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How much would it cost me to buy one gold futures contract on Comex? | When you buy a futures contract you are entering into an agreement to buy gold, in the future (usually a 3 month settlement date). this is not an OPTION, but a contract, so each party is taking risk, the seller that the price will rise, the buyer that the price will fall. Unlike an option which you can simply choose not to exercise if the price goes down, with futures you are obligated to follow through. (or sell the contract to someone else, or buy it back) The price you pay depends on the margin, which is related to how far away the settlement date is, but you can expect around 5% , so the minimum you could get into is 100 troy ounces, at todays price, times 5%. Since we're talking about 100 troy ounces, that means the margin required to buy the smallest sized future contract would be about the same as buying 5 ounces of gold. roughly $9K at current prices. If you are working through a broker they will generally require you to sell or buy back the contract before the settlement date as they don't want to deal with actually following through on the purchase and having to take delivery of the gold. How much do you make or lose? Lets deal with a smaller change in the price, to be a bit more realistic since we are talking typically about a settlement date that is 3 months out. And to make the math easy lets bump the price of gold to $2000/ounce. That means the price of a futures contract is going to be $10K Lets say the price goes up 10%, Well you have basically a 20:1 leverage since you only paid 5%, so you stand to gain $20,000. Sounds great right? WRONG.. because as good as the upside is, the downside is just as bad. If the price went down 10% you would be down $20000, which means you would not only have to cough up the 10K you committed but you would be expected to 'top up the margin' and throw in ANOTHER $10,000 as well. And if you can't pay that up your broker might close out your position for you. oh and if the price hasn't changed, you are mostly just out the fees and commissions you paid to buy and sell the contract. With futures contracts you can lose MORE than your original investment. NOT for the faint of heart or the casual investor. NOT for folks without large reserves who can afford to take big losses if things go against them. I'll close this answer with a quote from the site I'm linking below The large majority of people who trade futures lose their money. That's a fact. They lose even when they are right in the medium term, because futures are fatal to your wealth on an unpredicted and temporary price blip. Now consider that, especially the bit about 'price blip' and then look at the current volatility of most markets right now, and I think you can see how futures trading can be as they say 'Fatal to your Wealth' (man, I love that phrase, what a great way of putting it) This Site has a pretty decent primer on the whole thing. their view is perhaps a bit biased due to the nature of their business, but on the whole their description of how things work is pretty decent. Investopedia has a more detailed (and perhaps more objective) tutorial on the futures thing. Well worth your time if you think you want to do anything related to the futures market. |
Ongoing Automatic Investment Fee | Reading the plan documentation, yes, that is what it means. Each purchase by bank debit, whether one-time or automatic, costs $2 plus $0.06 per share; so if you invested $50, you would get slightly less than $48 in stock as a result (depending on the per-share price). Schedule of Fees Purchases – A one-time $15.00 enrollment fee to establish a new account for a non-shareholder will be deducted from the purchase amount. – Dividend reinvestment: The Hershey Company pays the transaction fee and per share* fee on your behalf. – Each optional cash purchase by one-time online bank debit will entail a transaction fee of $2.00 plus $0.06 per share* purchased. – Each optional cash purchase by check will entail a transaction fee of $5.00 plus $0.06 per share* purchased. – If funds are automatically deducted from your checking or savings account, the transaction fee is $2.00 plus $0.06 per share* purchased. Funds will be withdrawn on the 10th of each month, or the preceding business day if the 10th is not a business day. – Fees will be deducted from the purchase amount. – Returned check and rejected ACH debit fee is $35.00. |
Personal finance software for Mac that can track stocks and mutual funds? (Even manual updating of share prices will do.) | I'm using iBank on my Mac here and that definitely supports different currencies and is also supposed to be able to track investments (I haven't used it to track investments yet, hence the 'supposed to' caveat). |
How should residents of smaller economies allocate their portfolio between domestic and foreign assets? | why should I have any bias in favour of my local economy? The main reason is because your expenses are in the local currency. If you are planning on spending most of your money on foreign travel, that's one thing. But for most of us, the bulk of our expenses are incurred locally. So it makes sense for us to invest in things where the investment return is local. You might argue that you can always exchange foreign results into local currency, and that's true. But then you have two risks. One risk you'll have anywhere: your investments may go down. The other risk with a foreign investment is that the currency may lose value relative to your currency. If that happens, even a good performing investment can go down in terms of what it can return to you. That fund denominated in your currency is really doing these conversions behind the scenes. Unless the bulk of your purchases are from imports and have prices that fluctuate with your currency, you will probably be better off in local investments. As a rough rule of thumb, your country's import percentage is a good estimate of how much you should invest globally. That looks to be about 20% for Australia. So consider something like 50% local stocks, 20% local bonds, 15% foreign stocks, 5% foreign bonds, and 10% local cash. That will insulate you a bit from a weak local currency while not leaving you out to dry with a strong local currency. It's possible that your particular expenses might be more (or less) vulnerable to foreign price fluctuations than the typical. But hopefully this gives you a starting point until you can come up with a way of estimating your personal vulnerability. |
How to divide a mortgage and living area fairly? | I think what you have here is actually TWO agreements with your sister, and explicitly splitting it into two agreements will bring some clarity. The first is ownership of and responsibility for the building. The second is each of your personal use of a unit. Here's what you do: Treat ownership as if you're not living there. Split the down payment, the monthly mortgage, taxes and insurance, responsibility for cost of maintenance, etc. as well as the ownership and benefit of the building 70%/30%. Put all that in a contract. Treat it like a business. Second, lease those units to yourselves as if you were tenants. And yes, I means even with leases. This clarifies your responsibilities in a tenant capacity. More to the point, each of you pays rent at the going rate for the unit you occupy. If rent from all three units equals the monthly expenses, nothing more needs to be done. If they're more than the monthly expenses, then each of you receives that as business income on that 70%/30% breakdown. If those three rents are less than the monthly expenses, then each of you are required to make up the difference, again at 70%/30%. Note: if any of those expenses are utilities, then they should be apportioned via the rent -- just as you would if you'd rented out the whole building to strangers. 2nd note: all that can be done with ledger entries, rather than moving money around, first as rent, then as expense payments, then as payouts. But, I think it will benefit all of you to explicitly pay rent at first, to really clarify your dual relationship as joint owners and as tenants. Final note: I think this is a stickier situation than you may think it is. Familial relationships have been destroyed both by going into business together, and by renting to family members. You're doing both, and mixing the two to boot. I'm not saying it will destroy your relationship, but that there's a solid risk there. Relationship destruction comes from assumptions and vague verbal agreements. Therefor, for the sake of all of you, put everything in writing. A clear contract for the business side, and clear leases for the tenant side. It's not about trust -- it's about understood communication and positive agreement on all important points. |
