge your bank account. Some merchants may want that extra insurance. |
What is a checking account and how does it work? | A savings account and a checking account (or a "demand" account, or a "transactional" account) have different regulations. For example, fractional reserve requirements are 10% against checking accounts, but 0% against savings accounts. The theory is that savings accounts are sticky, while checking accounts are hot money. So the Fed wants to stop banks from creating accounts that are regulated as savings accounts but have the features of checking accounts. In the past, this was done by forbidding banks to pay interest on checking accounts. They eliminated that rule back in the inflation years, and instead imposed the rule that to qualify as a savings accounts for regulatory purposes, banks must discourage you from using them as transactional accounts. For example, by limiting the number of withdrawals per month that can be made from a savings account. If the Fed gave up on trying to enforce a distinction, I suspect there would soon no longer be a distinction. |
Home Renovations are expensive.. Should I only pay cash for them? | I have a different take on this. If it would only take 3 months to save up to pay for it, line up the work now. Shop with your spouse to find the exact floor you want. By the time you hire the store to do the install, a month will have gone by, by the time the charge bill comes in, you'll be able to pay 2/3 off, and pay in full next month. Note: I see this was asked in December. For those carrying no debt at all, I'm not adverse to a purchase of this type getting partially floated on a credit card for a month or two. Not a pair of shoes, or golf clubs, but a kitchen floor? The $10 interest is worth it to not walk over a ripped up floor in your home. |
60% Downpayment on house? | Keep in mind, this is a matter of preference, and the answers here are going to give you a look at the choices and the member's view on the positive/negative for each one. My opinion is to put 20% down (to avoid PMI) if the bank will lend you the full 80%. Then, buy the house, move in, and furnish it. Keep track of your spending for 2 years minimum. It's the anti-budget. Not a list of constraints you have for each category of spending, but a rear-view mirror of what you spend. This will help tell you if, in the new house, you are still saving well beyond that 401(k) and other retirement accounts, or dipping into that large reserve. At that point, start to think about where kids fit into your plans. People in million dollar homes tend to have child care that's 3-5x the cost the middle class has. (Disclosure - 10 years ago, our's cost $30K/year). Today, your rate will be about 4%, and federal marginal tax rate of 25%+, meaning a real cost of 3%. Just under the long term inflation rate, 3.2% over the last 100 years. I am 53, and for my childhood right through college, the daily passbook rate was 5%. Long term government debt is also at a record low level. This is the chart for 30 year bonds. I'd also suggest you get an understanding of the long term stock market return. Long term, 10%, but with periods as long as 10 years where the return can be negative. Once you are at that point, 2-3 years in the house, you can look at the pile of cash, and have 3 choices. We are in interesting times right now. For much of my life I'd have said the potential positive return wasn't worth the risk, but then the mortgage rate was well above 6-7%. Very different today. |
Is there a good forum where I can discuss individual US stocks? | I've used Wikinvest before and think that's close to what you're looking for - but in Wiki-style rather than forums. Otherwise, I agree with CrimsonX that The Motley Fool is a good place to check out. |
Married Couple - Open investment account Separate or Joined? | I don't believe it makes a difference at the federal level -- if you file taxes jointly, gains, losses, and dividends appear on the joint tax account. If you file separately, I assume the tax implications only appear on the owner's tax return. Then the benefits might outweigh the costs, but only if you correctly predict market behavior and the behavior of your positions. For example, lets say you lose 30k in the market in one year, and your spouse makes 30k. If you're filing jointly, the loss washes out the gain, and you have no net taxes on the investment. If you're filing separately, you can claim 3k in loss (the remaining 27k in loss is banked to future tax years), but your spouse pays taxes on 30k in gain. Where things get more interesting is at the state level. I live in a "community property state," where it doesn't matter whether you have separate accounts or not. If I use "community money" to purchase a stock and make a million bucks, that million bucks is shared by the two of us, whether the account is in my name our in our name. income during the marriage is considered community property. However property you bring into the marriage is not. And inheritances are not community property -- until co-mingled. Not sure how it works in other states. I grew up in what's called an "equitable property state." |
