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Why are big companies like Apple or Google not included in the Dow Jones Industrial Average (DJIA) index? | In addition to the answers provided above, the weight the Dow uses to determine the index is not the market capitalization of the company involved. That means that companies like Google and Apple with very high share prices and no particular inclination to split could adversely effect the Dow, turning it into essentially the "Apple and Google and then some other companies" Industrial Average. The highest share price Dow company right now, IIRC, is IBM. Both Google and Apple would have three times the influence on the Index as IBM does now. |
How can a person with really bad credit history rent decent housing? | This tale makes me sad the more I learn of it. I am impressed with your dedication and caring for your ex-wife and particularly your kids; you seem like a good person from your questions. But you are tired and exasperated too. You have every right to be. The problem isn't how this woman can rent a new apartment (which there isn't a good way that won't screw over some unsuspecting landlord) but how to get this woman into conseling on a regular basis. Not just money, but personal or group therapy. She honestly needs help and must face this problem herself otherwise these questions will never stop. I know you mentioned this doesn't appear to be an option, anf maybe it isn't your job, but I. See your questions are much deeper than personal finance. I wish you the best and I really do admire your resolve to take care of your kids. |
Is it a good idea to teach children that work is linearly related to income? | Completely linear? We don't do that. Our daughter has a fixed allowance, and we expect a certain amount of help around the house as being part of the family. We don't make any explicit ties between the two, and we don't seem to have any problems. We bought an eBay lot of Polly Pockets and divided them up into $5 bags. (This is a better deal that what we could get in the store new.) Her allowance isn't enough that she can "buy" one every week. After sensing her frustration we gave her the opportunity to earn some more money by doing extra work. It happened to be cleaning up after our dogs in the back yard, a chore we had neglected for quite a while. She stuck with the job, and truly earned that money. (She'll be six in January.) What's more, it was a good deal for me. It needed to be done, and I didn't really want to do it. :) So, for now this seems like a fair balance. It prevents her from getting the idea that she won't work unless she gets paid, but she also knows that working harder does have its rewards. We still have time to teach her the idea of working smarter. (This isn't a formal study. It's just my experience.) |
Methods for forecasting price? | It's not impossible to forecast the future price of a commodity. However, it's exactly that; an educated guess, much like the weather, and the further out that prediction is made, the higher the percentage error is expected. A lot of information is gathered by various instruments, spotters etc at a very high cost of time and money, to produce a prediction that starts breaking down after about five days and is no more than a wild guess after about ten. How accurately a price can be forecast depends on the commodity. There are seasonal and thus cyclical changes in many commodities, on top of which there is a general trend which is nearer term. A pretty decent prediction can thus be arrived at with a relatively simple seasonally-adjusted percentage change algorithm; take a moving average of the last few measurements, compute the percent change versus the same period last year (current minus last divided by last) and multiply it by last year's number for the current day or month to arrive at a pretty decent prediction for the current and near-future periods (up to about as far ahead as you have looked behind). Another thing you may need to do is normalize. Many price graphs are very jittery; the price of a stock may fluctuate many percentage points on a single day, and there's a lot of "noise" inherent in them. A common tool to normalize is a box-and-whisker plot, which for a given time period will aggregate all samples within that period, and give you a measurement of the lowest sample, highest sample, median, and quartiles (the range of each 25% of the full sample space). Box plots can also be plotted on the "interquartile range" or "middle fifty"; this throws away the very noisy outliers and constructs a much more regular plot from the inner part of the bell curve. You can reverse-engineer a best-fit line connecting the elements of each box, and the closer two lines are, the more likely the real future data will be around that area (because the quartile between those to lines is very dense; 25% of the values are in a very small range meaning many samples occurred there). Lastly, there are outside factors that are not included in simple percentage growth. Big news must be taken into account by introducing more subjective guesses about future data. If you see an active hurricane season coming (or a hurricane bearing down on Galveston/Houston) then it's reasonable to assume that the price of oil and/or refined oil products (like gas and jet fuel) will skyrocket. A cyclical growth model will not predict these events, but you can factor in the likelihood of a big change with a base onto which you add last year's numbers, and onto that you add regular growth. Conversely, when a huge spike happens due to a non-cyclical event like a natural disaster, you must smooth it out by reducing the readings to fit in the curve, otherwise your model for next year will expect the same anomaly at the same time and so it will be wrong. These adjustments are necessary, but the more of them you make, the less the graph reflects real history and the more it reflects what you think it should have been. |
What is today's price of 15 000 Euro given 15 years ago? | What you are positioning as a loan was not a loan at all. Your father bought something to be delivered in the future. Your aunt does not want to deliver it, so she should buy it back at whatever the current market value is. What is the price that your dad believes her share of the inheritance is currently worth? Is that based on actual appraisals and some sort of objective audit? If so, your aunt doesn't have much of a case. If not, then she could seek an audit to bolster her bargaining position. How much did your aunt benefit from having a place to live for the last 15 years. Was that benefit greater than some larger amount of money at an unknown future date? That's probably why she sold her inheritance 15 years ago. Now that the inheritance looks like it is going to be available soon, she wants to trade back after having enjoyed the use of your father's money. That might be okay, but simply paying back the original sum with inflation, but without interest, doesn't seem fair to your father. She may not be able to afford to give any more than what she is offering, in which case, she might want to consider offering the original sum now and some portion of her inheritance as interest on that original sum. I'm not taking sides in this one. If it were one of my siblings, I'd be inclined to give the benefit of the doubt and take a smaller amount back if I felt that the lesson was learned (and if I felt that he/she would make wise use of my gift to him/her). I have no idea what your father's current economic situation is, nor am I aware of any other baggage that might influence his feelings about his sister. It's as likely as not that money isn't really what is bothering him, in which case, the amount she repays may have little to do with bridging the divide between them. You might need to ask different questions in the Interpersonal Skills stack if you want to help your father feel better. |
Is engaging in stocks without researching unwise? | If you don't want to do the deep research on each individual company, you might want to look at index funds and similar "whole market" investments. |
What are the marks of poor investment advice? | Proverbs 11:14 states: "For lack of guidance a nation falls, but many advisers make victory sure." Asking here is a good start. You'll (hopefully) get a few opinions. |
Walking away from an FHA loan | Nearly every state in the US is full-recourse. If one doesn't seek bankruptcy protection, creditors can seek judgement, and collect assets. Foreclosures frequently sell for approximately half the market price. Considering unemployment risk, homes can be risky. A far better way to accumulate wealth is with equities (stocks). However, the risk converts from insolvency to liquidation since during times of high unemployment, equities are also cheap, causing any liquidation used to fund current expenses to be potentially ruinous. |
Calculating a stock's price target | The price-earnings ratio is calculated as the market value per share divided by the earnings per share over the past 12 months. In your example, you state that the company earned $0.35 over the past quarter. That is insufficient to calculate the price-earnings ratio, and probably why the PE is just given as 20. So, if you have transcribed the formula correctly, the calculation given the numbers in your example would be: 0.35 * 4 * 20 = $28.00 As to CVRR, I'm not sure your PE is correct. According to Yahoo, the PE for CVRR is 3.92 at the time of writing, not 10.54. Using the formula above, this would lead to: 2.3 * 4 * 3.92 = $36.06 That stock has a 52-week high of $35.98, so $36.06 is not laughably unrealistic. I'm more than a little dubious of the validity of that formula, however, and urge you not to base your investing decisions on it. |
Teaching school kids about money - what are the real life examples of math, budgeting, finance? | My education on this topic at this age range was a little more free-form. We were given a weeklong project in the 6th grade, which I remember pretty clearly: Fast forward 6 years (we were 12). You are about to be kicked out of your parents' house with the clothes on your back, $1,000 cash in your pocket, your high school diploma, and a "best of luck" from your parents. That's it. Your mission is to not be homeless, starving and still wearing only the clothes on your back in 3 months. To do this, you will find an apartment, a job (you must meet the qualifications fresh out of high school with only your diploma; no college, no experience), and a means of transportation. Then, you'll build a budget that includes your rent, estimated utilities, gasoline (calculated based on today's prices, best-guess fuel mileage of the car, and 250% of the best-guess one-way distance between home and job), food (complete nutrition is not a must, but 2000cal/day is), toiletries, clothing, and anything else you want or need to spend your paycheck or nest egg on. Remember that the laundromat isn't free, and neither is buying the washer/dryer yourself. Remember most apartments aren't furnished but do have kitchen appliances, and you can't say you found anything on the side of the road. The end product of your work will be a narrative report of the first month of your new life, a budget for the full 3 months, plus a "continuing" budget for a typical month thereafter to prove you're not just lasting out the 3 months, and all supporting evidence for your numbers, from newspaper clippings to in-store mailers (the Internet and e-commerce were just catching on at the time, Craigslist and eBay didn't exist yet, and not everyone had home Internet to begin with). Extra Credit: Make your budget work with all applicable income and sales taxes. Extra Extra Credit: Have more than your original $1000 in the bank at the end of the 3 months, after the taxes in the Extra Credit. This is a pretty serious project for a 12-year-old. Not only were we looking through the classified ads and deciphering all the common abbreviations, we were were taking trips to the grocery store with shopping lists, the local Wal-Mart or Target, the mall, even Goodwill. Some students had photos of their local gas station's prices, to which someone pointed out that their new apartment would be on the other side of town where gas was more expensive (smart kid). Some students just couldn't make it work (usually the mistakes were to be expected of middle-class middle-schoolers, like finding a job babysitting and stretching that out full-time, only working one job, buying everything new from clothes to furniture, thinking you absolutely need convenience items you can do without, and/or trying to buy the same upscale car your dad takes to work), though most students were able to provide at least a plausible before-tax budget. A few made the extra credit work, which was a lot of extra credit, because not only were you filling out a 1040EZ for your estimated income taxes, you were also figuring FICA and Social Security taxes which even some adults don't know the rates for, and remember, no Internet. Given that the extra-extra credit required you to come out ahead after taxes (good luck), I can't remember that anyone got that far. The meta-lesson that we all learned? Life without a college education is rough. |
As a young adult, what can I be doing with my excess income? | If I were you I would just save the money until I had at least 5000 pounds to keep as an emergency fund. There are various kinds of unexpected events and it is smart to have some cash in case a problem comes up. Next time I would recommend buying a car you can afford. Borrowing money to buy nice things is the enemy of wealth accumulation. Also, when you buy a car for cash you will get a much better deal than when you let a dealer put his foot on your neck. |