ETF S&P 500 with Reinvested Dividend | The problem there is that there's a tax due on that dividend. So, if you wish, you can buy the ETF and specify to reinvest dividends, but you'll have to pay a bit of tax on them, and keep track of your basis, if the account isn't a retirement account. |
Options liquidity and trading positions larger than the daily volume? | One broker told me that I have to simply read the ask size and the bid size, seeing what the market makers are offering. This implies that my order would have to match that price exactly, which is unfortunate because options contract spreads can be WIDE. Also, if my planned position size is larger than the best bid/best ask, then I should break up the order, which is also unfortunate because most brokers charge a lot for options orders. |
Why does my car loan interest go up despite making payments on-time? | The interest probably accrues daily, regardless of whether your payments are on time. |
When is the best time to put a large amount of assets in the stock market? | I have been considering a similar situation for a while now, and the advice i have been given is to use a concept called "dollar cost averaging", which basically amounts to investing say 10% a month over 10 months, resulting in your investment getting the average price over that period. So basically, option 3. |
What is the tax treatment of scrip dividends in the UK? | The HMRC website would explain it better to you. There is a lot of factors and conditions involved, so refer to the HMRC website for clarification. If your question had more details, it could have been easy to pinpoint the exact answer. Do I declare the value of shares as income Why would you do that ? You haven't generated income from that yet(sold it to make a profit/loss), so how can that be declared as income. |
In the stock market, why is the “open” price value never the same as previous day's “close”? | A stock is only worth what someone is willing to pay for it. If it trades different values on different days, that means someone was willing to pay a higher price OR someone was willing to sell at a lower price. There is no rule to prevent a stock from trading at $10 and then $100 the very next trade... or $1 the very next trade. (Though exchanges or regulators may halt trading, cancel trades, or impose limits on large price movements as they deem necessary, but this is beside the point I'm trying to illustrate). Asking what happens from the close of one day to the open of the next is like asking what happens from one trade to the next trade... someone simply decided to sell or pay a different price. Nothing needs to have happened in between. |
It's possible to short a stock without paying interest? | It is possible and it depends on your strategy. As short selling interest rates are annual and levied monthly at a prorated rate. Interest rates are also low in general, with the exception of hard to borrow stocks. Therefore you can maintain a short position for weeks on end and notice nothing. Months even, if the position itself has already gained in your favor. There is no additional fee for opening the short position. Although some brokers have a "locate" fee, if it is hard to borrow the stock and they need to go find some shares to short. So you can do it as much as you like. |
What happens if someone destroy money? | Depending on the country, nothing. For example, the US has about $1.3 trillion dollars of cash in circulation. Which means that if you were to burn a million dollars of it, that would be 0.000077% of the circulating cash. But cash is a small portion of the actual money in the US. Only about 8% of all money is in cash, the rest is in other forms of value, which means that you'd only be destroying 0.0000062% of the US's money if you burned a full $1,000,000. |
How can I find a high-risk, high-reward investment that is not strongly correlated with the U.S. economy? | These days almost all risky assets move together, so the most difficult criterion to match from your 4 will be "not strongly correlated to the U.S. economy." However, depending on how you define "strongly," you may want to consider the following: Be careful, you are sort of asking for the impossible here, so these will all be caveat emptor type assets. EDIT: A recent WSJ article talks about what some professional investors are doing to find uncorrelated bets. Alfredo Viegas, an emerging-markets strategist for boutique brokerage Knight Capital Group, is encouraging clients to bet against Israeli bonds. His theory: Investors are so focused on Europe that they are misjudging risks in the Middle East, such as a flare-up in relations between Israel and Iran, or greater conflict in Egypt and Syria. Once they wake up to those risks, Israeli bonds are likely to tumble, Mr. Viegas reasons. In the meantime, the investment isn't likely to be pushed one way or another by the European crisis, he says. |
Tenant wants to pay rent with EFT | I am able to set this up for my tenants by providing them with a form to fill out so that they provide their name and bank account information, and then I gave that to my bank and they establish a recurring ACH transfer. This way the tenant never gets my bank information. One note about this, I had a tenant break her lease and move out. She notified me a couple of days before the first of the month, and by the time she had moved a few days later the rent had been automatically paid. She called her bank and asked them to reverse the most recent transaction so she could have that month's rent refunded, and much to my surprise, they did. So the financial transfer is not necessarily one-way. This is in the US. |
Which USA Brokerage Firms can I transfer my India stocks to? | You might what to check out Interactive Brokers. If your India stock is NSE listed they might be able to do it since they support trading on that exchange. I would talk to a customer service rep there first. https://www.interactivebrokers.com/en/index.php?f=exchanges&p=asia |
Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan? | The key to understanding a mortgage is to look at an amortization schedule. Put in 100k, 4.5% interest, 30 years, 360 monthly payments and look at the results. You should get roughly 507 monthly P&I payment. Amortization is only the loan portion, escrow for taxes and insurance and additional payments for PMI are extra. You'll get a list of all the payments to match the numbers you enter. These won't exactly match what you really get in a mortgage, but they're close enough to demonstrate the way amortization works, and to plan a budget. For those terms, with equal monthly payments, you'll start paying 74% interest from the first payment. Each payment thereafter, that percentage drops. The way this is all calculated is through the time value of money equations. https://en.wikipedia.org/wiki/Time_value_of_money. Read slowly, understand how the equations work, then look at the formula for Repeating Payment and Present Value. That is used to find the monthly payment. You can validate that the formula works by using their answer and making a spreadsheet that has these columns: Previous balance, payment, interest, new balance. Each line represents a month. Calculate interest as previous balance * APR/12. Calculate new balance as previous balance minus payment plus interest. Work through all this for a 1 year loan and you will understand a lot better. |
What is the easiest way to back-test index funds and ETFs? | yAnother potential tool for you would be a Monte Carlo Simulator. here's one http://financial-dictionary.thefreedictionary.com/Business+Fundamentals I know that past performance is no guarantee..... but I think it's in many cases not exactly a flawed tool, and especially with respect to money managers a good way to find good ones. If a manager has shown an ability over time to consistently beat the market, yes he might be due for a bad day, but you'd generally expect that they should be able to continue that trend. I'd apply the same logic to pundits. If their track record sucks, and they constantly seem to whipsaw you with their advice, why listen to them other than |