First time home buyer. How to negotiate price? | Well it all kind of depends. The Realtor is your pro, and you should communicate further with him. Is this a neighborhood on the decline? Is there a good reason to make such a low offer? Are you totally off base when you think 85K is fair, and if so why? Is he just working his tail off for you (a great thing)? One thing that is a key to this negotiation is financing. What does your financing status look like? A reasonable cash offer with no contingencies and a quick close might be less than 70K. A person with strong financing can get a better discount then a person that is questionable. It could be that the Realtor is testing the waters to find the bottom price. The home selling season is closed (typically the summer), and the home has been on the market for a bit. Offering 70K might mean a counter at 82K, so you can work on an offer between 80 and 82. To me, it sounds like this guy is working for you. You should thank him. It is pretty hard to find a realtor that is willing to negotiate his pay down in order to save you money. Also he can answer the closing cost question better than us as he is more familiar with your particular market. |
Question about data from FTSE 100 | Open, high, low, close, volume. The hint is that volume on new years day is 0. DC's comment is actually a better answer than mine - when given any data set, you should really know the meaning of each cell/number. |
Long term saving: Shares, Savings Account or Fund | Congratulations on a solid start. Here are my thoughts, based on your situation: Asset Classes I would recommend against a long-term savings account as an investment vehicle. While very safe, the yields will almost always be well below inflation. Since you have a long time horizon (most likely at least 30 years to retirement), you have enough time to take on more risk, as long as it's not more than you can live with. If you are looking for safer alternatives to stocks for part of your investments, you can also consider investment-grade bonds/bond funds, or even a stable value fund. Later, when you are much closer to retirement, you may also want to consider an annuity. Depending on the interest rate on your loan, you may also be able to get a better return from paying down your loan than from putting more in a savings account. I would recommend that you only keep in a savings account what you expect to need in the next few years (cushion for regular expenses, emergency fund, etc.). On Stocks Stocks are riskier but have the best chance to outperform versus inflation over the long term. I tend to favor funds over individual stocks, mostly for a few practical reasons. First, one of the goals of investing is to diversify your risk, which produces a more efficient risk/reward ratio than a group of stocks that are highly correlated. Diversification is easier to achieve via an index fund, but it is possible for a well-educated investor to stay diversified via individual stocks. Also, since most investors don't actually want to take physical possession of their shares, funds will manage the shares for you, as well as offering additional services, such as the automatic reinvestments of dividends and tax management. Asset Allocation It's very important that you are comfortable with the amount of risk you take on. Investment salespeople will prefer to sell you stocks, as they make more commission on stocks than bonds or other investments, but unless you're able to stay in the market for the long term, it's unlikely you'll be able to get the market return over the long term. Make sure to take one or more risk tolerance assessments to understand how often you're willing to accept significant losses, as well as what the optimal asset allocation is for you given the level of risk you can live with. Generally speaking, for someone with a long investment horizon and a medium risk tolerance, even the most conservative allocations will have at least 60% in stocks (total of US and international) with the rest in bonds/other, and up to 80% or even 100% for a more aggressive investor. Owning more bonds will result in a lower expected return, but will also dramatically reduce your portfolio's risk and volatility. Pension With so many companies deciding that they don't feel like keeping the promises they made to yesterday's workers or simply can't afford to, the pension is nice but like Social Security, I wouldn't bank on all of this money being there for you in the future. This is where a fee-only financial planner can really be helpful - they can run a bunch of scenarios in planning software that will show you different retirement scenarios based on a variety of assumptions (ie what if you only get 60% of the promised pension, etc). This is probably not as much of an issue if you are an equity partner, or if the company fully funds the pension in a segregated account, or if the pension is defined-contribution, but most corporate pensions are just a general promise to pay you later in the future with no real money actually set aside for that purpose, so I'd discount this in my planning somewhat. Fund/Stock Selection Generally speaking, most investment literature agrees that you're most likely to get the best risk-adjusted returns over the long term by owning the entire market rather than betting on individual winners and losers, since no one can predict the future (including professional money managers). As such, I'd recommend owning a low-cost index fund over holding specific sectors or specific companies only. Remember that even if one sector is more profitable than another, the stock prices already tend to reflect this. Concentration in IT Consultancy I am concerned that one third of your investable assets are currently in one company (the IT consultancy). It's very possible that you are right that it will continue to do well, that is not my concern. My concern is the risk you're carrying that things will not go well. Again, you are taking on risks not just over the next