Resources on Buying Rental Properties | The book HOLD: How to Find, Buy, and Rent Houses for Wealth by Chader et al. was one of the best I've read on the subject. It has all of the basics, explanations, examples, and gives you real-life assumptions for your inputs when you do your analysis. It does contain some less-relevant information now that was more realistic before 2007, but it's a worthwhile read (or listen). They have some good starter worksheets, as well, on their website to help you do your analysis, which I found useful despite already having my own. |
Financing with two mortgages: a thing of the past? | There are a few of ways to do this: Ask the seller if they will hold a Vendor Take-Back Mortgage or VTB. They essentially hold a second mortgage on the property for a shorter amortization (1 - 5 years) with a higher interest rate than the bank-held mortgage. The upside for the seller is he makes a little money on the second mortgage. The downsides for the seller are that he doesn't get the entire purchase price of the property up-front, and that if the buyer goes bankrupt, the vendor will be second in line behind the bank to get any money from the property when it's sold for amounts owing. Look for a seller that is willing to put together a lease-to-own deal. The buyer and seller agree to a purchase price set 5 years in the future. A monthly rent is calculated such that paying it for 5 years equals a 20% down payment. At the 5 year mark you decide if you want to buy or not. If you do not, the deal is nulled. If you do, the rent you paid is counted as the down payment for the property and the sale moves forward. Find a private lender for the down payment. This is known as a "hard money" lender for a reason: they know you can't get it anywhere else. Expect to pay higher rates than a VTB. Ask your mortgage broker and your real estate agent about these options. |
Is being a landlord a good idea? Is there a lot of risk? | Buying a property and renting it out can be a good investment if it matches your long term goals. Buying an investment property is a long term investment. A large chunk of your money will be tied up with the property and difficult to access. If you put your money into dividend producing stocks you can always sell the stock and have your money back in a matter of days this is not so with a property. (But you can always do a Home equity line of credit (HELOC)) I would also like to point out landlording is not a passive endeavor as JohnFx stated dealing with a tenant can be a lot of work. This is not work you necessarily have to deal with, it is possible to contract with a property management company that would place tenants and take care of those late night calls. Property management companies often charge 10% of your monthly rent and will eat a large portion of your profits. It could be worth the time and headache of tenant relations. You should build property management into you expenses anyway in case you decide to go that route in the future. There are good things about owning an investment property. It can produce returns in a couple of ways. If you choose this route it can be lucrative but be sure to do your homework. You must know the area you are investing very well. Know the rent, and vacancy rates for Single family homes, look at multifamily homes as a way of mitigating risk(if one unit is vacant the others are still paying). |
Will there always be somebody selling/buying in every stock? | Will there be a scenario in which I want to sell, but nobody wants to buy from me and I'm stuck at the brokerage website? Similarly, if nobody wants to sell their stocks, I will not be able to buy at all? You're thinking of this as a normal purchase, but that's not really how US stock markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers (NASDAQ) or Specialists (NYSE), who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers and specialists may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for the Market Maker / specialist to accumulate or distribute a large number of shares, without end-investors like you or I being involved on both sides of the same transaction. |
Will an ETF increase in price if an underlying stock increases in price | The ETF supply management policy is arcane. ETFs are not allowed to directly arbitrage their holdings against the market. Other firms must handle redemptions & deposits. This makes ETFs slightly costlier than the assets held. For ETFs with liquid holdings, its price will rarely vary relative to the holdings, slippage of the ETF's holdings management notwithstanding. This is because the firms responsible for depositing & redeeming will arbitrage their equivalent holdings of the ETF assets' prices with the ETF price. For ETFs with illiquid holdings, such as emerging markets, the ETF can vary between trades of the holdings. This will present sometimes large variations between the last price of the ETF vs the last prices of its holdings. If an ETF is shunned, its supply of holdings will simply drop and vice versa. |
Is investing in housing considered an adequate hedge against inflation? | No, there is no linkage to the value of real estate and inflation. In most of the United States if you bought at the peak of the market in 2006, you still haven't recovered 7+ years later. Also real estate has a strong local component to the price. Pick the wrong location or the wrong type of real estate and the value of your real estate will be dropping while everybody else sees their values rising. Three properties I have owned near Washington DC, have had three different price patterns since the late 80's. Each had a different starting and ending point for the peak price rise. You can get lucky and make a lot, but there is no way to guarantee that prices will rise at all during the period you will own it. |
Why do stocks go up? Is it due to companies performing well, or what else? [duplicate] | The same applies if you were looking for a business to buy: would you pay more for a business that is doing well making increasing profits year after year, or for a business that is not doing so well and is losing money. A share in a company is basically a small part of a company which a shareholder can own. So would you rather own a part of a company that is increasing profits year after year or one that is continuously losing money? Someone would buy shares in a company in order to make a better return than they could make elsewhere. They can make a profit through two ways: first, a share of the company's profits through dividends, and second capital gains from the price of the shares going up. Why does the price of the shares go up over the long term when a company does well and increases profits? Because when a company increases profits they are making more and more money which increases the net worth of the company. More investors would prefer to buy shares in a company that makes increasing profits because this will increase the net worth of the company, and in turn will drive the share price higher over the long term. A company's increase in profits creates higher demand for the company's shares. Think about it, if interest rates are so low like they are now, where it is hard to get a return higher than inflation, why wouldn't investors then search for higher returns in good performing companies in the stock market? More investors' and traders' wanting some of the pie, creates higher demand for good performing stocks driving the share price higher. The demand for these companies is there primarily because the companies are increasing their profits and net worth, so over the long term the share price will increase in-line with the net worth. Over the short to medium term other factors can also affect the share price, sometime opposite to how the company is actually performing; however this is a whole different answer to a whole different question. |
Pay off car loan entirely or leave $1 until the end of the loan period? | If I were you, I would pay off the car loan today. You already have an excellent credit score. Practically speaking, there is no difference between a 750 score and an 850 score; you are already eligible for the best loan rates. The fact that you are continuing to use 5 credit cards and that you still have a mortgage tells me that this car loan will have a negligible impact on your score (and your life). By the way, if you had told me that your score was low, I would still tell you to pay off the loan, but for a different reason. In that case, I would tell you to stop worrying about your score, and start getting your financial life in order by eliminating debt. Take care of your finances by reducing the amount of debt in your life, and the score will take care of itself. I realize that the financial industry stresses the importance of a high score, but they are also the ones that sell you the debt necessary to obtain the high score. |
Working abroad in Australia, what is involved financially and administratively? | If you think there is no complication in your application and you can easily satisfy all criteria you can do the process yourself without using any agent and save few thousand dollars. I have done myself. Another cost Chris forgot to mention is the medical examination cost which is mandatory. If your certificates and docs are non-English translation fees are quite high as well. The immigration process is very bureaucratic and requires lot of supporting documents. As for living in Australia, Rent, Car and living expenses are high compared to US. But in Sydney and Melbourne you can rent near public transport, which isn't too bad (well not like Europe ). So having a car is not essential. Rent for a decent flat in these cities will be $300 - $350 p/w and you may have to pay 4-6 weeks as advance. You can get a lot of information from the dept. of immingration website. |
How can I improve my auto insurance score? | As a recent college grad who switched to his own car insurance, many of the things I did myself are reflected here. The #1 thing I did was find out what coverages I had, what coverages some friends of mine had (car enthusiasts mostly - they're the most informed on this stuff), and then figured out what kind of coverages I wanted. From there, I went around getting quotes from anyone and everyone and eventually built out a sizeable spreadsheet that made it obvious which company was going to offer me the best rate at a given coverage level. Something else to remember - not all insurance companies look at past accidents and violations (speeding, etc) the same. In my search, I found some have a 3-year scope on accidents and violations, while others were as much as 5 years. So, if your driving record isn't a shining example (mine isn't perfect), you could potentially save money by considering insurance through a company that will see fewer violations/incidents than another because of the size of their scope. I ended up saving $25/mo by choosing a company that had a 3-year scope, which was on the cusp of when my last violation/incident occurred. Insurance companies will also give out discounts for younger drivers based on GPA average. If you have kids and they maintain a high GPA, you might be able to get a discount there. Not all companies offer it, so if they do it's worth finding out how much it is |
If you own 1% of a company's stock, are you entitled to 1% of its assets? | No. If the share price drops to $0, it's likely that the company is in bankruptcy. Usually, debt holders (especially holders of senior debt) are paid first, and you're entitled to whatever the bankruptcy proceedings decide to give holders of equity after the debt holders are paid off. More often than not, equity holders probably won't get much. To give an example, corporate bankruptcy usually involves one of two options: liquidation or reorganization. In the US, these are called Chapter 7 and Chapter 11 bankruptcy, respectively. Canada and the United Kingdom also have similar procedures for corporations, although in the UK, reorganization is often referred to as administration. Many countries have similar procedures in place. I'll use the US as an example because it's what I'm most familiar with. In Chapter 7 bankruptcy, the company is liquidated to pay its debts. Investopedia's article about bankruptcy states: During Chapter 7 bankruptcy, investors are considered especially low on the ladder. Usually, the stock of a company undergoing Chapter 7 proceedings is usually worthless, and investors lose the money they invested. If you hold a bond, you might receive a fraction of its face value. What you receive depends on the amount of assets available for distribution and where your investment ranks on the priority list on the first page. In Chapter 11 bankruptcy, the company is turned over to a trustee that guides it through a reorganization. The Investopedia article quotes the SEC to describe what happens to stockholders when this happens: "During Chapter 11 bankruptcy, bondholders stop receiving interest and principal payments, and stockholders stop receiving dividends. If you are a bondholder, you may receive new stock in exchange for your bonds, new bonds or a combination of stock and bonds. If you are a stockholder, the trustee may ask you to send back your stock in exchange for shares in the reorganized company. The new shares may be fewer in number and worth less. The reorganization plan spells out your rights as an investor and what you can expect to receive, if anything, from the company." The exact details will depend on the reorganization plan that's worked out, local laws, court agreements, etc.. For example, in the case of General Motor's bankruptcy, stockholders in the company before reorganization were left with worthless shares and were not granted shares in the new company. |
Should I stockpile nickels? | At one point it was illegal to melt silver coins in the US, but it is legal now. I don't know that will happen with copper coins, but that's what happened with silver coins. Accumulating nickels and leaving them as-is (in their spendable state) is legal. It's also a way to take physical ownership of copper. I expect to see more sales of nickels based on weight. People are already selling high-copper-content cents on eBay, by weight. There are machines in production that sort the zinc ones from the copper ones. Gresham's Law has small business backing. ;) Copper cents are already worth twice their face value in the copper content. Nickels will get up there, too. They are awfully heavy and bulky relative to their value, though. Precious metals give you better bang for your ounce. |