How do I factor dividends and yield into the performance of a security? | Instead of a price chart can use a performance chart, which is usually expressed as a percentage increase from the original purchase price. To factor in the dividends, you can either add in all of your dividends to the final price, or subtract the accumulated dividends from your cost basis (the initial price). |
How does end-of-year interact with mutual fund prices (if it does)? | This answer is applicable to the US. Similar rules may hold in some other countries as well. The shares in an open-ended (non-exchange-traded) mutual fund are not traded on stock exchanges and the "market" does not determine the share price the way it does for shares in companies as brokers make offers to buy and sell stock shares. The price of one share of the mutual fund (usually called Net Asset Value (NAV) per share) is usually calculated at the close of business, and is, as the name implies, the net worth of all the shares in companies that the fund owns plus cash on hand etc divided by the number of mutual fund shares outstanding. The NAV per share of a mutual fund might or might not increase in anticipation of the distribution to occur, but the NAV per share very definitely falls on the day that the distribution is declared. If you choose to re-invest your distribution in the same fund, then you will own more shares at a lower NAV per share but the total value of your investment will not change at all. If you had 100 shares currently priced at $10 and the fund declares a distribution of $2 per share, you will be reinvesting $200 to buy more shares but the fund will be selling you additional shares at $8 per share (and of course, the 100 shares you hold will be priced at $8 per share too. So, you will have 100 previous shares worth only $800 now + 25 new shares worth $200 for a total of 125 shares at $8 = $1000 total investment, just as before. If you take the distribution in cash, then you still hold the 100 shares but they are worth only $800 now, and the fund will send you the $200 as cash. Either way, there is no change in your net worth. However, (assuming that the fund is is not in a tax-advantaged account), that $200 is taxable income to you regardless of whether you reinvest it or take it as cash. The fund will tell you what part of that $200 is dividend income (as well as what part is Qualified Dividend income), what part is short-term capital gains, and what part is long-term capital gains; you declare the income in the appropriate categories on your tax return, and are taxed accordingly. So, what advantage is there in re-investing? Well, your basis in those shares has increased and so if and when you sell the shares, you will owe less tax. If you had bought the original 100 shares at $10 and sell the 125 shares a few years later at $11 and collect $1375, you owe (long-term capital gains) tax on just $1375-$1200 =$175 (which can also be calculated as $1 gain on each of the original 100 shares = $100 plus $3 gain on the 25 new shares = $175). In the past, some people would forget the intermediate transactions and think that they had invested $1000 initially and gotten $1375 back for a gain of $375 and pay taxes on $375 instead. This is less likely to occur now since mutual funds are now required to report more information on the sale to the shareseller than they used to in the past. So, should you buy shares in a mutual fund right now? Most mutual fund companies publish preliminary estimates in November and December of what distributions each fund will be making by the end of the year. They also usually advise against purchasing new shares during this period because one ends up "buying a dividend". If, for example, you bought those 100 shares at $10 on the Friday after Thanksgiving and the fund distributes that $2 per share on December 15, you still have $1000 on December 15, but now owe taxes on $200 that you would not have had to pay if you had postponed buying those shares till after the distribution was paid. Nitpickers: for simplicity of exposition, I have not gone into the detailed chronology of when the fund goes ex-dividend, when the distribution is recorded, and when cash is paid out, etc., but merely treated all these events as happening simultaneously. |
Why doesn't the emerging markets index reflect GDP growth? | GDP being a measurement for an economy's growth and with the stock market being driven (mostly) by company profits you would expect a tight correlation between GDP growth and stock market performance. After all, a growing economy should lead to a corresponding increase in profit right? But the stock market is heavily influenced by investor mentality; irrational exuberant buying and panic selling make the stock market far more volatile than GDP ever can be. Just look at the 2001 bubble and 2008 panic sell-off for famous examples. I feel emerging markets are particularly prone to overly optimistic buying to "get in" on the GDP growth followed by overly pessimistic selling when politics get unfavorable. Also keep in mind that GDP measurements are all done after the fact, the growth that is reported has already happened. The stock market might have already expected the reported growth and priced it in. A final point: governments and companies in emerging markets have a reputation (sometimes deserved) of poor governance, think corruption, nepotism etc. So even if the economy grows substantially investors might not believe they can profit from the growth. P.S. What do you base the "no great increase" on? Emerging markets have had a rough decade but that index would have still returned 9% annually if you held it since 2001. |
How To Assign Payments Received Properly In GnuCash? | When I receive a check from a customer whom I previously sent an invoice, I go to the customer report for that customer, click on the link "Invoice" for that invoice, then click on the Pay Invoice button (very far right side). I then do a customer report and see that there is no balance (meaning all the invoices have been paid). I don't process invoices using the same method you do. Instead I go to Business -> Customer -> Process Payment. From there I can select the applicable customer, and a list of unpaid invoices will come up. I've never experienced the issue you've described. On a related topic: are you posting your invoices? From experience that has caused issues for me; when you post the invoice it should show up in your Accounts Receivable (or whichever account you've designated), and after you process the payment the A/R should go down accordingly. When posting your invoice, you specify which account it gets posted to: So that account should show a balance once you have posted it: Then, when a client pays you, your cash will go up, and A/R will go down. |
Price movement behaviour before earnings announcements | This depends entirely on what the market guesses the news will be and how much of that guess has already been factored into the price. There is no general answer beyond that. Note that this explains the apparently paradoxical responses where a stock good down on good news (the market expected better) or up on bad news (the market expected worse). |
Pros/Cons of Buying Discounted Company Stock | Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly. |
Good/Bad idea to have an ETF that encompasses another | You are overthinking it. Yes there is overlap between them, and you want to understand how much overlap there is so you don't end up with a concentration in one area when you were trying to avoid it. Pick two, put your money in those two; and then put your new money into those two until you want to expand into other funds. The advantage of having the money in an IRA held by a single fund family, is that moving some or all of the money from one Mutual fund/ETF to another is painless. The fact it is a retirement account means that selling a fund to move the money doesn't trigger taxes. The fact that you have about $10,000 for the IRA means that hopefully you have decades left before you need the money and that this $10,00 is just the start. You are not committed to these investment choices. With periodic re-balancing the allocations you make now will be adjusted over the decades. One potential issue. You said: "I'm saving right not but haven't actually opened the account." I take it to mean that you have money in a Roth TRA account but it isn't invested into a stock fund, or that you have the money ready to go in a regular bank account and will be making a 2015 contribution into the actual IRA before tax day this year, and the 2016 contribution either at the same time or soon after. If it is the second case make sure you get the money for 2015 into the IRA before the deadline. |