few years, but over the next 30 or so years until you retire, and even if it seems unlikely that this company will experience a downturn in the next few years, it's very possible that could change over a longer period of time. Please just be aware that there is a risk. One way to mitigate that risk would be to work with an advisor or a fund to structure and investment plan where you invest in a variety of sector funds, except for technology. That way, your overall portfolio, including the single company, will be closer to the market as a whole rather than over-weighted in IT/Tech. However, if this IT Consultancy happens to be the company that you work for, I would strongly recommend divesting yourself of those shares as soon as reasonably possible. In my opinion, the risk of having your salary, pension, and much of your investments tied up in the fortunes of one company would simply be a much larger risk than I'd be comfortable with. Last, make sure to keep learning so that you are making decisions that you're comfortable with. With the amount of savings you have, most investment firms will consider you a "high net worth" client, so make sure you are making decisions that are in your best financial interests, not theirs. Again, this is where a fee-only financial advisor may be helpful (you can find a local advisor at napfa.org). Best of luck with your decisions! |
Could an ex-employee of a company find themself stranded with shares they cannot sell (and a tax bill)? | they are entirely free to do whatever they want with the shares. In particular, they can sell them to whomever they choose No. Restrictions on who can sell when and to whom are a common thing with startups. "Publicly traded" companies are regulated in a much stricter way than private companies, so until the IPO the sales are limited to the OTC markets. But even that can be restricted by bylaws - for example ownership can only be limited to a group of investors approved by the board. As an employee - your grant was approved by the board, but when you come to sell, the buyer was not and the company may not agree to vet them. Bottom line is that it is not illegal to impose all kinds of restrictions on what the employees can do with their shares, as long as the shares are not listed on a public stock exchange (even after the company goes IPO with one class, other classes may remain restricted). |
Dividends Growing Faster than Cost of Capital | I don't think the method falls short, it's the premise that is wrong. If the dividend stream really did grow faster than the cost of capital indefinitely, eventually the company behind the share would become larger than the entire economy. Logically, at some point, the growth must slow down. |
Pay off car loan entirely or leave $1 until the end of the loan period? | I used to work for Ally Auto (formerly known as GMAC) and I'd advise not to pay off the account unless you need to free up some debt in your credit report since until the account is paid off it will show that you owe your financial institution the original loan amount. The reason why I am saying not to pay-off the account is because good/bad payments are sent to the credit bureau 30 days after the due date of the payment, and if you want to increase your credit score then its best to pay it on a monthly basis, the negative side to this is you will pay more interest by doing this. If ever you decide to leave $1.00 in loan, I am pretty much sure that the financial institution will absorb the remaining balance and consider the account paid off. What exactly is your goal here? Do you plan to increase your credit score? Do you need to free up some debt? |
How does one value Facebook stock as a potential investment? | The amount of hype and uneducated investors/speculators driving its prices up. Just by that I would say its prices are inflated. Bear in mind that Facebook don't sell anything tangible. They can go down as fast as they went up. Most of their income is ad based and single-product oriented, and as such highly dependent on usage and trends (remember MySpace?). Having said that, all the other "classic" valuation techniques are still valid and you should utilize them. |
Can you buy out a pink sheet listed company by purchasing all of the oustanding shares? | I suggest you contact head of the company your are interested in, ask if he or she owns a controlling interest. If so offer to buy him out. |
FICA was not withheld from my paycheck | According to this section in Publication 15: Collecting underwithheld taxes from employees. If you withheld no income, social security, or Medicare taxes or less than the correct amount from an employee's wages, you can make it up from later pay to that employee. But you’re the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. [...] it seems that if the employer withheld less than the correct amount of FICA taxes from you, it is still the employer who owes your FICA taxes to the government, not you. I do not believe there is a way for you, an employee (not self-employed), to directly pay FICA taxes to the government without going through the employer. The employer can deduct the underwithheld amount from you future paychecks (assuming you still work for them), or settle it with you in some other way. In other words, you owe the employer, and the employer owes the government, but you do not directly owe the government. If they do deduct it from your future pay, then they can issue a corrected W-2, to reflect the amount deducted from you. But they cannot issue a corrected W-2 that says FICA were deducted from you if it wasn't. |