Is it worth it to buy TurboTax Premier over Deluxe if I sold investments in a taxable account? | I have used turbo tax for years. Apart from the snafu in 2014, I have had no problem using deluxe, and I have lots of asset sales to report. I prefer form mode anyway. I can import the data from my broker, and I can e-file with no problem. So the only thing I'm missing is the support. I can usually find answers to questions on the web, anyway. |
Why I cannot find a “Pure Cash” option in 401k investments? | There is no zero risk option! There is no safe parking zone for turbulent times! There is no such thing as a zero-risk investment. You would do well to get this out of your head now. Cash, though it will retain its principle over time, will always be subject to inflation risk (assuming a positive-inflation environment which, historically in the US anyway, has always been the case since the Great Depression). But I couldn't find a "Pure Cash - No investment option" - what I mean by this is an option where my money is kept idle without investing in any kind of financial instrument (stocks, bonds, other MFs, currencies, forex etc etc whatever). Getting back to the real crux of your question, several other answers have already highlighted that you're looking for a money market fund. These will likely be as close to cash as you will get in a retirement account for the reasons listed in @KentA's answer. Investing in short-term notes would also be another relatively low-risk alternative to a money market fund. Again, this is low-risk, not no-risk. I wanted such kinda option because things may turn bad and I may want nothing invested in the stock markets/bond markets. I was thinking that if the market turns bear then I would move everything to cash Unless you have a the innate ability to perfectly time the market, you are better off keeping your investments where they are and riding out the bear market. Cash does not generate dividends - most funds in a retirement account do. Sure, you may have a paper loss of principle in a bear market, but this will go away once the market turns bull again. Assuming you have a fairly long time before you retire, this should not concern you in the slightest. Again, I want to stress that market timing does not work. Even the professionals, who get paid the big bucks to do this, on average, get it right as often as they get it wrong. If you had this ability, you would not be asking financial questions on Stack Exchange, I can tell you that. I would recommend you read The Four Pillars of Investing, by William Bernstein. He has a very no-nonsense approach to investing and retirement that would serve you (or anybody) well in turbulent financial markets. His discussion on risk is especially applicable to your situation. |
What is the ticker symbol for “Vanguard Target Retirement 2045 Trust Plus”? | Use VTIVX. The "Target Retirement 2045" and "Target Retirement 2045 Trust Plus" are the same underlying fund, but the latter is offered through employers. The only differences I see are the expense ratio and the minimum investment dollars. But for the purposes of comparing funds, it should be pretty close. Here is the list of all of Vanguard's target retirement funds. Also, note that the "Trust Plus" hasn't been around as long, so you don't see the returns beyond the last few years. That's another reason to use plain VTIVX for comparison. See also: Why doesn't a mutual fund in my 401(k) have a ticker symbol? |
Optimal way to use a credit card to build better credit? | nan |
Small investing for spending money? | The existing answers are good, I justed wanted to provide a simpler answer to your question: Would I be able to invest this in a reasonable way that it would provide me with say $200 spending money per month over the school year? No. There is no way to invest $10,000 to reliably get $200 every month. Any way that you invest it that has even the possibility of getting that much will have a significant possibility of losing a lot of money. If you want to get "free" spending money out without risk of losing money, you're unlikely to be able to find an investment that will give you more than a couple dollars per month. |
Best way to buy Japanese yen for travel? | When I went on vacation to London a few years ago, I looked around at banks with ATM deals with UK banks. I found that B of A had a deal with a UK bank that you could use their ATMs to take out money from your US account for practically no fees. So the week or so before I left, I opened an account at B of A, put a bunch of money in it, and used the B of A debit card during my trip as much as possible. |
Why is the price of my investment only updated once per day? | I strongly suggest you go to www.investor.gov as it has excellent information regarding these types of questions. A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates. When you buy shares of a mutual fund you're buying it at NAV, or net asset value. The NAV is the value of the fund’s assets minus its liabilities. SEC rules require funds to calculate the NAV at least once daily. Different funds may own thousands of different stocks. In order to calculate the NAV, the fund company must value every security it owns. Since each security's valuation is changing throughout the day it's difficult to determine the valuation of the mutual fund except for when the market is closed. Once the market has closed (4pm eastern) and securities are no longer trading, the company must get accurate valuations for every security and perform the valuation calculations and distribute the results to the pricing vendors. This has to be done by 6pm eastern. This is a difficult and, more importantly, a time consuming process to get it done right once per day. Having worked for several fund companies I can tell you there are many days where companies are getting this done at the very last minute. When you place a buy or sell order for a mutual fund it doesn't matter what time you placed it as long as you entered it before 4pm ET. Cutoff times may be earlier depending on who you're placing the order with. If companies had to price their funds more frequently, they would undoubtedly raise their fees. |
Is my stock gone forever from a reverse split / bought by another company? | You can't own fractional shares. If the Reverse Split resulted in you having less a full share (for example, if you had 500 shares, and they did a 1000:1 reverse split), your fractional share was cashed in (sold). That could be that 'money market' activity shown on the next day? It is your responsibility to be prepared for a reverse split, by either selling at your desired price, or buying more shares, so you end with an integer number of shares after the reverse split. |
Should I continue to invest in an S&P 500 index fund? | I would be very cautious about investing any more funds into the S&P500 at this stage. You are quite correct in your observation with the charts regarding the 2001 and 2008 crashes, and below is the chart of the S&P500 over the last 20 years with some indicators on it. The green line on the price chart is the 100 week Moving Average (MA) and the pink line below the price chart is the Moving Average of the Rate of Change (ROC) Indicator. In general the market is moving up if price is above the 100 week MA and the ROC is above 0%, and vise-versa the market is moving down if price is below the 100 week MA and the ROK is below 0%. Both times in 2001 and in 2008 when prices broke below the 100 week MA and then the ROC crossed below the zero line, well we all know what happened next. In 2001 prices kept falling and the ROC didn't cross back above zero for about 2.5 years, in 2008 much the same happened and the ROC didn't cross back above zero for over 20 months. Now as we are reaching the end of 2015 prices have once again broken below the 100 week MA and the ROC is just above the zero line quickly heading down towards it. If you have a 5 to 8 year time frame, and prices do continue to fall much further after the ROC crosses below the zero line, your current funds and any new funds you invest in this ETF will potentially see heavy losses for the next one to two years and then take another year to two years or more to recover to current levels. This means that your funds will potentially have no gains at all in 5 or 6 years time. A better option is to get out of the market once the ROC crosses below zero and then look to get back in once the recovery has started, when the ROC crosses back above the Zero line. You might be out of the market for a year or two, but once you get back in you can expect robust gains over the next 3 to 5 years. If you do get out and things reverse quite quickly you can easily just get back in. In mid-2010 and mid-2011 the price broke below the 100 week MA but the ROC remained above Zero and prices continued moving up after short corrections. In mid-2012 the ROC got very close to the Zero line but did not cross below it, and again prices continued to go up after a small correction. You should plan for the worst and be ready if it occurs. If you don't plan you're just hoping and hoping is what will keep you awake at night whist things are going against you. |
What do brokerage firms do? | You can get direct market access (DMA) but you have to pay for data, as this is part of the exchanges data plan, and there are plenty of other fees that are passed straight down to you. Your clearing firm also has fees that are passed on to you. In general you are looking at $150 a month on the low side, in data and software fees. If you wanted pure access, NASDAQ alone charges $6,000 a month last I checked. The different routes data routes to the exchange all have different rules, and they give you rebates for some kinds of orders in some conditions. Brokers nowadays usually assume this responsibility (including collecting the rebates lol), at the very least, and charge an average price for routing your orders, a price that fits into their business plan and their target audience. Hope that helps. |
Is being a landlord a good idea? Is there a lot of risk? | I have been a landlord in Texas for just over 3 years now. I still feel like a novice, but I will give you the benefit of my experience. If you are relying on rental properties for current income versus a long term return you are going to have to do a good job at shopping for bargains to get monthly cash flow versus equity growth that is locked up in the property until you sell it. If you want to pull a lot of cash out of a property on a regular basis you probably are going to have to get into flipping them, which is decidedly not passive investing. Also, it is easy to underestimate the expenses associated with rental properties. Texas is pretty landlord friendly legally, however it does have higher than usual property taxes, which will eat into your return. Also, you need to factor in maintenance, vacancy, tenant turnover costs, etc. It can add up to a lot more than you would expect. If you are handy and can do a lot of repairs yourself you can increase your return, but that makes it less of a passive investment. The two most common rules I have heard for initially evaluating whether an investment property is likely to be cash flow positive are the 1% and 50% rules. The 1% rule says the expected monthly rent needs to be 1% or greater of the purchase price of the house. So your hypothetical $150K/$10K scenario doesn't pass that test. Some people say this rule is 2% for new landlords, but in my experience you'd have to get lucky in Texas to find a house priced that competitively that didn't need a lot of work to get rents that high. The 50% rule says that the rent needs to be double your mortgage payment to account for expenses. You also have to factor in the hassle of dealing with tenants, the following are not going to happen when you own a mutual fund, but are almost inevitable if you are a landlord long enough: For whatever reason you have to go to court and evict a tenant. A tenant that probably lost their job, or had major medical issues. The nicest tenant you ever met with the cutest kids in the world that you are threatening to make homeless. Every fiber of your being wants to cut them some slack, but you have a mortgage to pay and can't set an expectation that paying the rent on time is a suggestion not a rule. or the tenant, who seemed nice at first, but now considers you "the man" decides to fight the eviction and won't move out. You have to go through a court process, then eventually get the Sheriff to come out and forcibly remove them from the property, which they are treating like crap because they are mad at you. All the while not paying rent or letting you re-let the place. The tenant isn't maintaining the lawn and the HOA is getting on your butt about it. Do you pay someone to mow the grass for them and then try to squeeze the money out of the tenant who "never agreed to pay for that"? You rent to a college kid who has never lived on their own and has adopted you as their new parent figure. "The light in the closet went out, can you come replace the bulb?" Tenants flat out lying to your face. "Of course I don't have any pets that I didn't pay the deposit for!" (Pics all over facebook of their kids playing with a dog in the "pet-free" house) |
What should I do with the stock from my Employee Stock Purchase Plan? | I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge. |
Good book-keeping software? | I like using Mint.com to track my expenses. It makes it very easy to watch my budget and monitor my spending. |