Is it better to pay an insurance deductible, or get an upgrade? | You asked for simple, and I promise you this is... it just looks a bit math-heavy to start with because we have to handle a couple of different scenarios. Bear with me :) I find the best way to deal with these kinds of questions is to put together a "Total cost" for each option, for a sensible amount of time, and see what the difference is. We'll include the current cost for both options, plus the subsequent costs for 12 months: I find that more useful than a straight "which is more expensive right now" because it includes the potential costs of the next upgrade, and any changes to the plan. Let's throw some numbers together for the next 12 months (if your current plan is longer than 12 months, read the note at the bottom first) First, write down the cost of these things **The above assume that you have two options if you take the repair option (and only one option if you use the buy-out option). The two options we're assuming here are that you can either: If you'd choose the same new plan regardless of whether you take the $100 or $150 option, there's no need to include both options: to simplify things you can just use the same numbers for both b/c and Pu/Py and the calculation below will still work. When you've found and written down the above, just do the sums below to find your two total costs over 12 months. Nothing fancy, just plug the numbers above into the equation. eg if Pe (eBay value of the phone) is $80, replace Pe with 80. Don't forget to do the parts in brackets first! That's your total cost for both options for the next year. Note: I'm assuming that your plan ends within the next 12 months. If not, just replace 12 in the above calculations with another term! You can also do this if you want to find out the price difference over a longer period (noting that if you upgrade to the same plan regardless of choice, you'll get the same answer for any period longer than your current contract) |
In Australia, how to battle credit card debt? | JoeTaxpayer mentioned a budget. Staying on top of your spending will be the result of getting out from under this debt. You may have Excel on your PC now, if not Open Office is free which has a program that handles finance applications. There is budgeting software for free out there. Youneedabudget.com is a lot better but cost a little. It keeps me from spending money I don't necessarily have as I can see a result month to month from having outflow of cash. As Joe mentioned - no more lattes in the near future which will help you pay off this debt which will be a bigger relief than a fashion statement. Having used budgeting software and attempted to stay in budget has been useful. I still over spend a little on food and can see the ramifications immediately. In short, try creating and sticking to a budget no matter the urge. As far as insolvency is concerned I'd struggle with paying it down before I do that. The thought passed my mind but I bit the bullet. DO NOT walk away from the debt however. That isn't a good idea Either. Budget and bite. |
Would the effects of an anticipated default by a nation be mostly symbolic? | It's only symbolic if things continue as if nothing had happened. Once large segments of people start becoming poor, it ceases to be symbolic and starts becoming real. Will a Greek default be felt in the US? Hard to say, but probably not. Will it be felt in Greece? You bet it will. |
Are there any investment strategies which take advantage of an in-the-money option price that incorporates no “time value”? | Options can have a negligible time premium. For American1 calls the time premium is never negative. If it had a negative premium it would be profitable to exercise it immediately. A deep in the money call has a delta of exactly one. That is, it's price movements completely mirror the price movements of the underlying stock. That means an option seller can buy stock and completely hedge his short option position. The seller of the option may be in an position to buy with very little margin and take your money and invest it. For example, consider a stock trading at $7.50, with its January 2014 $4 call option trading at $3.50. For one option, representing 100 shares, a trader could take your 350 dollars and invest it, and only use a small portion of the money to buy the stock on margin. Market-makers can typically borrow money at very low interest rates. If you have high borrowing costs, or are unable to buy on margin, then buying deep in the money calls can be a good strategy. Long story short, option sellers are making money off selling these deep in the money calls even with almost zero time premium. So, in general, there's no way to make money by buying them. 1. An American call is a call that can be exercised at any time up to and including its expiration date. |
Should I Use an Investment Professional? | I am sure there would be many views on the above topic, my take is that DIY takes the following: Now, for many, one or more of the other factors are missing. In this case, it is probably best to go for a financial adviser. There are others who have some of the above in place and are interested but probably cannot spend enough time. For them a middle ground of Mutual Funds probably is a good choice. Here they get to choose the fund they invest in and the fund manager manages the fund. For the people who have the above more or less in place and also are willing to take risk and learn, they probably can do a DIY for a while and find out the actual result. Just my views and opinion. |
Good book-keeping software? | You can try manager.io. It has a desktop, cloud and server edition that should fit your needs. |
How to calculate the rate of return on selling a stock? | Simple math. Take the sale proceeds (after trade expenses) and divide by cost. Subtract 1, and this is your return. For example, buy at 80, sell at 100, 100/80 = 1.25, your return is 25%. To annualize this return, multiply by 365 over the days you were in that stock. If the above stock were held for 3 months, you would have an annualized return of 100%. There's an alternative way to annualize, in the same example above take the days invested and dive into 365, here you get 4. I suggested that 25% x 4 = 100%. Others will ask why I don't say 1.25^4 = 2.44 so the return is 144%/yr. (in other words, compound the return, 1.25x1.25x...) A single day trade, noon to noon the next day returning just 1%, would multiply to 365% over a year, ignoring the fact there are about 250 trading days. But 1.01^365 is 37.78 or a 3678% return. For long periods, the compounding makes sense of course, the 8%/yr I hope to see should double my money in 9 years, not 12, but taking the short term trades and compounding creates odd results of little value. |
Is it a good idea to rebalance without withdrawing money? | Yes, rebalancing with new money avoids capital gains taxes and loads (although if you're financially literate enough to be thinking about rebalancing techniques, I'm surprised to hear that you're invested in funds with loads). On the other hand, if it's taking you years to rebalance, then: (a) you are not rebalancing anywhere near frequently enough. Rebalancing should be something you do every 6 months or 1 year, such that it would take only a few weeks or maybe a month of new investment to get back in balance. (b) you will be out-of-balance for quite a long time, while the whole point of the theory of rebalancing is to always be mathematically prepared for swings in the market. Any time spent out of balance represents that much more risk that an unexpected market move can seriously hurt your portfolio. You should weigh the time it will take you to rebalance the long way (i.e. the risk cost of not rebalancing immediately) vs. the taxes and fees involved in rebalancing quickly. If you had said that it would take you only a couple weeks or a month to rebalance the long way, I would say that the long way is fine. But the prospect of spending years without a balanced portfolio seems far more costly to me than any expenses you might incur rebalancing quickly. Since it's almost the end of the calendar year, have you considered doing two quick rebalances, one this year, and another in January? That way half of the tax consequences would happen in April, and the other half not until the next April, giving you plenty of time to scrounge up the money. Also, even if you have no capital losses this year with which to offset some of your expected capital gains, you would have all of next year to harvest some losses against next year's half of the rebalancing gains. |