I file 83(b) election, but did't include a copy of it in that year’s tax return | This may be relevant: it suggests that IRS is lenient with the attachment of the form with 1040. To paraphrase: "The ruling involved a taxpayer who timely filed the election with the IRS within 30 days of the property transfer but who did not attach a copy of the election to his or her Form 1040 for the year of the transfer. Fortunately for the taxpayer in question, the ruling indicated that the submission of the election to the IRS within 30 days of the property transfer fulfilled the requirements for a valid election, and the failure to attach the copy to the tax return did not affect the validity of the election. The IRS requested that the taxpayer forward a copy of the election to the IRS to be associated with the processing of the tax return. - See more at: http://www.bnncpa.com/services/employee_benefit_plans/blog/irs_rules_that_failure_to_attach_83b_election_to_form_1040_did_not_invalida#sthash.0c3h2nJY.dpuf" If someone wants to grok the IRS ruling: http://www.irs.gov/pub/irs-wd/1405008.pdf And this is the article where I saw the above referenced. www.bnncpa.com/services/employee_benefit_plans/blog/irs_rules_that_failure_to_attach_83b_election_to_form_1040_did_not_invalida |
Can travel expenses be deducted from Form 1040A if they were used to gather material for a book? | Hobby expenses are not tax deductible. Business expenses are, but only if it's a bona fide business. First they look at profitability: if you reported a net profit (i.e. paid taxes) in your first 3 years, they will believe you rant on Youtube for a living. Remember, by the time they get around to auditing you, you'll likely be well into, or through, your third year. There is an exception for farms. Other than that, if you lose money year after year, you better be able to show that you look, walk and quack like a business; and one with a reasonable business reason for delayed profitability. For instance Netflix's old business model of mailing DVDs had very high fixed infrastructure expense that took years to turn profitable, but was a very sensible model. They're fine with that. Pets.com swandived into oblivion but they earnestly tried. They're fine with that too. You can't mix all your activities. If you're an electrician specializing in IoT and smart homes, can you deduct a trip to the CES trade show, you bet. Blackhat conference, arguable. SES? No way. Now if you had a second business of a product-reco site which profited by ads and affiliate links, then SES would be fine to deduct from that business. But if this second business loses money every year, it's a hobby and not deductible at all. That person would want separate accounting books for the electrician and webmaster businesses. That's a basic "duck test" of a business vs. a hobby. You need to be able to show how each business gets income and pays expense separate from every other business and your personal life. It's a best-practice to give each business a separate checking account and checkbook. You don't need to risk tax penalties on a business-larva that may never pupate. You can amend your taxes up to 3 years after the proper filing date. I save my expense reciepts for each tax year, and if a business becomes justifiable, I go back and amend past years' tax forms, taking those deductions. IRS gives me a refund check, with interest! |
Are my purchases of stock, mutual funds, ETF's, and commodities investing, or speculation? | I'd argue the two words ought to (in that I see this as a helpful distinction) describe different activities: "Investing": spending one's money in order to own something of value. This could be equipment (widgets, as you wrote), shares in a company, antiques, land, etc. It is fundamentally an act of buying. "Speculating": a mental process in which one attempts to ascertain the future value of some good. Speculation is fundamentally an act of attempted predicting. Under this set of definitions, one can invest without speculating (CDs...no need for prediction) and speculate without investing (virtual investing). In reality, though, the two often go together. The sorts of investments you describe are speculative, that is, they are done with some prediction in mind of future value. The degree of "speculativeness", then, has to be related to the nature of the attempted predictions. I've often seen that people say that the "most speculative" investments (in my use above, those in which the attempted prediction is most chaotic) have these sorts of properties: And there are probably other ideas that can be included. Corrections/clarifications welcome! P.S. It occurs to me that, actually, maybe High Frequency Trading isn't speculative at all, in that those with the fastest computers and closest to Wall Street can actually guarantee many small returns per hour due to the nature of how it works. I don't know enough about the mechanics of it to be sure, though. |
Does the P/E ratio not apply to bond ETFs? | How would you compute the earnings for governments that are some of the main issuers of bonds and debt? When governments run deficits they would have a negative earnings ratio that makes the calculation quite hard to evaluate. |