Why do Americans have to file taxes, even if their only source of income is from a regular job? | you either tell your financial department about them (e.g. I used to get a student's tax discount), or you file them separately. But you don't have to file anything by default. That is a comment connected to the question. In the united states you can almost achieve this. 90% of the numbers on my tax form are automated. The W-2s are sent to the IRS, the 1099-s for my non retirement accounts are also sent. The two biggest items that take time are charities, and the educational benefits. Nobody has to claim every deduction they are entitled to. They must claim all the income, and decide to take the standard deduction. It would probably take less than an hour to finish the families taxes: both federal and state. |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | Credit Scores / Rates are based on sometimes simple and sometimes quite complex Statistical Models (Generalised Linear Models, Neural Networks, Regression and Classification Trees, Mixture Models, etc).This depends on whether it is something more general like FICO or what large banks develop in-house. In any case, there are many legislation-dependent factors (Qualitative such as education, occupation security, sex, etc, payment history; or Quantitative such as age, liquidity and leverage ratios, etc). Now, most model that are used today are propriety and closely held trade secrets. The most important reason for this is actually because of the databases that feed the models. More better quality data is what makes the real difference ... although at the cutting-edge, the mathematicians/statisticians/computer scientists that design the algorithms will make a huge difference. Now, back to the main thing: The Credit Score/Rate is meant to be used only as an indicator for representing the Probability of Default ("How likely you are to default on your obligation towards me?" is what it means and that is largely based upon "Has company/he/she honoured his financial obligations?") of a certain consumer. In more sophisticated models, they may also use your industry sector or occupational and financial security to predict the future behaviour. However, this "Credit Score" has meaning only in relation to a "Credit Limit" ("Can you pay back my $X?"). The credit limit on the other hand is defined by your income level, debt/asset, etc). As a credit risk analyst, whether we are dealing with large corporate loans, mortgages, personal loans, etc), the principles are the same: One thing to consider is that factors considered in determining a credit score usually do not have a simple linear relationship. Consumer Profile types such as utilisation rate are a lot more about EFFECT than CAUSE: The most important thing is to honour your obligations, whether you pay before or after you spend makes little difference, so long as you pay in full and prior to maturity, your rate/score will improve with time. Financial Institutions have many ways to make money of everyone. Some, such as interest rates and fees are directly charged to you and some are charged to your goods-and-services providers. That has no bearing on your score. Sometimes it even makes sense to take on customers with rock-bottom ratings, lend them lots of money, and charge them to dirt. As you may well know, the recent financial crisis - with ongoing after-shocks and tremors - was the result of such practices. |
Placing bid in market price | Market price is just the bid or offer price of the last sell or buy order in the market. The price that you actually receive or pay will be the price that the person buying the stock off you or selling it to you will accept. If there are no other participants in the market to make up the other side of your order (i.e. to buy off you if you are selling or to sell to you if you are buying) the exchange pays large banks to be "market makers"; they fulfil your order using stocks that they don't want to either buy or sell just so that you get your order filled. When you place an order outside of market hours the order is kept on the broker's order books until the market reopens and then, at market opening time there is an opening "auction" at which orders are matched to opposing orders (i.e. each buy order will be matched with a sell) at a price determined by auction. You will not know what price the order was filled at until it has been filled. If you want to guarantee a price you can do so by placing a limit order that says not to pay more than a certain price for any unit of the stock. |
Suitable Vanguard funds for a short-term goal (1-2 years) | A bond fund like VBMFX or similar I think are a good choice. Bonds are far less volatile and less risky than stocks. With your 1-2 year time frame, I say definitely stay away from stocks. |
Purpose of having good credit when you are well-off? | there are several reasons you might want good credit even if you could afford to pay for all your expenses in cash. having pointed out all the above reasons to have good credit, it is probably worth noting that many people with good credit choose to not borrow simply because they are more comfortable with the risks of not borrowing (e.g. inflation risk), than they are with the risks of borrowing (e.g. investment volatility). |
Lease vs buy car with cash? | A lease is a rental plain and simple. You borrow money to finance the expected depreciation over the course of the lease term. This arrangement will almost always cost more over time of your "ownership." That does not mean that a lease is always a worse "deal." Cars are almost always a losing proposition; save for the oddball Porsche or Ferrari that is too scarce relative to demand. You accept ownership of a car and it starts to lose value. New cars lose value faster than used cars. Typically, if you were to purchase the car, then sell it after 3 years, the total cost over those three years will work out to less total money than the equivalent 36 month lease. But, you will have to come up with a lot more money down, or a higher monthly payment, and/or sell the car after 36 months (assuming the pretty standard 36 month lease). With this in mind, some cars lease better than others because the projected depreciation is more favorable than other brands or models. Personally, I bought a slightly used car certified pre-owned with a agreeable factory warranty extension. My next car I may lease. Late model cars are getting so unbelievably expensive to maintain that more and more I feel like a long term rental has merit. Just understand that for the convenience, for the freeing up of your cash flow, for the unlikelihood of maintenance, to not bother with resale or trading the car in, a lease will cost a premium over a purchase over the same time frame. |
Should one invest in smaller valued shares in higher amounts, or higher valued shares in smaller amounts? | Short answer: No, it only matters if you want to use covered calls strategies. The price of a share is not important. Some companies make stock splits from time to time so that the price of their shares is more affordable to small investors. It is a decision of the company's board to keep the price high or low. More important is the capitalization for these shares. If you have lots of money to invest, the best is to divide and invest a fixed pourcentage of your portfolio in each company you choose. The only difference is if you eventually decide to use covered call strategies. To have a buy write on Google will cost you a lot of money and you will only be able to sell 1 option for every 100 shares. Bottom line: the price is not important, capitalization and estimated earnings are. Hope this answers your question. |
What is the economic explanation for the high cost of weddings? | There is the price they want and the price you pay. Everything is negotiable when its a service (always possible, but usually harder with actual "goods"). You should always haggle and price match your vendors. You can also try going to different vendors and not telling them its for a wedding and see if there really is a price difference. For example, call up a florist and say you need X, Y, and Z for a corporate banquet or for a special event for which you cannot give the details. If you then tell them its actually a wedding, and they blindly raise it without a good justification, move on. That said, they jack up the price because they know most people will says "it's my wedding", "it's once in a lifetime", "it's MY special day", etc.... The same is true about diamonds, their price does not reflect the actual supply and demand ratio, just the perception that has been created. However, as mentioned in some of the comments above, the service provided at a wedding may be different or more involved than just a normal dinner The more important issue is ensuring there are no back fees, no hidden fees, and you have well written, well reviewed contracts. For example, we know a couple whose caterer added a mandatory 20% gratuity, regardless of the service which was provided. Most venues or restaurants will not be making the bar a lose-leader, but they will charge for other things. You can also save money by buying used or looking on ebay for prices closer to wholesale for the product. I think a good analogy to this is the Recent Time Magazine article on the price of healthcare - it costs a lot because its a small market and its harder to navigate, and most are not experienced shoppers in the area or don't have control over the individual item costs. |
Insurance company sent me huge check instead of pharmacy. Now what? | This is not a mistake. This is done for "Out of Network" providers, and mainly when the patient is an Anthem member, be it Blue Shield or Blue Cross. Even though an "Assignment of Benefits" is completed by the patient, and all fields on the claim from (CMS1500 or UB04) are completed assigning the benefits to the provider, Anthem has placed in their policy that the Assignment of Benefits the patient signs is null and void. No other carrier that I have come across conducts business in this manner. Is it smart? Absolutely not! They have now consumed their member's time in trying to figure out which provider the check is actually for, the member now is responsible for forwarding the payment, or the patient spends the check thinking Anthem made a mistake on their monthly premium at some point (odds are slim) and is now in debt thousands of dollars because they don't check with Anthem. It creates a huge mess for providers, not only have we chased Anthem for payment, but now we have to chase the patient and 50% of the time, never see the payment in our office. It creates more phone calls to Anthem, but what do they care, they are paying pennies on the dollar for their representatives in the Philippines to read from a script. Anthem is the second largest insurance carrier in the US. Their profit was over 800 million dollars within 3 months. The way they see it, we issued payment, so stop calling us. It's amazing how they can accept a CMS1500, but not follow the guidelines associated with it. Your best bet, and what we suggest to patients, either deposit the check and write your a personal check or endorse and forward. I personally would deposit the check and write a personal check for tracking purposes; however, keep in mind that in the future, you may depend on your bank statements for proof of income (e.g. Social Security) and imagine the work having to explain, and prove, a $20,000 deposit and withdraw within the same month. |
What emergencies could justify a highly liquid emergency fund? | Since no one else mentioned it, there are sometimes amazing deals that require being the first person to take advantage of them. I'm not talking about black Friday sales, I'm talking about the woman who decided to sell the Porsche (she had bought for her cheating husband) for $1000. You might not run into those types of deals often, but having liquid investments will allow you to take advantage of them instead of kicking yourself. I just bought some real estate with some of my emergency fund that needed several months before I could properly finance it due to some legal issues with the deed that needed to go through court because there was a deceased person on the title. I will make far more on the deal when it's done than I ever could have made with that money invested in the market. |
Should I cash out my Roth IRA to pay my mother's property tax debt, to avoid foreclosure on her home? | @foreverBroke - Ok, here are the questions - Is mom's house paid for in full? If there's any mortgage, is it current? If not, what are the numbers? Is it underwater, i.e. owe more that it's worth? Will the tax department talk to you and negotiate? Maybe let you make payments over time? If you have that kind of cash flow, the slower payment may keep you from killing your savings. We don't know your age. I do know that the early years savings, often around the first 8-12 years, are the funds that turn into half your final retirement savings due to compounding. Obviously, this a tough time emotionally, what I don't want is for you to make a financial move that is a temporary fix. Not knowing the rest of the story limits my answer. If my mom needed my help I'd want to understand the whole picture. Not that I'm a fan, but have you considered a reverse mortgage? It may be a way to keep the house but give up the equity, or some of it, on her moving out or passing. |
What is a maximum amount that I can wire transfer out of US? | I can clear the Thailand side for you. These are the sale tax in Thailand: Don't forget to ask your bank in Thailand to issue an (FTFs). This document shows the money originated from abroad (before in came to your Thai account) from outside of Thailand. The land office will ask for the (FTFs). |