Will Short Sale Prevent Me From Getting VA Home Loan Later? | From MyFICO: A foreclosure remains on your credit report for 7 years, but its impact to your FICO® score will lessen over time. While a foreclosure is considered a very negative event by your FICO score, it's a common misconception that it will ruin your score for a very long time. In fact, if you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as 2 years. The important thing to keep in mind is that a foreclosure is a single negative item, and if you keep this item isolated, it will be much less damaging to your FICO score than if you had a foreclosure in addition to defaulting on other credit obligations. (personal note - I tip my hat to you, sir. Regardless of party, we owe our Vets a debt of gratitude. If I had my way, a VA loan would ignore the past short sale. I wish you well. And thank you for serving) |
Does “income” include capital gains? | The $100,000 is taxed separately as "ordinary income". The $350,000 is taxed at long-term capital gains of 15%. Capital gains is not taxed at 20% until $415,050. Even though $100,000 + 350,000 = $450,000, only $350,000 can be taxed at capital gains. The total ordinary income tax burden will be $31,986 if single, in California. Caveat: By creating a holdings corporation (C-corp), you can section 351 that $100,000 into the C-corp for tax deferment, which won't be taxed until you take money from the corporation. Since you will hold 100% of the voting stock, all distributions will be considered pro rata. Additionally, you can issue yourself a dividend under the rules of 26 USC §§243-246 (a greather-than-80% shareholder who receives a dividend can write-off 100% of said dividend). As long as that dividend doesn't trigger §§1.243-246 of The Regulations by keeping the distribution just under 10% of E&P i.e. $10,000. Wages are deductible against basis so pay yourself $35,000 and keep $55,000 in the corporation and you can decrease the total liabilities down to $22,000 from $31,000, which includes the CA franchise tax. You don't have to pay yourself any money out a corporation to use the money. |
Fund or ETF that simulates the investment goals of an options “straddle” strategy? | *Volatility and the VIX can be very tricky to trade. In particular, going out longer than a month can result in highly surprising outcomes because the VIX is basically always a one month snapshot, even when the month is out in the future. |
Investing small amounts at regular intervals while minimizing fees? | It is difficult to find investment banks that offer both low fees and low minimum investments. If you google around for "no-fee low-minimum mutual funds" you can find various articles with recommendations, such as this one. One fund they mention that looks promising is the Schwab Total Stock Market Index Fund, which apparently has a minimum investment of only $100 and an expense ratio of 0.09%. (I've never heard of this fund before, so I'm just repeating the info from the site. Be sure to look into it more thoroughly to see if there are any hidden costs here. I'm not recommending this fund, just mentioning it as an example of what you may be able to find.) Another possibility is to make use of funds in an existing brokerage account that you use for yourself. This could allow you to make use of Craig W.'s suggestion about ETFs. For instance, if you already have a brokerage account at Vanguard or another firm, you could add $100 to the account and buy some particular fund, mentally earmarking it as your daughter's. |
Value of a call option spread | The Explanation is correct. The Traders buys the 1st call and profits linearly form 40$ onwards. At at 45 the short call kick in and neutralizes any further profit on the first call. |
Source of income: from dividends vs sale of principal or security | All that it is saying is that if you withdraw money from your account it doesn't matter whether it has come from dividends or capital gains, it is still a withdrawal. Of course you can only withdraw a capital gain if you sell part of the assets. You would only do this if it was the right time for you to sell the asset. |
Buying a small amount (e.g. $50) of stock via eToro “Social Trading Network” using a “CFD”? | Is eToro legitimate? If you have any doubts about eToro or other CFD providers (or even Forex providers, which are kind of similar), just type eToro scam in Google and see the results. |
Where to find the full book of outstanding bids/asks for a stock? | For starters, that site shows the first 5 levels on each side of the book, which is actually quite a bit of information. When traders say the top of the book, they mean just the first level. So you're already getting 8 extra levels. If you want all the details, you must subscribe to the exchange's data feeds (this costs thousands of dollars per month) or open an account with a broker who offers that information. More important than depth, however, is update frequency. The BATS site appears to update every 5 seconds, which is nowhere near frequently enough to see what's truly going on in the book. Depending on your use case, 2 levels on each side of the book updated every millisecond might be far more valuable than 20 levels on each side updated every second. |
Why are American-style options worth more than European-style options? | If you're into math, do this thought experiment: Consider the outcome X of a random walk process (a stock doesn't behave this way, but for understanding the question you asked, this is useful): On the first day, X=some integer X1. On each subsequent day, X goes up or down by 1 with probability 1/2. Let's think of buying a call option on X. A European option with a strike price of S that expires on day N, if held until that day and then exercised if profitable, would yield a value Y = min(X[N]-S, 0). This has an expected value E[Y] that you could actually calculate. (should be related to the binomial distribution, but my probability & statistics hat isn't working too well today) The market value V[k] of that option on day #k, where 1 < k < N, should be V[k] = E[Y]|X[k], which you can also actually calculate. On day #N, V[N] = Y. (the value is known) An American option, if held until day #k and then exercised if profitable, would yield a value Y[k] = min(X[k]-S, 0). For the moment, forget about selling the option on the market. (so, the choices are either exercise it on some day #k, or letting it expire) Let's say it's day k=N-1. If X[N-1] >= S+1 (in the money), then you have two choices: exercise today, or exercise tomorrow if profitable. The expected value is the same. (Both are equal to X[N-1]-S). So you might as well exercise it and make use of your money elsewhere. If X[N-1] <= S-1 (out of the money), the expected value is 0, whether you exercise today, when you know it's worthless, or if you wait until tomorrow, when the best case is if X[N-1]=S-1 and X[N] goes up to S, so the option is still worthless. But if X[N-1] = S (at the money), here's where it gets interesting. If you exercise today, it's worth 0. If wait until tomorrow, there's a 1/2 chance it's worth 0 (X[N]=S-1), and a 1/2 chance it's worth 1 (X[N]=S+1). Aha! So the expected value is 1/2. Therefore you should wait until tomorrow. Now let's say it's day k=N-2. Similar situation, but more choices: If X[N-2] >= S+2, you can either sell it today, in which case you know the value = X[N-2]-S, or you can wait until tomorrow, when the expected value is also X[N-2]-S. Again, you might as well exercise it now. If X[N-2] <= S-2, you know the option is worthless. If X[N-2] = S-1, it's worth 0 today, whereas if you wait until tomorrow, it's either worth an expected value of 1/2 if it goes up (X[N-1]=S), or 0 if it goes down, for a net expected value of 