Importance of dividend yield when evaluating a stock? | The dividend yield can be used to compare a stock to other forms of investments that generate income to the investor - such as bonds. I could purchase a stock that pays out a certain dividend yield or purchase a bond that pays out a certain interest. Of course, there are many other variables to consider in addition to yield when making this type of investment decision. The dividend yield can be an important consideration if you are looking to invest in stocks for an income stream in addition to investing in stocks for gain by a rising stock price. The reason to use Dividend/market price is that it changes the dividend from a flat number such as $1 to a percentage of the stock price, which thus allows it to be more directly compared with bonds and such which return a percentage yeild. |
What are the tax consequences if my S corporation earns money in a foreign country? | Be careful here: If ACME were in California, I would pay taxes on USD 17,000 because I had revenue of 20,000 and expenses of 3,000. To CALIFORNIA. And California taxes S-Corps. And, in addition, you'd pay $800 for the right of doing business in the State. All that in addition to the regular Federal and State taxes to the State where you're resident. Suppose that ACME is in Britain (or anywhere else for that matter). My revenue and expenses are the same, but now my money has been earned and my expenses incurred in a foreign country. Same thing exactly. Except that you'll have to pay taxes to the UK. There may be some provision in the tax treaty to help you though, so you may end up paying less taxes when working in the UK than in California. Check with a licensed tax adviser (EA/CPA licensed in your State) who won't run away from you after you say the words "Tax Treaty". Does it even make sense to use my S-Corporation to do business in a foreign country? That should be a business decision, don't let the tax considerations drive your business. |
Risks associated with investing in dividend paying stocks for short term income. Alternatives? | I wouldn't focus too much on dividends itself; at the end of the day what matters is total gain, because you can convert capital gain into income by selling your assets (they have different tax implications, but generally capital gains tend to be more tax efficient). I think the more important question is how much volatility you can tolerate. Since your investment horizon is short & your risk tolerance is low (as in if you suddenly get much lower income than you planned from your investment you'll be in trouble), you probably want assets that have low volatility. To achieve that, I'd consider the following if I were you: tl;dr If I were you I'd just hold a general investment portfolio with a lower risk profile rather than focusing on dividend generating assets. |
Where do expense ratios show up on my statement? | For Vanguard: Vanguard does compare its fees with similar funds from its competitors on this tab, but then again, this is Vanguard giving you this information, so take with a grain of salt. |
High dividend stocks | I had read a book about finance, and it had mentioned that you can gain big profits from investing in the best companies in the most boring markets, like the funeral business for example. These markets are slow growing, but the companies pay a good dividend. Many books recommend investing in dividends because of the compound growth and stable income. Remember that at the end of the day, you should put the same amount of research into buying a stock as you would buying the entire company. With that being said, you may find a great company that may or may not offer dividends, but it should not be of great significance since you feel you are buying into a great company at a fair price. Though dividend growth is a great tool to use to see if a company is doing well. |
When does it make sense for the money paid for equity to go to the corporation? | BigCo is selling new shares and receives the money from Venturo. If Venturo is offering $250k for 25% of the company, then the valuation that they are agreeing on is a value of $1m for the company after the new investment is made. If Jack is the sole owner of one million shares before the new investment, then BigCo sells 333,333 shares to Venturo for $250k. The new total number of shares of BigCo is 1,333,333; Venturo holds 25%, and Jack holds 75%. The amount that Jack originally invested in the company is irrelevant. At the moment of the sale, the Venturo and Jack agree that Jack's stake is worth $750k. The value of Jack's stake may have gone up, but he owes no capital gains tax, because he hasn't realized any of his gains yet. Jack hasn't sold any of his stake. You might think that he has, because he used to hold 100% and now he holds 75%. However, the difference is that the company is worth more than was before the sale. So the value of his stake was unchanged immediately before and after the sale. Jack agrees to this because the company needs this additional capital in order to meet its potential. (See "Why is stock dilution legal?") For further explanation and another example of this, see the question "If a startup receives investment money, does the startup founder/owner actually gain anything?" Your other scenario, where Venturo purchases existing shares directly from Jack, is not practical in this situation. If Jack sells his existing shares, you are correct that the company does not gain any additional capital. An investor would not want to invest in the company this way, because the company is struggling and needs new capital. |