What's the catch in investing in real estate for rent? | More possible considerations: Comparability with other properties. Maybe properties that rent for $972 have more amenities than this one (parking, laundry, yard, etc) or are in better repair. Or maybe the $972 property is a block closer to campus and thus commands 30% higher rent (that can happen). Condition of property. You know nothing about this until you see it. It could be in such bad shape that you can't legally rent it until you spend a lot of money fixing it. Or it may just be run down or outdated: still inhabitable but not as attractive to renters, leading to lower rent and/or longer vacancy periods. Do you accept that, or spend a lot of money to renovate? Collecting the rent. Tenants don't necessarily always pay their rent on time, or at all. If a tenant quits paying, you incur significant expenses to evict them and then find a new tenant, and all the while, you collect no rent. There could be a tenant in place paying a much lower rent. Rent control or a long lease may prevent you from raising it. If you are able to raise it, and the tenant doesn't want to pay, see above. Maintenance and more maintenance. College students could be hard on the property; one good kegger could easily cause more damage than their security deposits will cover. Being near a university doesn't guarantee you an easy time renting it. It suggests the demand is high, but maybe the supply is even higher. Renting to college students has additional issues. They are less likely to have incomes large enough to satisfy you that they can pay the rent. Are you willing to deal with cosigners? If a student quits paying, are you willing to try to collect from their cosigning parents in another state? And you'll probably have many tenants (roommates) living in the house. They will come and go separately and unexpectedly, complicating your leasing arrangements. And you may well get drawn in to disputes between them. |
FICA was not withheld from my paycheck | Should I have a W-2 re-issued? A W-2 can be corrected and a new copy will be filed with the IRS if your employer incorrectly reported your income and withholding on a W-2 that they issued. In this case, though the employer didn't withhold those taxes, they should not reissue the W-2 unless they plan to pay your portion of the payroll taxes that were not withheld. (If they paid your share of the taxes, that would increase your gross income.) Who pays for the FICA I should have paid last year? Both you and your employer owe 7.65% each for FICA taxes. By law your employer is required to pay their half and you are required to pay your half. Both you and your employer owe additional taxes because of this mistake. Your other questions assume that your employer will pay your portion of the taxes withheld. You employer could decide to do that, but this also assumes that it was your employer's fault that the mistakes were made. If you transitioned to resident alien but did not inform your employer, how is that your employer's fault? |
How decreasing the prime interest rate helps to offset decreasing oil prices | You may be missing how countries like Canada may have oil be more of the GDP than countries like the US. In Canada, the lower oil prices may mean more of an economic slowdown with oil companies laying off staff, canceling projects and some companies probably going under as some provinces like Alberta are highly dependent on oil prices to drive most of the economy. In contrast, the US isn't quite as rich in Energy sources and thus may not have the same issues would be my guess. Context matters here. If the rate change helps everybody, doesn't that include the oil producing companies? I'd like to think so using basic logic. What if the main reason for lowering rates was the economic fallout of the decrease in oil prices? Consider that the there would be the question of, "Why do this now?" that has to be answered and the only main change is lower oil prices on a macroeconomic level. |
If someone gives me cash legally, can my deposit trigger an audit for them? | Why would you even accept 75K in cash? If anything is going to trigger an audit, this will be it. 75K in cash deposited will look like money laundring, so you better have a paper trail ready to prove this is legal or this won't end well. |
Is it possible to lower the price of a stock while buying? | The strategy could conceivably work if you had sufficient quantity of shares to fill all of the outstanding buy orders and fill your lower buy orders. But in this case you are forcing the market down by selling and reinforcing the notion that there is a sell off by filling ever lower buy orders. There is the potential to trigger some stop loss orders if you can pressure it low enough. There is a lot of risk here that someone sees what you are doing and decides to jump in and buy forcing the price back up. Could this work sure. But it is very risky and if you fail to create the panic selling then you risk losing big. I also suspect that this would violate SEC Rules and several laws. And if the price drops too far then trading on the stock would be halted and is likely to return at the appropriate price. Bottom line I can not see a scenario where you do not trigger the stop, net a profit and end up with as many or more stock that you had in the first place. |
Tax Implications - First 2-Family Rental Property | You should really be talking to a tax adviser (EA/CPA licensed in your State) about taxes and to a lawyer about the liability protection. You won't find answers from neither of theses here. Besides the liability protection, how do these 2 options affect taxes? There's no liability protection difference between the two (talk to a lawyer to verify) since you'll be cosigning them personally either way. In the first case (loan to the LLC) - everything goes on the 1065 and you get the bottom line on K-1 which transfers to you own tax return. In the second case the loan interest is your personal investment expense (Schedule A deduction) while the loan proceeds you moved to the LLC add to your basis. I'd suggest getting the loan directly in the LLC name, if you can. However, the Lawyers seem to agree that this would void the mortgage because of the "Due on Sale" clause in mortgage loans. "Due on sale" may or may not be invoked, but that's a risk you'd be taking, yes. LLC is a separate legal entity (as opposed to a living trust, to which your second quote seems to be referring), so it is definitely a possibility for a lender to call on the loan if you re-title it. |
Is there lesser or no tax on assets? | US federal tax law distinguishes many types of income. For most people, most of their income is "earned income", money you were paid to do a job. Another category of income is "capital gains", money you made from the sale of an asset. For a variety of reasons, capital gains tax rates are lower than earned income tax rates. (For example, it is common that much of the gain is not real profit but inflation. If you buy an asset for $10,000 and sell it for $15,000, you pay capital gains tax on the $5,000 profit. But what if prices in general since you bought the asset have gone up 50%? Then your entire profit is really inflation, you didn't actually make any money -- but you still have to pay a tax on the paper gain.) So if you make your money by investing in assets -- buying and selling at a profit -- you will pay lower taxes than if you made the same amount of money by receiving a salary from a job, or by running a business where you sell your time and expertise rather than an asset. But money made from assets -- capital gains -- is not tax free. It's just a lower tax. It MIGHT be that when combined with other deductions and tax credits this would result in you paying no taxes in a particular year. Maybe you could avoid paying taxes forever if you can take advantage of tax loopholes. But for most people, making money from capital gains could result in lower taxes per dollar of income than someone doing more ordinary work. Or it could result in higher taxes, if you factor in inflation, net present value of money, and so on. BTW Warren Buffet's "secretary" is not a typist. She apparently makes at least $200,000 a year. http://www.forbes.com/sites/paulroderickgregory/2012/01/25/warren-buffetts-secretary-likely-makes-between-200000-and-500000year/#ab91f3718b8a. And side note: if Warren Buffet thinks he isn't paying enough in taxes, why doesn't he voluntarily pay more? The government has a web site where citizens can voluntarily pay additional taxes. In 2015 they received $3.9 million in such contributions. http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm |
What is a call spread and how does it work? | A bullish (or 'long') call spread is actually two separate option trades. The A/B notation is, respectively, the strike price of each trade. The first 'leg' of the strategy, corresponding to B, is the sale of a call option at a strike price of B (in this case $165). The proceeds from this sale, after transaction costs, are generally used to offset the cost of the second 'leg'. The second 'leg' of the strategy, corresponding to A, is the purchase of a call option at a strike price of A (in this case $145). Now, the important part: the payoff. You can visualize it as so. This is where it gets a teeny bit math-y. Below, P is the profit of the strategy, K1 is the strike price of the long call, K2 is the strike price of the short call, T1 is the premium paid for the long call option at the time of purchase, T2 is the premium received for the short call at the time of sale, and S is the current price of the stock. For simplicity's sake, we will assume that your position quantity is a single option contract and transaction costs are zero (which they are not). P = (T2 - max(0, S - K2)) + (max(0, S - K1) - T1) Concretely, let's plug in the strikes of the strategy Nathan proposes, and current prices (which I pulled from the screen). You have: P = (1.85 - max(0, 142.50 - 165)) - (max(0, 142.50 - 145)) = -$7.80 If the stock goes to $150, the payoff is -$2.80, which isn't quite break even -- but it may have been at the time he was speaking on TV. If the stock goes to $165, the payoff is $12.20. Please do not neglect the cost of the trades! Trading options can be pretty expensive depending on the broker. Had I done this trade (quantity 1) at many popular brokers, I still would've been net negative PnL even if NFLX went to >= $165. |
What to bear in mind when considering a rental home as an investment? | Here would be the big two you don't mention: Time - How much of your own time are you prepared to commit to this? Are you going to find tenants, handle calls if something breaks down, and other possible miscellaneous issues that may arise with the property? Are you prepared to spend money on possible renovations and other maintenance on the property that may occur from time to time? Financial costs - You don't mention anything about insurance or taxes, as in property taxes since most municipalities need funds that would come from the owner of the home, that would be a couple of other costs to note in having real estate holdings as if something big happens are you expecting a government bailout automatically? If you chose to use a property management company for dealing with most issues then be aware of how much cash flow could be impacted here. Are you prepared to have an account to properly do the books for your company that will hold the property or would you be doing this as an individual without any corporate structure? Do you have lease agreements printed up or would you need someone to provide these for you? |
100% Ownership and 30% profit to sale director | Perhaps an example will help make it more clear. Any given year: Revenue: 200K, profit 60K You get 40K in profit, plus any salary, he gets 20K Next year you attract the attention of a competitor and they offer and you accept to sell. You would get 100% of the proceeds. This is kind of a bad deal for him as you could easily play accounting tricks to diminish the company's profits and reduce his pay. For the given example, you could pay yourself a 60K bonus and reduce the profit to zero and eliminate his compensation. There should probably be a revenue metric included in his compensation. Edit: It is really nice to hear you have a desire to treat this person fairly. Honesty in business is necessary for long term success. I would simply make his salary dependent upon the revenue he generates. For example, lets say you can make a widget for 4 and you expect to sell them for 10. Your profit would be 6, and with the suggested split he would receive $2, you $4. Instead I would have him receive like 15% of the revenue generated This allows for some discounts for bulk items and covers the cost of processing sales. It also allows him to share revenue with his staff. Alternatively you could also do a split. Perhaps 7.5% of revenue and 10% of profit. |
Should I scale down my 401k? | Because stock markets don't always go up, sometimes they go down. Sometimes they go way down. Between 2007 and 2009 the S&P 500 lost over half its value. So if in 2007 you thought you had just enough to retire on, in 2009 you'd suddenly find you had only half of what you needed! Of course over the next few years, many of the stocks recovered value, but if you had retired in 2008 and depended on a 401k that consisted entirely of stocks, you'd have been forced to sell a bunch of stocks near the bottom of the market to cover your retirement living expenses. Bonds go up and down too, but usually not to the same extent as stocks, and ideally you aren't selling the bonds for your living expenses, just collecting the interest that's due you for the year. Of course, some companies and cities went bankrupt in the 2008 crisis too, and they stopped making interest payments. Another risk is that you may be forced to retire before you were actually planning to. As you age you are at increasing risk for medical problems that may force an early retirement. Many businesses coped with the 2008 recession by laying off their older workers who were earning higher salaries. It wasn't an easy environment for older workers to find jobs in, so many folks were forced into early retirement. Nothing is risk free, so you need to make an effort to understand what the risks are, and decide which ones you are comfortable with. |
Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? | In the first case, if you wish to own the stock, you just exercise the option, and buy it for the strike price. Else, you can sell the option just before expiration, it will be priced very close to its in-the-money value. |
What is a rule of thumb for accruing debt on a rental property? | To start, I hope you are aware that the properties' basis gets stepped up to market value on inheritance. The new basis is the start for the depreciation that must be applied each year after being placed in service as rental units. This is not optional. Upon selling the units, depreciation is recaptured whether it's taken each year or not. There is no rule of thumb for such matters. Some owners would simply collect the rent, keep a reserve for expenses or empty units, and pocket the difference. Others would refinance to take cash out and leverage to buy more property. The banker is not your friend, by the way. He is a salesman looking to get his cut. The market has had a good recent run, doubling from its lows. Right now, I'm not rushing to prepay my 3.5% mortgage sooner than it's due, nor am I looking to pull out $500K to throw into the market. Your proposal may very well work if the market sees a return higher than the mortgage rate. On the flip side I'm compelled to ask - if the market drops 40% right after you buy in, will you lose sleep? And a fellow poster (@littleadv) is whispering to me - ask a pro if the tax on a rental mortgage is still deductible when used for other purposes, e.g. a stock purchase unrelated to the properties. Last, there are those who suggest that if you want to keep investing in real estate, leverage is fine as long as the numbers work. From the scenario you described, you plan to leverage into an already pretty high (in terms of PE10) and simply magnifying your risk. |
Why is auto insurance ridiculously overpriced for those who drive few miles? | Insurance rates are about assessing risk. If the insurer has no way to reliably and easily assess usage, they will not reduce the premiums. Many companies are providing tracking devices that connect to the OBD-II port. This not only tracks actual miles driven, but can typically track aggressive driving, time of day, length of trips, and other information. Unless you are using this kind of device to give the insurer actionable feedback on your driving habits, do not expect any discounts for mileage or usage. |
Will I be turned down for a car loan? | Considering I'm putting 30% down and having my father cosign is there any chance I would be turned down for a loan on a $100k car? According to BankRate, the average credit score needed to buy a new car is 714, but they also show average interest rates at 6.39% for new-car loans to people with credit scores in the 601-660 range. High income certainly helps offset credit score to some extent. Not every bank/dealership does things the same way. Being self-employed you'd most likely be required to show 2 years of tax returns, and they'd use those as a basis for your income rather than whatever you have made recently. If using a co-signer, their income matters. Another key factor is debt to income ratio, if too much of someone's income is already spoken for by other debts a lender will shy away. So, yes, there's a chance, given all the information we don't know and the variability with lender policies, that you could be turned down for a car loan. How should I go about this? If you're set on pursuing the car loan, just go talk to some lenders. You'll want to shop around for a good rate anyway, so no need to speculate just go find out. Include the dealership as a potential financing option, they can have great rates. Personally, I'd get a much cheaper car. Your insurance premium on a 100k car will be quite high due to your age. You might be rightly confident in your earning potential, but nothing is guaranteed, situations can change wildly in short order. A new car is not a good investment or a value-retaining asset, so why bother going into debt for one if you don't have to? If you buy something in cash now, you could upgrade in a few years without financing if your earning prediction holds and would save quite a bit in car insurance and interest over the years between. |
Is it safer to send credit card number via unsecured website form or by e-mail? What safer options are there? | Buy a prepaid gift card, such as a MasterCard or Visa gift card. You can find them at the grocery store, a pharmacy, or your local bank. Provide this on their online form. If anyone steals your gift card information, you will have already used the funds for your purchase and there is no further risk to you. |
Which is better when working as a contractor, 1099 or incorporating? | I'll just re-post my comment as an answer as i disagree with Michael Pryor. According to this article (and few others) you may save money by incorporating. These factors don’t change the general payroll tax advantage of an S corporation, however: A S corporation can often save business owners substantial amounts of payroll tax if the business profit greatly exceeds what the business needs to pay owners for their work. |
How is taxation for youtube/twitch etc monetization handled in the UK? | Unless your video does very well, it's unlikely that your income from it will exceed your expenses incurred in making it, such as the purchase prices of your computer and video camera and the cost of your broadband connection, so there shouldn't be any tax to pay. |
Germany: Employee and Entrepreneur at same time (for getting AppStore payments) | (Selling apps is AFAIK business, not freelancing - unless the type of app you produce is considered a freelancing subject. The tax office will give you a questionnaire and then decide). As Einzelunternehmer, you can receive the payments for the apps to the same account where your wages go. However, there are lots of online accounts that do not cost fees, so consider to receive them on a separate account so you have the business and private kind of separate (for small Einzelunternehmer, there is no legal separation between business and private money - you have full liability with your private money for the business). The local chamber of commerce can tell you everything about setting up such a business, ask them (you'll probably have to become a member there anyways). They have information as well on VAT (Umsatzsteuer, USt) which you need to declare unless you get an exemption (probably possible), and about Gewerbesteuer (the income tax of the business) etc. For the tax, you have "subforms" for the income tax e.g. for wages and for business income, so you just submit both with the main form. You'll get an appropriate tax number when registering the business. Social security/insurance: as long as the app selling is only a side business, the social insurance payments for your main job completely cover the side job as well. You need to make sure that your employment contract is compatible with the app business, though. A quick search indicates that there is a tax treaty between Germany and the Ukraine, Wikipedia says there are no contracts about social insurance in effect (yet). |
Am I liable for an auto accident if I'm a cosigner but not on the title, registration, or insurance policy? | I am sure that laws differ from state to state. My brother and I had to take over my dads finances due to his health. He had a vehicle that had a loan on it. We refinanced the vehicle and it was in our name. One of our family members needed a vehicle and offered to take over the payment. Our attorney advised us to be on the insurance policy with them and make sure if was paid correctly. We are in Indiana. I know it is hard to discuss finances with family members. However, if you co-signed the loan I think it would be wise to either have your name added to the insurance policy or at least have your brother show proof it has been paid. If you are not comfortable with that it may be a good idea to make sure the bank has your correct address and ask if they would notify you if insurance has lapsed. If your on the loan and there is no insurance at the very least if the vehicle was damaged you would still be responsible to pay the loan. |
CEO entitlement from share ownership? | In its basic form, a corporation is a type of 'privileged democracy'. Instead of every citizen having a vote, votes are allocated on the basis of share ownership. In the most basic form, each share you own gives you 1 vote. In most public companies, very few shareholders vote [because their vote is statistically meaningless, and they have no particular insight into what they want in their Board]. This means that often the Board is voted in by a "plurality" [ie: 10%-50%] of shareholders who are actually large institutions (like investment firms or pension funds which own many shares of the company). Now, what do shareholders actually "vote on"? You vote to elect individuals to be members of the Board of Directors ("BoD"). The BoD is basically an overarching committee that theoretically steers the company in whatever way they feel best represents the shareholders (because if they do not represent the shareholders, they will get voted out at the next shareholder meeting). The Board members are typically senior individuals with experience in either that industry or a relevant one (ie: someone who was a top lawyer may sit on the BoD and be a member of some type of 'legal issues committee'). These positions typically pay some amount of money, but often they are seen as a form of high prestige for someone nearing / after retirement. It is not typically a full time job. It will typically pay far, far less than the role of CEO at the same company. The BoD meets periodically, to discuss issues regarding the health of the company. Their responsibility is to act in the interests of the shareholders, but they themselves do not necessarily own shares in the company. Often the BoD is broken up into several committees, such as an investment committee [which reviews and approves large scale projects], a finance committee [which reviews and approves large financial decisions, such as how to get funding], an audit committee [which reviews the results of financial statements alongside the external accountants who audit them], etc. But arguably the main role of the BoD is to hire the Chief Executive Officer and possibly other high level individuals [typically referred to as the C-Suite executives, ie Chief Financial Officer, Chief Operating Officer, etc.] The CEO is the Big Cheese, who then typically has authority to rule everyone below him/her. Typically there are things that the Big Cheese cannot do without approval from the board, like start huge investment projects requiring a lot of spending. So the Shareholders own the company [and are therefore entitled to receive all the dividends from profits the company earns] and elects members of the Board of Directors, the BoD oversees the company on the Shareholders' behalf, and the CEO acts based on the wishes of the BoD which hires him/her. So how do you get to be a member of the Board, or the CEO? You become a superstar in your industry, and go through a similar process as getting any other job. You network, you make contacts, you apply, you defend yourself in interviews. The shareholders will elect a Board who acts in their interests. And the Board will hire a CEO that they feel can carry out those interests. If you hold a majority of the shares in a company, you could elect enough Board members that you could control the BoD, and you could then be guaranteed to be hired as the CEO. If you own, say, 10% of the shares you will likely be able to elect a few people to the Board, but maybe not enough to be hired by the Board as the CEO. Short of owning a huge amount of a company, therefore, share ownership will not get you any closer to being the CEO. |
Best way to pay off debt? | The most tax efficient way to get some cash would be to sell some stocks from the Fidelity account that have the lowest capital gains. The tax will typically be 15% of the capital gains. This will be a one-time cost which should save you money compared to paying 7.5% on the loan year after year. Tax on selling the stock options will probably be higher, since you imply there would be high capital gains, and some of the proceeds might even be taxed as income, not capital gains. |
How can a 529 plan help me save for my child's college education? | If you're ready to start a 529 account, it makes a big difference which state you choose (some states have excessive fees). It doesn't have to be your own state, but some states give you tax incentives to stay in-state. What you need to do is check out Clark Howard's 529 Guide and check to see if your state is in the "good" list. If not, then pick out a good state. |
What's the purpose of having separate checking and savings accounts? | For some people, it's easier to stick to a budget if they have separate checking and savings accounts because they can deposit funds directly into their savings account and not have those funds accessible by debit/credit card, checks, etc. This allows people to pay themselves first and accumulate savings, while making it slightly more difficult to spend those savings on a whim. One a more technical/legal note, one key difference in the United States comes from Regulation D. §204.2(d)(2) of the law limits you to six withdrawals from savings and money market accounts. No such limit exists for checking accounts. Regulation D also forbids banks from paying interest on business checking accounts. In the simplest case, checking accounts and savings accounts are a tradeoff between liquidity and return. Checking accounts are much more liquid, but won't necessarily earn interest, while savings accounts are less liquid because of the withdrawal limits, but earn interest. Nowadays, however, sweep accounts blur this line somewhat because they function like checking accounts, in that you can write an unlimited number of checks, make an unlimited number of withdrawals, etc. but you can also earn interest on your account balance because some or all of the funds are "swept" into an investment account when not in use. The definition of "in use" can vary from business to business and bank to bank. |