1/4, so you should wait. If X[N-2] = S, it's worth 0 today, whereas tomorrow it's either worth an expected value of 1 if it goes up, or 0 if it goes down -> net expected value of 1/2, so you should wait. If X[N-2] = S+1, it's worth 1 today, whereas tomorrow it's either worth an expected value of 2 if it goes up, or 1/2 if it goes down (X[N-1]=S) -> net expected value of 1.25, so you should wait. If it's day k=N-3, and X[N-3] >= S+3 then E[Y] = X[N-3]-S and you should exercise it now; or if X[N-3] <= S-3 then E[Y]=0. But if X[N-3] = S+2 then there's an expected value E[Y] of (3+1.25)/2 = 2.125 if you wait until tomorrow, vs. exercising it now with a value of 2; if X[N-3] = S+1 then E[Y] = (2+0.5)/2 = 1.25, vs. exercise value of 1; if X[N-3] = S then E[Y] = (1+0.5)/2 = 0.75 vs. exercise value of 0; if X[N-3] = S-1 then E[Y] = (0.5 + 0)/2 = 0.25, vs. exercise value of 0; if X[N-3] = S-2 then E[Y] = (0.25 + 0)/2 = 0.125, vs. exercise value of 0. (In all 5 cases, wait until tomorrow.) You can keep this up; the recursion formula is E[Y]|X[k]=S+d = {(E[Y]|X[k+1]=S+d+1)/2 + (E[Y]|X[k+1]=S+d-1) for N-k > d > -(N-k), when you should wait and see} or {0 for d <= -(N-k), when it doesn't matter and the option is worthless} or {d for d >= N-k, when you should exercise the option now}. The market value of the option on day #k should be the same as the expected value to someone who can either exercise it or wait. It should be possible to show that the expected value of an American option on X is greater than the expected value of a European option on X. The intuitive reason is that if the option is in the money by a large enough amount that it is not possible to be out of the money, the option should be exercised early (or sold), something a European option doesn't allow, whereas if it is nearly at the money, the option should be held, whereas if it is out of the money by a large enough amount that it is not possible to be in the money, the option is definitely worthless. As far as real securities go, they're not random walks (or at least, the probabilities are time-varying and more complex), but there should be analogous situations. And if there's ever a high probability a stock will go down, it's time to exercise/sell an in-the-money American option, whereas you can't do that with a European option. edit: ...what do you know: the computation I gave above for the random walk isn't too different conceptually from the Binomial options pricing model. |
How are stock buybacks not considered insider trading? | In most countries there are specific guidelines on buy backs. It is never a case where by one fine morning company would buy its shares and sell it whenever it wants. In general company has to pass a board resolution, sometimes it also requires it to be approved by share holders. It has to notify the exchange weeks in advance. Quite a few countries require a price offer to all. I.E. it cannot execute a market order. All in all the company may have inside information, but it cannot time the market. |
How do ETF fees get applied? | The ETF price quoted on the stock exchange is in principle not referenced to NAV. The fund administrator will calculate and publish the NAV net of all fees, but the ETF price you see is determined by the market just like for any other security. Having said that, the market will not normally deviate greatly from the NAV of the fund, so you can safely assume that ETF quoted price is net of relevant fees. |
Why ever use a market order? | The purpose of a market order is to guarantee that your order gets filled. If you try to place a limit order at the bid or ask, by the time you enter your order the price might have moved and you might need to keep amending your limit order in order to buy or sell, and as such you start chasing the market. A market order will guarantee your order gets executed. Also, an important point to consider, is that market orders are often used in combination with other orders such as conditional orders. For example if you have a stop loss (conditional order) set at say 10% below your buy price, you might want to use a market order to make sure your order gets executed if the price drops 10% and your stop loss gets triggered, making sure that you get out of the stock instead of being stuck with a limit order 10% below your buy price whilst the stock keeps falling further. |
Tax deductions on car and/or home? | If you itemize your deductions then the interest that you pay on your primary residence is tax deductible. Also realestate tax is also deductible. Both go on Schedule A. The car payment is not tax deductible. You will want to be careful about claiming business deduction for home or car. The IRS has very strict rules and if you have any personal use you can disqualify the deduction. For the car you often need to use the mileage reimbursement rates. If you use the car exclusively for work, then a lease may make more sense as you can expense the lease payment whereas with the car you need to follow the depreciation schedule. If you are looking to claim business expense of car or home, it would be a very good idea to get professional tax advice to ensure that you do not run afoul of the IRS. |
My bank often blocks my card during purchases - what is the most reliable bank card? (UK) | I have had my card blocked at home only rarely. One occasion comes to mind - I had bought something fairly large online late at night. No sooner had I clicked Purchase than my phone rang - the bank was asking had I actually just spent [$amount] at [$online store]? I said yes and that was that. A little later I made another purchase late at night on a different card. It went through, but when I tried to use the card the next day for something small in a store, it was declined. Embarrassed, I used a different card then called the bank. They said they had put the card on hold because of the online purchase for a large amount, even though they had let the purchase go through. They hadn't called me because it was late at night, and they hadn't given themselves any reasonable mechanisms to compensate for that (like calling me the next morning, emailing me, or the like) they'd just blocked the card. We had what you might call a frank and open exchange of views on the matter. Not all banks use the same strategies or software. I suggest: Far and away the simplest thing is just to have more than one card so that these declines are a momentary hiccup you might forget by the time you and your Rolex are out of the store. |
Investment for beginners in the United Kingdom | a) Go to Money super market and compare all the share dealing accounts and choose one to your liking. b) That depends on one's own circumstances. Nobody can be give you any specific strategies without knowing your financial situation, goals and risk averseness. |
What do “cake and underwear” stocks refer to? | JoeTaxpayer's answer is dead on... but let me give my own two cents with a little bit of math. Otherwise, I personally find that people talking about diversified portfolios tends to be full of buzzwords. Let's say that Buffett's investments are $10 million. He would like to earn ≥7% this year, or $700,000. He can invest that money in coca-cola//underwear, which might return: Or he can invest in "genius moves" that will make headlines: (like buying huge stakes in Goldman Sachs), which might return: And he makes plays for the long haul based on the expected value of the investments. So if he splits it 50/50... ($5 million/ $5 million), then his expected value is 822,250: By diversifying, he does reduce the expected value of the portfolio... (He is not giving $10 M the chance to turn into $1.5 million or $2 million for him!). The expected value of that shock-and-awe portfolio with all $10 million invested in it is $1.2M. By taking less risk... for less reward... his expected return is lower. But his risk is lower too. Scale this example back up into the $100 million or billion range that Buffett invests in and that extra margin makes the difference. In the context of your original article, the lower-risk 'cake and underwear' investments let Buffett go big on the things that will make 20%+ returns on billions of dollars, without completely destroying his investment capital when things take a turn for the worse. |