Advantages of paying more of your mortgage while you know you won't continue to live there your whole life | I will add one thought on to this thread. This is a financial concept called "Net Present Value". In plain English, it means "What's the best use for your money right now?" So, let's say you have an extra €300/month which is not being spent on living expenses. If you leave that money under your pillow (or spend it on beer or fancy electronics!) instead of paying off your startersloan early, that is costing you 300*(0.04/12) per month, every month. So €1/month, or €12/year. This is cumulative for the life of your loan. So not paying €300 this month will ultimately cost you €120 assuming you keep the loan open for 10 years. If you're saying "pay my debts or spend the money on a snappy smartphone?" the answer is that you should pay your debts. Now, here's the important part. Let's suppose you have a better use for the money than beer or electronics. Let's suppose you have a mutual fund which will reliably provide you with a return of 10% a year. If you put that €300/month into a high-yield fund, and if the returns are consistent, you are STILL paying that €12/year (because you invested elsewhere and didn't pay your debts), but you are realizing profits of 300*(0.1/12)=€2.5/month on the invested money. €2.5-1=€1.5/month, which is a net gain. So, in some cases, paying off your debt may not be the best use of your money. There are a number of other questions involved which are related to your exposure to capital gains taxes, incentives or disincentives for holding debt, &c. &c. These are generally country specific. A poster above who seems to be familiar with Netherlands law did a good explanation of some of those incentives. I'm in the US, and our incentive and disincentive system is different. TL;DR: It depends. |
Clothing Store Credit Card Account closed but not deleted | There are three parties involved here: there's the store that issued you the card, then they have some bank that's actually handling the account, and there is some network (VISA, MasterCard, etc.) that the transactions go through. So one avenue to consider is seeing whether all three are aware of you canceling the card. |
1099 for settlement what about lawyer fees? | You report it as an expense against the 1099 income when you do your taxes. You will only be taxed on the amount after the lawyers fees (but if it cost you more in lawyers fees than you recover in damages, the loss is not deductible). Be sure to keep documentation of the lawyers bill and the contract. Compensatory damages are generally not taxable at all. You can see here for more information on that. |
What gives non-dividend stocks value to purchasers? [duplicate] | A Company start with say $100. Lets say the max it can borrow from bank is $100 @ $10 a year as Interest. After a years say, On the $200 the company made a profit of $110. So it now has total $310 Option 1: Company pays back the Bank $100 + $10. It further gave away the $100 back to shareholders as dividends. The Balance with company $100. It can again start the second year, borrow from Bank $100 @ 10 interest and restart. Option 2: Company pays back the Bank $100 + $10. It now has $200. It can now borrow $200 from Bank @ $20. After a year it makes a profit of $250. [Economics of scale result $30 more] Quite a few companies in growth phase use Option 2 as they can grow faster, achieve economies of scale, keep competition at bay, etc Now if I had a share of this company say 1 @ $1, by end of first year its value would be $2, at the end of year 2 it would be $3.3. Now there is someone else who wants to buy this share at end of year 1. I would say this share gives me 100% returns every year, so I will not sell at $2. Give me $3 at the end of first year. The buyer would think well, if I buy this at $3, first year I would notionally get $.3 and from then on $1 every year. Not bad. This is still better than other stocks and better than Bank CD etc ... So as long as the company is doing well and expected to do well in future its price keeps on increasing as there is someone who want to buy. Why would someone want to sell and not hold one: 1. Needs cash for buying house or other purposes, close to retirement etc 2. Is balancing the portfolio to make is less risk based 3. Quite a few similar reasons Why would someone feel its right to buy: 1. Has cash and is young is open to small risk 2. Believes the value will still go up further 3. Quite a few similar reasons |
Are there alternatives to double currency account to manage payments in different currencies? | Cheaper and faster are usually mutually exclusive. If you want faster, nothing is faster than cash. I would recommend using an ATM to withdraw cash from your USD account as Florints and then use as appropriate. If you want cheaper, then the cheapest currency conversion commonly available is foreign exchange / transfer services like OFX / XE Trade / Transferwise. Turn around time on these can be as little as a business day or two but more commonly takes a few business days, but they typically offer the best currency exchange rates at the lowest cost. If you must make regular payments to 3rd parties, you can set these services up to send the converted currency to a 3rd party rather than back to your own account. |