Investing in hemp producers in advance of possible legalization in Canada? | Hemp is already pretty easily grown by farmers here. Canada had 50,000 acres of legal hemp in 2006, but it's been in decline the last 3 years due to the cost, lack of demand, and the high values of some other crops. It's also difficult to harvest due to its size. It's possible that the demand for hemp products will increase, but given that many Asian countries (Russia, China and Korea, for example) never banned it in the first place, there's a pretty ready supply already in place. In Canada, the big reason to grow it is as an alternative crop for use in rotation that has some commercial demand, but it's certainly not as valuable as crops like canola, oats or soy beans. |
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. |
Ballpark salary equivalent today of “healthcare benefits” in the US? | As a contractor, I have done this exact calculation many times so I can compare full time employment offers when they come. The answer varies greatly depending on your situation, but here's how to calculate it: So, subtracting the two and you get I've run many different scenarios with multiple plans and employers, and in my situation with a spouse and 1 child, the employer plans usually ended up saving me approximately $5k per year. So then, to answer your question: ...salary is "100k", "with healthcare", or then "X" "with no healthcare" - what do we reckon? I reckon I would want to be paid $5K more, or $105K. This is purely hypothetical though and assumes there are no other differences except for with or without health insurance. In reality, contractor vs employee will have quite a few other differences. But in general, the calculation varies by company and the more generous the employer's health benefits, the more you need to be compensated to make up for not having it. Note: the above numbers are very rough, and there are many other factors that come into play, some of which are: As a side note, many years ago, during salary talks with a company, I was able to negotiate $2K in additional yearly salary by agreeing not to take the health insurance since I had better insurance through my spouse. Health insurance in the US was much cheaper back then so I think closer to $5K today would be about right and is consistent with my above ballpark calculation. I always wondered what would have happened if I turned around and enrolled the following year. I suspect had I done that they could not have legally lowered my salary due to my breaking my promise, but I wouldn't be surprised if I didn't get a raise that year either. |
Gift Tax and LLC with foreign partners | The LLC portion is completely irrelevant. Don't know why you want it. You can create a joint/partnership trading account without the additional complexity of having LLC. What liability are you trying to limit here? Her sisters will file tax returns in the us using the form 1040NR, and only reporting the dividends they received, everything else will be taxed by Vietnam. You'll have to investigate how to file tax returns there as well. That said, you'll need about $500,000 each to invest in the regional centers. So you're talking about 1.5 million of US dollars at least. From a couple of $14K gifts to $1.5M just by trading? I don't see how this is feasible. |
Why would I vote for an increase in the number of authorized shares? | As a common shareholder, why would I want to approve an increase in the number of authorized shares?" Because it could increase the value of your existing shares. Companies sell new shares to raise capital, and they use capital to (among other things) expand. If Whole Foods issues new shares and uses the capital to opens new stores, then profit could increase enough to offset the dilution effect, and your stock price will go up. You should ask yourself: What areas is is your company of choice planning on expanding into? Will they do well there? Are there better ways for the company to raise capital (debt, cash in hand, cut expenses elsewhere, etc)? If you think that the management has a good plan for expanding, then authorizing new shares makes good sense for you personally. |
How can I improve my credit score if I am not paying bills or rent? | So you work, and give a small irregular amount to you parents. You live with very low expenses. Assuming you make a bit below the average salary in the UK, you should be able to save around £1000. If you found a part time job could you save double? I bet you could. So why do you need credit? Why do you need a credit score? Having poor or no credit can be remedied by having a large down payment. Essentially the bank asks, if this person could afford the payment of this loan why have they not been saving the money? You could save the money and either buy the thing(s) you desire with cash (the smartest), or put 50% down. Putting 50% or more down turns you into a good credit risk despite having no credit history. In case you missed it: why not just save the money and buy it for cash? Why have compounding interest working against you? Why do you want to work for the bank? Making the interest payments on loans in order to build a credit score is just silly. It is an instance of a "tail wagging the dog". |
Should my husband's business pay my business? | I agree with some of the points of the other answers but why not avoid all the guesswork? I highly recommend you not charge him now. Wait until the end of the year when you have much more information about both of your companies and then you can run the numbers both ways and decide if it would benefit you (collectively). If either of your businesses runs on a cash basis and you decide to invoice, just make sure the check is deposited before Dec 31. Update: If you want to do this for 2016, at least your husband's business would have to be using an accrual basis (since it's too late to take the deduction on a cash basis). Simply run the numbers both ways and see if it helps you. If it doesn't help enough to warrant it for 2016 you could rerun the numbers near the end of 2017 to see if it helps then. Diclaimer: I think it's OK to do this type of manipulation for the scenario you described since you have done (or are doing) the work and you are charging a reasonable fee, but realize that you shouldn't manipulate the amount of the invoice, or fabricate invoices. For example, you shouldn't ever think about such things as: "If I invoice $50K instead of $3K, will that help us?" |
devastated with our retirement money that we have left | The answers you've received already are very good. I truly sympathize with your situation. In general, it makes sense to try to build off of existing relationships. Here are a few ideas: I don't know if you work for a small or large company, or local/state government. But if there is any kind of retirement planning through your workplace, make sure to investigate that. Those people are usually already paid something for their services by your employer, so they should have less of an interest in making money off you directly. One more thought: A no-fee brokerage company e.g. Charles Schwab. They offer a free one hour phone call with an investment adviser if you invest at least $25K. I personally had very good experiences with them. This answer may be too anecdotal and not specifically address the annuity dilemma you mentioned. That annunity dilemma is why you need to find someone you can trust, who is competent (see the credentials for financial advisers mentioned in the other answers), and will work the numbers out with you. |
Is debt almost always the cause of crashes and recessions? | The root cause can be said to always be a crisis in confidence. It may be due to a very real event. However, confidence is what pushes the markets up and worries are what bring them down. |
Is real (physical) money traded during online trading? | With Forex trading - physical currency is not involved. You're playing with the live exchange rates, and it is not designed for purchasing/selling physical currency. Most Forex trading is based on leveraging, thus you're not only buying money that you're not going to physically receive - you're also paying with money that you do not physically have. The "investment" is in fact a speculation, and is akin to gambling, which, if I remember correctly, is strictly forbidden under the Islam rules. That said, the positions you have - are yours, and technically you can demand the physical currency to be delivered to you. No broker will allow online trading on these conditions, though, similarly to the stocks - almost no broker allows using physical certificates for stocks trading anymore. |
Why do banks finance shared construction as mortgages instead of financing it directly and selling the apartments in a building? | The core competency of banks is to lend money from depositors and re-lend that money to borrowers. They do not have the expertise to develop real estate. They have trouble evening managing foreclosed real estate, such that they have to sell them at a discount. |
Is a “total stock market” index fund diverse enough alone? | Brendan, The short answer is no, there is no need to get into any other funds. For all intents and purposes the S&P 500 is "The Stock Market". The news media may quote the Dow when the market reaches new highs or crashes but all of the Dow 30 stocks are included in the S&P 500. The S&P is also marketcap weighted, which means that it owns in higher proportion the big "Blue Chip" stocks more than the smaller less known companies. To explain, the top 10 holdings in the S&P represent 18% of the total index, while the bottom 10 only represent 0.17% (less than 1 percent). They do have an equal weighted S&P in which all 500 companies represent only 1/500th of the index and that is technically even more diversified but in actuality it makes it more volatile because it has a higher concentration of those smaller less known companies. So it will tend to perform better during up markets and worse during down markets. As far as diversification into different asset classes or other countries, that's non-sense. The S&P 500 has companies in it that give you that exposure. For example, it includes companies that directly benefit from rising oil prices, rising gold prices, etc known as the Energy and Materials sector. It also includes companies that own malls, apartment complexes, etc. known as the Real Estate sector. And as far as other countries, most of the companies in the S&P are multi-national companies, meaning that they do business over seas in many parts of the world. Apple and FaceBook for example sell their products in many different countries. So you don't need to invest any of your money into an Emerging Market fund or an Asia Fund because most of our companies are already doing business in those parts of the world. Likewise, you don't need to specifically invest into a real estate or gold fund. As far as bonds go, if you're in your twenties you have no need for them either. Why, because the S&P 500 also pays you dividends and these dividends grow over time. So for example, if Microsoft increases its dividend payment by 100% over a ten year period , all of the shares you buy today at a 2.5% yield will, in 10 years, have a higher 5% yield. A bond on the other hand will never increase its yield over time. If it pays out 4%, that's all it will ever pay. You want to invest because you want to grow your money and if you want to invest passively the fastest way to do that is through index ETFs like the $SPY, $IVV, and $RSP. Also look into the $XIV, it's an inverse VIX ETF, it moves 5x faster than the S&P in the same direction. If you want to actively trade your money, you can grow it even faster by getting into things like options, highly volatile penny stocks, shorting stocks, and futures. Don't get involved in FX or currency trading, unless it through futures. |
If the put is more expensive than the call, what does it mean | It is a fool's errand to attribute abnormal option volume or volatility to any meaningful move in the stock. One side of the chain is frequently more expensive than the other. The relationship between historical volatility and implied volatility is dubious at best, and also a big area of study. |
Why do US retirement funds typically have way more US assets than international assets? | It's likely that the main reason is the additional currency risk for non-USD investments. A wider diversification in general lowers risk, but that has to be balanced by the risk incurred when investing abroad. This implies that the key factor isn't so much the country of residence, but the currency of the listing. Euro funds can invest across the whole Euro zone. Things become more complex when you consider countries whose currency is less trusted and whose economy is less diversified. In those cases, the "currency risk" may be more due to the national currency, which justifies a more global investment strategy. |