Do I need a Like-Kind Exchange when selling a personal vehicle for a company car | You cannot do a like-kind (Sec. 1031) exchange for personal property, only for business/investment property. Since you said that you traded in your personal car - no like-kind exchange is possible. Also, since the new car doesn't belong to you - you didn't actually perform any exchange. You sold your old car, but you didn't buy a new one. If Turbo-Tax suggests you to fill the exchange form - you must have entered something wrong to make it think there was an exchange. Check your entries again, specifically - check if you entered that you purchased a new car instead of the old one, since you didn't. See an example of where to start looking here. |
Why can't you just have someone invest for you and split the profits (and losses) with him? | What you are looking for is a pretty terrible deal for you, so I'd say it doesn't exist because there isn't a market for it, or nobody has noticed there is a market for it. In principle I would happily take the deal you offer from as many people as would let me, put the money into treasury bills, and take half the profits while doing pretty much nothing. If I had more risk tolerance I would be pretty happy to have half the value of my "fund" as zero cost investment capital for more aggressive investments. My business would then be a lot like an insurance company without the hassle of selling insurance to get hold of float to invest. Also, most insurance companies actually lose money on policies, but come out ahead by investing the float, so an insurance company with zero cost float is quite a good business. Another answer mentions Berkshire Hathaway. If you read one of the famous Berkshire Hathaway annual letters to shareholders and read the section about insurance you'll see that very low cost float has a large role in that company's success. So, back to your end of the deal: if the deal is that good for me, how good is it for you? I'd have to double market returns just for you to break even. If you're smart enough to pick a financial adviser that can beat the market by that much, how come you aren't able to pick an investment strategy that ties the market? |
What should I be aware of as a young investor? | Risk and return always go hand by hand.* Risk is a measure of expected return volatility. The best investment at this stage is a good, easy to understand but thorough book on finance. *Applies to efficient markets only. |
Why index funds have different prices? | Funds which track the same index may have different nominal prices. From an investors point of view, this is not important. What is important is that when the underlying index moves by a given percentage, the price of the tracking funds also move by an equal percentage. In other words, if the S&P500 rises by 5%, then the price of those funds tracking the S&P500 will also rise by 5%. Therefore, investing a given amount in any of the tracking funds will produce the same profit or loss, regardless of the nominal prices at which the individual funds are trading. To see this, use the "compare" function available on the popular online charting services. For example, in Google finance call up a chart of the S&P500 index, then use the compare textbox to enter the codes for the various ETFs tracking the S&P500. You will see that they all track the S&P500 equally so that your relative returns will be equal from each of the tracking funds. Any small difference in total returns will be attributable to management fees and expenses, which is why low fees are so important in passive investing. |
Quickbooks custom field for computing a value | Custom fields are limited to non-calculated values. Read more here: http://qbblog.ccrsoftware.info/2008/07/custom-fields-in-quickbooks/ To do this you will need an add-on. I would reccomend CCRQInvoice, but only because its the only one I've tried and it worked. More here (this is an order form example, but it works): http://ccrqblog.ccrsoftware.info/adding-calculated-fields-to-order-forms/ The product info is here: http://www.ccrsoftware.com/CCRQInvoice/InvoiceQ.htm |
Is it bad etiquette to use a credit or debit card to pay for single figure amounts at the POS | Generally, I consider it bad etiquette to inconvenience others. I would recommend cash for small purchases. Try to offer as close to the required amount as possible. Don't pay with several dollars worth of change if you can avoid it. You shouldn't need to carry a lot of cash. When you do don't make it obvious. |
Eligibility for stock rights offering | Yes, there is a delay between when you buy a stock and when you actually take ownership of it. This is called the settlement period. The settlement period for US equities is T+2 (other markets have different settlement periods), meaning you don't actually become a shareholder of record until 2 business days after you buy. Conversely, you don't stop being a shareholder of record until 2 business days after you sell. Presumably at some point in the (far) future all public markets will move to same-day changes of ownership, at which point companies will stop making announcements of the form all shareholders of record as of September 22nd and will switch to announcements of the form all shareholders of record as of September 22nd at 13:00 UTC |
What can my relatives do to minimize their out of pocket expenses on their fathers estate | Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house. It essentially renders the house, which is mortgaged, valueless. You'd have to put money into it to maintain the mortgage until she dies and you can sell it. The way that I see it, you have four options: Crack that provision in the will. You'd need to hire a lawyer for that. It may not be possible. Abandon the house. It's currently owned by the estate, so leave it in the estate. Distribute any goods and investments, but let the bank foreclose on the house. You don't get any value from the house, but you don't lose anything either. Your father's credit rating will take a posthumous hit that it can afford. You may need to talk to a lawyer here as well, but this is going to be a standard problem. Explore a reverse mortgage. They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout. Or maybe not. It doesn't hurt to ask. Find a property manager in Philadelphia and have them rent out the house for you. Google gave some results on "find property management company Philadelphia" and you might be able to do better while in Philadelphia to get rid of his stuff. Again, I'd leave the house on the estate, as you are blocked from selling. A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period). Pay the mortgage out of the rent. If there's extra left over, you can either pay down the mortgage faster or distribute it. Note that the rent may not support the mortgage. If not, then option four is not practical. However, in that case, the house is unlikely to be worth much net of the mortgage anyway. Let the bank have it (option two). If the aunt needs to move into the house, then you can give up the rental income. She can either pay the mortgage (possibly by renting rooms) or allow foreclosure. A reverse mortgage might also help in that situation. It's worth noting that three of the options involve a lawyer. Consulting one to help choose among the options might be constructive. You may be able to find a law firm with offices in both Florida and Pennsylvania. It's currently winter. Someone should check on the house to make sure that the heat is running and the pipes aren't freezing. If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes. Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first). Note that the kind of heat matters. You may need to buy oil or pay a gas bill in addition to electricity. |
Investing in income stocks for dividends - worth it? | To answer your question: yes, it's often "worth it" to have investments that produce income. Do a Google search for "income vs growth investing" and you'll get a sense for two different approaches to investing in equities. In a nutshell: "growth" stocks (think Netflix, etc) don't pay dividends but are poised to appreciate in price more than "income" stocks (think banks, utilities, etc) that tend to have less volatile prices but pay a consistent dividend. In the long run (decades), growth stocks tend to outperform income stocks. That's why younger investors tend to pick growth stocks while those closer to retirement tend to stick with more stable income-producing portfolio. But there's nothing wrong with a mixed approach, either. I agree with Pete's answer, too. |