GAAP or non-GAAP numbers in nasdaq.com? | You're interpreting things correctly, at least at a high level. Those numbers come from the 10Q filing and investor summary from Microsoft, but are provided to NASDAQ by Zacks Investment Research, as noted on the main page you linked to. That's a big investment data firm. I'm not sure why they reported non-GAAP Microsoft numbers and not, say, AAPL numbers; it's possible they felt the non-GAAP numbers reflect things better (or have in the past) for some material reason, or it's possible they made a typo, though the last three quarters at least all used non-GAAP numbers for MSFT. MSFT indicates that the difference in GAAP and non-GAAP revenue is primarily deferred revenue (from Windows and Halo). I did confirm that the SEC filing for MSFT does include the GAAP number, not the non-GAAP number (as you'd expect). I will also note that it looks like the 10Q is not the only source of information. Look at ORCL for example: they had in the March 2016 report (period ending 2/29/16) revenues of .50/share GAAP / .64/share non-GAAP. But the NASDAQ page indicates .59/share for that quarter. My suspicion is that the investment data firm (Zack's) does additional work and includes certain numbers they feel belong in the revenue stream but are not in the GAAP numbers. Perhaps MS (and Oracle) have more of those - such as deferred software revenues (AAPL has relatively little of that, as most of their profit is hardware). |
What exactly changes following a stock split? Why doesn't “Shares” (on the following SEC balance sheet) change? | In theory*, if a company has 1m shares at $10 and does a 10 for 1 split, then the day after it has 10m shares at $1 (assuming no market move). So both the price and the number of share change, keeping the total value of the company unchanged. Regarding your BIS, I suspect that the new number of shares has not been reported yet because it's an ETF (the number of shares in issue changes everyday due to in/out flows). Your TWX example is not ideal either because there was a spin off on the same day as the stock split so you need to separate the two effects. * Some studies have documented a positive stock split effect - one of the suggested reasons is that the stock becomes more liquid after the split. But other studies have rejected that conclusion, so you can probably safely consider that on average it will not have a material effect. |
question about short selling stocks | If you had an agreement with your friend such that you could bring back a substantially similar car, you could sell the car and return a different one to him. The nature of shares of stock is that, within the specified class, they are the same. It's a fungible commodity like one pound of sand or a dollar bill. The owner doesn't care which share is returned as long as a share is returned. I'm sure there's a paragraph in your brokerage account terms of service eluding to the possibility of your shares being included in short sale transactions. |
Why would I want a diversified portfolio, versus throwing my investments into an index fund? | Index funds are well-known to give the best long-term investment. Are they? Maybe not all the time! If you had invested in an index fund tracking the S&P500 at the start of 2000 you would still be behind in terms of capital appreciation when taking inflation into considerations. Your only returns in 13.5 years would have been any dividends you may have received. See the monthly chart of the S&P500 below. Diversification can be good for your overall returns, but diversification simply for diversification sake is as you said, a way of reducing your overall returns in order of smoothing out your equity curve. After looking up indexes for various countries the only one that had made decent returns over a 13.5 year period was the Indian BSE 30 index, almost 400% over 13.5 years, although it also has gone nowhere since the end of 2007 (5.5 years). See monthly chart below. So investing internationally (especially in developing countries when developed nations are stagnating) can improve your returns, but I would learn about the various international markets first before plunging straight in. Regarding investing in an Index fund vs direct investment in a select group of shares, I did a search on the US markets with the following criteria on the 3rd January 2000: If the resulting top 10 from the search were bought on 3rd January 2000 and held up until the close of the market on the 19th June 2013, the results would be as per the table below: The result, almost 250% return in 13.5 years compared to almost no return if you had invested into the whole S&P 500 Index. Note, this table lists only the top ten from the search without screening through the charts, and no risk management was applied (if risk management was applied the 4 losses of 40%+ would have been limited to a maximum of 20%, but possibly much smaller losses or even for gains, as they might have gone into positive territory before coming back down - as I have not looked at any of the charts I cannot confirm this). This is one simple example how selecting good shares can result in much better returns than investing into a whole Index, as you are not pulled down by the bad stocks. |
Can I buy only 4 shares of a company? | One of my university professors suggested doing this systematically to get access to shareholder meetings where there is typically a nice dinner involved. As long as the stock price + commission is less than the price of a nice restaurant it's actually not a bad idea. |
Why doesn't Japan just divide the Yen by 100? | Some answers already informed about denomination. There are currencies, doing the cut off of two digits, for example the french franc. See http://en.wikipedia.org/wiki/French_franc#New_franc When you look to old french movies, they often talked about 'old franc' when talking about values (at least in French original, I don't know what happens in English translations). |