Self-directed RRSP into mortgage investment | The Globe and Mail has an interesting article on what you can do with your RRSPs. Be aware that the article is from early 2011 and rules change. They describe holding your own mortgage inside your RRSP. That is, if you have $100,000 inside your RRSP already and your remaining mortgage is $100,000, you can use that money to pay off your mortgage, then pay back the money at interest, generating a tax-deferred profit inside your RRSP. That approach may be viable, though you'd want to talk to your accountant first. I'd be very cautious about loaning money to someone else for a second mortgage using my RRSP, though. Second mortgages are inherently risky, so this is a very speculative investment. Once you make an RRSP contribution, that space is used up (barring a couple of exceptions such as the life-long learning plan). So, let's say you used $100,000 of your RRSP to loan to someone for a second mortgage. Any interest payments should be sheltered inside the RRSP (substantial benefit), but if the person defaults on the second mortgage (which you should expect to be a significant possibility), you've lost your entire $100,000 contribution room (as well as, obviously, the $100,000 that you loaned out). I can't tell you whether or not it makes sense to invest in risky second-mortgage loans and I can't tell you whether, if you choose to do so, it definitely should be done inside an RRSP. There are substantial risks in the loan and there are both costs and benefits to doing so inside an RRSP. Hopefully, though, I've helped you understand the questions you should be asking yourself. |
When applying for a mortgage, can it also cover outstanding debts? | Yes, but should you be even trying to get a mortgage if you can't aford at least a 5% deposit? Prove you do want the house by doing without a new car for a few years... |
Investment strategy for 401k when rolling over soon | The time horizon for your 401K/IRA is essentially the same, and it doesn't stop at the day you retire. On the day you do the rollover you will be transferring your funds into similar investments. S&P500 index to S&P 500 index; 20xx retirement date to 20xx retirement date; small cap to small cap... If your vested portion is worth X $'s when the funds are sold, that is the amount that will be transferred to the IRA custodian or the custodian for the new employer. Use the transfer to make any rebalancing adjustments that you want to make. But with as much as a year before you leave the company if you need to rebalance now, then do that irrespective of your leaving. Cash is what is transferred, not the individual stock or mutual fund shares. Only move your funds into a money market account with your current 401K if that makes the most sense for your retirement plan. Also keep in mind unless the amount in the 401K is very small you don't have to do this on your last day of work. Even if you are putting the funds in a IRA wait until you have started with the new company and so can define all your buckets based on the options in the new company. |
What is the best way to stay risk neutral when buying a house with a mortgage? | You can hedge your house price from losing value if you believe that the housing market is correlated with major stock indices. Speak with a commodities broker because they will be able to help you buy puts on stock indices which if correlated with housing prices will offer somewhat of a hedge. Example. House prices drop 30% because of weak economy, stocks will generally drop around that same amount 30%. If you have enough exposure to in the puts compared to your house value you will be protected. You can also buy calls in 30 year bonds for interest rate lock if you are not on a fixed interest rate. Many investors like warren buffet and carl icahn have been protecting them selves from a potential market downward turn. Speak to a local commodity broker to get some detailed advice, not etrade or any discount brokers they won't be able to help you specialize your trades. look for a full time commodity broker house. |
Is gold really an investment or just a hedge against inflation? | From Wikipedia: Investment has different meanings in finance and economics. In Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. The second part of the question can be addressed by analyzing the change in gold price vs inflation year by year over the long term. As Chuck mentioned, there are periods in which it didn't exceed inflation. More important, over any sufficiently long length of time the US stock market will outperform. Those who bought at the '87 peak aren't doing too bad, yet those who bought in the last gold bubble haven't kept up with inflation. $850 put into gold at the '80 top would inflate today to $2220 per the inflation calculator. You can find with a bit of charting some periods where gold outpaced inflation, and some where it missed. Back to the definition of investment. I think gold fits speculation far better than it does investment. I've heard the word used in ways I'd disagree with, spend what you will on the shoes, but no, they aren't an investment, I tell my wife. The treadmill purchase may improve my health, and people may use the word colloquially, but it's not an investment. |
Why should we expect stocks to go up in the long term? | Stock returns cannot be evaluated on its own. You need to take into account inflation and the return of other investment vehicles. Over the long run, you want to earn more than your peers (ie inflation), or lose less than them. Stock lets you buy into the profits of a company managed by others. So the fundamental question is "do those company managers make better decision than average person?" Of course there are times when they make awful decisions (eg just before dotcom bubble), and sometimes the best decision is to close the business. But overall those people are much better educated, have higher IQ, more resourceful, etc, and so over long time and across all the companies, this is correct and hence the stock market premium. |
Military Separation | Welcome to Money.SE, and thank you for your service. In general, buying a house is wise if (a) the overall cost of ownership is less than the ongoing cost to rent in the area, and (b) you plan to stay in that area for some time, usually 7+ years. The VA loan is a unique opportunity and I'd recommend you make the most of it. In my area, I've seen bank owned properties that had an "owner occupied" restriction. 3 family homes that were beautiful, and when the numbers were scrubbed, the owner would see enough rent on two units to pay the mortgage, taxes, and still have money for maintenance. Each situation is unique, but some "too good to be true" deals are still out there. |
Why is it good to borrow money to buy a house? | In most cases of purchases the general advice is to save the money and then make the purchase. Paying cash for a car is recommended over paying credit for example. For a house, getting a mortgage is recommended. Says who? These rules of thumb hide the actual equations behind them; they should be understood as heuristics, not as the word of god. The Basics The basic idea is, if you pay for something upfront, you pay some fixed cost, call it X, where as with a loan you need to pay interest payments on X, say %I, as well as at least fixed payments P at timeframe T, resulting in some long term payment IX. Your Assumption To some, this obviously means upfront payments are better than interest payments, as by the time the loan is paid off, you will have paid more than X. This is a good rule of thumb (like Newtonian's equations) at low X, high %I, and moderate T, because all of that serves to make the end result IX > X. Counter Examples Are there circumstances where the opposite is true? Here's a simple but contrived one: you don't pay the full timeframe. Suppose you die, declare bankruptcy, move to another country, or any other event that reduces T in such a way that XI is less than X. This actually is a big concern for older debtors or those who contract terminal illnesses, as you can't squeeze those payments out of the dead. This is basically manipulating the whole concept. Let's try a less contrived example: suppose you can get a return higher than %I. I can currently get a loan at around %3 due to good credit, but index funds in the long run tend to pay %4-%5. Taking a loan and investing it may pay off, and would be better than waiting to have the money, even in some less than ideal markets. This is basically manipulating T to deal with IX. Even less contrived and very real world, suppose you know your cash flow will increase soon; a promotion, an inheritance, a good market return. It may be better to take the loan now, enjoy whatever product you get until that cash flows in, then pay it all off at once; the enjoyment of the product will make the slight additional interest worth it. This isn't so much manipulating any part of the equation, it's just you have different goals than the loan. Home Loan Analysis For long term mortgages, X is high, usually higher than a few years pay; it would be a large burden to save that money for most people. %I is also typically fairly low; P is directly related to %I, and the bank can't afford to raise payments too much, or people will rent instead, meaning P needs to be affordable. This does not apply in very expensive areas, which is why cities are often mostly renters. T is also extremely long; usually mortgages are for 15 or 30 years, though 10 year options are available. Even with these shorter terms, it's basically the longest term loan a human will ever take. This long term means there is plenty of time for the market to have a fluctuation and raise the investments current price above the remainder of the loan and interest accrued, allowing you to sell at a profit. As well, consider the opportunity cost; while saving money for a home, you still need a place to live. This additional cost is comparable to mortgage payments, meaning X has a hidden constant; the cost of renting. Often X + R > IX, making taking a loan a better choice than saving up. Conclusion "The general advice" is a good heuristic for most common human payments; we have relatively long life spans compared to most common payments, and the opportunity cost of not having most goods is relatively low. However, certain things have a high opportunity cost; if you can't talk to HR, you can't apply for jobs (phone), if you can't get to work, you can't eat (car), and if you have no where to live, it's hard to keep a job (house). For things with high opportunity costs, the interest payments are more than worth it. |
Consequences of buying/selling a large number of shares for a low volume stock? | First, If you buy $10K of a penny stock and try to sell it that afternoon, you probably won't get your money back. The bid/ask spread may cost you dearly. On the shady side, if you are able to afford to trade enough shares to attract attention, the interest of those who believe the volume is an indication of some real event happening, you may pump it high enough to make some nice money, selling into the ensuing rise. This is a classic pump and dump (which often but not always, includes posts on message boards) and it is illegal. The same way this volume attracts traders, it can also attract the attention of the SEC. This should be read as a narrative, not as advice. If anything, it's advice on what not to do. |
Why would a long-term investor ever chose a Mutual Fund over an ETF? | First, it's not always the case that ETFs have lower expenses than the equivalent mutual funds. For example, in the Vanguard family of funds the expense ratio for the ETF version is the same as it is for the Admiral share class in the mutual fund version. With that in mind, the main advantages of a mutual fund over an equivalent ETF are: From a long-term investor's point of view, the main disadvantage of mutual funds relative to ETFs is the minimum account sizes. Especially if the fund has multiple share classes (i.e., where better classes get lower expense ratios), you might have to have quite a lot of money invested in the fund in order to get the same expense ratio as the ETF. There are some other differences that matter to more active investors (e.g., intraday trading, options, etc.), but for a passive investor the ones above are the major ones. Apart from those mutual funds and ETFs are pretty similar. Personally, I prefer mutual funds because I'm at a point where the fund minimums aren't really an issue, and I don't want to deal with the more fiddly aspects of ETFs. For investors just starting out the lower minimum investment for an ETF is a big win, as long as you can get commission-free trades (which is what I've assumed above.) |
Where can I lookup accurate current exchange rates for consumers? | Current and past FX rates are available on Visa's website. Note that it may vary by country, so use your local Visa website. |
No-line-of-credit debit card? | We have a pre-paid mastercard. This will only allow the spending up to the amount already paid into the card account. Visa Electron is a bank account linked debit card that will not allow the account to go overdrawn but this card type is getting quite rare. |
Would it make sense to buy a rental property as an LLC and not in my own name? | Don't worry about the spam mail. If you get a loan, it will be based on your personal credit. I don't know if you can get a real estate loan for your LLC, even if it owns many properties. Typically you get the loan in your own name, then transfer title to the LLC. The LLC does offer good liability protection. The downside is that it can be expensive (at least in California) and requires some work. You may have to pay an annual tax, and file (multiple) tax returns. It may not be worth it for one property. But it definitely a good idea if it is not too expensive. |
What does APR mean I'm paying? | Banks have to disclose up front the Annual Percentage Rate or interest rate that will be charged if you have an outstanding balance on a credit card. However, the APR of 19.9% is not charged all at once. For example if you had a $100 dollar balance on your credit card you would not be charged 19.9% interest or 19.90 making your new balance 119.90. Instead you would be charged the periodic rate which is one month's interest. You can easily calculate the period rate by dividing the APR by 12. So, 19.9% equals 1.65833% per month. This means if you had a $100 balance you would be charged 1.65833% interest or 1.66 making your new balance 101.66. Ask the bank or look on the website for a document called "Cardholders Agreement". If you can't find a link ask them for a copy so you can read all the fine print ahead of time. |
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