Did an additional $32 billion necessarily get invested into Amazon.com stock on October 26th, 2017? | The market capitalization of a stock is the number of shares outstanding (of each stock class), times the price of last trade (of each stock class). In a liquid market (where there are lots of buyers and sellers at all price points), this represents the price that is between what people are bidding for the stock and what people are asking for the stock. If you offer any small amount more than the last price, there will be a seller, and if you ask any small amount less than the last price, there will be a buyer, at least for a small amount of stock. Thus, in a liquid market, everyone who owns the stock doesn't want to sell at least some of their stock for a bit less than the last trade price, and everyone who doesn't have the stock doesn't want to buy some of the stock for a bit more than the last trade price. With those assumptions, and a low-friction trading environment, we can say that the last trade value is a good midpoint of what people think one share is worth. If we then multiply it by the number of shares, we get an approximation of what the company is worth. In no way, shape or form does it not mean that there is 32 billion more invested in the company, or even used to purchase stock. There are situations where a 32 billion market cap swing could mean 32 billion more money was invested in the company: the company issues a pile of new shares, and takes in the resulting money. People are completely neutral about this gathering in of cash in exchange for dilluting shares. So the share price remains unchanged, the company gains 32 billion dollars, and there are now more shares outstanding. Now, in some sense, there is zero dollars currently invested in a stock; when you buy a stock, you no longer have the money, and the money goes to the person who no longer has the stock. The issue here is the use of the continuous tense of "invested in"; the investment was made at some point, but the money doesn't really stay in this continuous state of being. Unless you consider the investment liquid, and the option to take money out being implicit, it being a continuous action doesn't make much sense. Sometimes the money is invested in the company, when the company causes stocks to come into being and sells them. The owners of stocks has invested money in stocks in that they spent that money to buy the stocks, but the total sum of money ever spent on stocks for a given company is not really a useful value. The market capitalization is an approximation, which under the efficient market hypothesis (that markets find the correct price for things nearly instantly) is reasonably accurate, of the value the company has collectively to its shareholders. The efficient market hypothesis isn't accurate, but it is an acceptable rule of thumb. Now, this value -- market capitalization -- is arguably not the total value of a company: other stakeholders include bond holders, labour, management, various contract counter-parties, government and customers. Some companies are structured so that almost all value is captured not by the stock owners, but by contract counter-parties (this is sometimes used for hiding assets or debts). But for most large publically traded companies, it (in theory) shouldn't be far off. |
How are days counted when funding a new account within 10 days | If the wording is "within 10 days" then its 10 days. Calendar days. Otherwise they would put "10 business days", for example. Usually, if you need to do something within 10 days from today, the first day to count is today. I would expect "within" to mean that you can fund in any of the days up to the 10th. But that's me, trying to read English as English. Why don't you call the bank and ask them? |
If the U.S. defaults on its debt, what will happen to my bank money? | There are many different things that can happen, all or some. Taking Russia and Argentina as precedence - you may not be able to withdraw funds from your bank for some period of time. Not because your accounts will be drained, but because the cash supply will be restricted. Similar thing has also happened recently in Cyprus. However, the fact that the governments of Russia and Argentina limited the use of cash for a period of time doesn't mean that the US government will have to do the same, it my choose some other means of restraint. What's for sure is that nothing good will happen. Nothing will probably happen to your balance in the bank (Although Cyprus has shown that that is not a given either). But I'm not so sure about FDIC maintaining it's insurance if the bank fails (meaning if the bank defaults as a result of the chain effect - you may lose your money). If the government is defaulting, it might not have enough cash to take over the bank deposits. After the default the currency value will probably drop sharply (devaluation) which will lead to inflation. Meaning your same balance will be worth much less than it is now. So there's something to worry about for everyone. |
What is a good rental yield? | I would just like to point out that the actual return should be compared to your down payment, not the property price. After all, you didn't pay $400K for that property, right? You probably paid only 20%, so you're collecting $20K/year on a $80K investment, which works out to 25%. Even if you're only breaking even, your equity is still growing, thanks to your tenants. If you're also living in one of the units, then you're saving rent, which frees up cash flow. Your increased savings, combined with the contributions of your tenants will put you on a very fast track. In a few years you should have enough to buy a second property. :) |
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