Good/Bad idea to have an ETF that encompasses another | Let's simplify things by assuming you only own 2 stocks. By owning VOO and VTI, you're overweight on large- and mid-cap stocks relative to the market composition. Likewise, by owning VTI and VT, you're overweight on U.S. stocks; conversely, by owning VXUS and VT, you're overweight on non-U.S. stocks. These are all perfectly fine positions to take if that's what you intend and have justification for. For example, if you're in the U.S., it may be a good idea to hold more U.S. stocks than VT because of currency risk. But 4 equity index ETFs is probably overcomplicating things. It is perfectly fine to hold only VTI and VXUS because these funds comprise thousands of stocks and thus give you sufficient diversification. I would recommend holding those 2 ETFs based on a domestic/international allocation that makes sense to you (Vanguard recommends 40% of your stock allocation to be international), and if for some reason you want to be overweight in large- and mid-cap companies, throw in VOO. You can use Morningstar X-Ray to look at your proposed portfolio and find your optimal mix of geographic and stock style allocation. |
250k USD in savings. What's next? | Find a good financial advisor that is willing to teach you and not just interested in making a commission on your net worth. Talk to them and talk some more. Go slow and don't make impulsive buying decisions. If you don't understand it then don't buy it. Think long term - how do I turn this 250K into 2.5M? Congrats on the savings! |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | A lot of these answers are really weak. The expected value is pretty much the answer. You have to also though, especially as many many millions of tickets are purchased--make part of the valuation the odds of the jackpot being split x ways. So about 1 in 290--> the jackpot needs to be a take-home pot of $580 million for the $2 ticket. Assume the average # of winners is about 1.5 so half the time you're going to split the pot, bringing the valuation needed for the same jackpot to be $870 million. It's actually somewhat not common to have split jackpots because the odds are very bad + many people pick 'favourite numbers'. |
Why do some people say a house “not an investment”? | You're hearing alot of talk about housing (and by implication property) not being an investment today because on the downside of a market, the conventional wisdom is to be negative about buying things that have lost value. Just as it was dumb to listen to your coworker about hot .Com IPOs in 1999, it's dumb to listen to the real estate naysayers now. Here's another question along a similar vein: Were stocks a good investment in the spring of 2009? The conventional wisdom said: "No, stocks are scary! Buy T-Bills or Gold Bullion!". The people who made money said: "Wait a second, Goldman Sachs is down like 75%? IBM is down like 30%, are they going anywhere? Time to buy." The wrong house is a poor investment in any economy. Buying a house in Detriot in 1970 was not a good move. Buying a house that needs $50k in work, not a good move. Buying a condo with a bankrupt HOA in Florida is not a good idea. But a good house that is well cared for is a great investment. I'm living in a house right now that is 80 years old, well maintained and affordable on a single income. A similar home a few blocks away sold in May for the same price as we paid in 2006. I'm paying about 20% less than I would for an apartment, and we'll think about moving in 2016 or 2017, by which time I'll probably have put $30-50k into the house. (Roof, kitchen, exterior painting, minor renovation) |
Ghana scam and direct deposit scam? | Yes, this is a scam. Tell your dad not to pay any money. There will likely be a large deposit in his account, but if he withdraws the money from his account, the bank will come after him looking for the money when the transfer to his account is reversed. |
Paid credit card bill, but money didn't leave my checking account [duplicate] | You probably don't need to call the bank. Today is Sunday, so three days ago was probably Friday (or Thursday depending on how you count the days). Banks normally don't post transactions on weekends - and transactions that do happen on the weekend sometimes don't get posted until Tuesday. I would give it till Tuesday and then call them if you still don't see it show up on your account. |
What should I do with $4,000 cash and High Interest Debt? | I'm going to suggest a slightly different approach. Most answers seem to suggest paying off the lower rate card to clear it. Some answers / comments also talk about emergency funds. One risk of paying off a card is that the card issuer may choose to reduce your credit limit if they see you as high risk, to prevent you re-spending the money. If you don't trust yourself with the card then this could be a good thing (and remember you're always free to ask for a limit decrease). But if you want access to emergency funds, then I would suggest paying half onto each card. That way if one card cuts you off, you have a chance of still having access to the other in an emergency. |
Is it a wise decision to sell my ESPP stock based on this situation? | Eric is right regarding the tax, i.e. ordinary income on discount, cap gain treatment on profit whether long term or short. I would not let the tax tail wag the investing dog. If you would be a holder of the stock, hold on, if not, sell. You are considering a 10-15% delta on the profit to make the decision. Now. I hear you say your wife hasn't worked which potentially puts you in a lower bracket this year. I wrote Topping off your bracket with a Roth Conversion which would help your tax situation long term. Simply put, you convert enough Traditional IRA (or 401(k) money) to use up some of the current bracket you are in, but not hit the next. This may not apply to you, depending on whether you have retirement funds to do this. Note - The cited article offers numbers for a single person, but illustrates the concept. See the tax table for the marginal rates that would apply to you. |
Finding stocks following performance of certain investor, like BRK.B for Warren Buffet | Since the vast majority of fund managers/big investors run private entities, it's not possible to track their performance. It's possible to look at what they are holding (that's never real-time information) and emulate their performance. |
Recommendation on Options Back Testing tool please | As JoeTaxpayer says, there's a lot you can do with just the stock price. Exploring that a bit: Stock prices are a combination of market sentiment and company fundamentals. Options are just a layer on top of that. As such, options are mostly formulaic, which is why you have a hard time finding historical option data -- it's just not that "interesting", technically. "Mostly" because there are known issues with the assumptions the Black-Scholes formula makes. It's pretty good, and importantly, the market relies on it to determine fair option pricing. Option prices are determined by: Relationship of stock price to strike. Both distance and "moneyness". Time to expiration. Dividends. Since dividend payments reduce the intrinsic value of a company, the prospect of dividend payments during the life of a call option depresses the price of the option, as all else equal, without the payments, the stock would be more likely to end up in the money. Reverse the logic for puts. Volatility. Interest rates. But this effect is so tiny, it's safe to ignore. #4, Volatility, is the biggie. Everything else is known. That's why option trading is often considered "volatility trading". There are many ways to skin this cat, but the result is that by using quoted historical values for the stock price, and the dividend payments, and if you like, interest rates, you can very closely determine what the price of the option would have been. "Very closely" depending on your volatility assumption. You could calculate then-historical volatility for each time period, by figuring the average price swing (in either direction) for say the past year (year before the date in question, so you'd do this each day, walking forward). Read up on it, and try various volatility approaches, and see if your results are within a reasonable range. Re the Black-Scholes formula, There's a free spreadsheet downloadable from http://optiontradingtips.com. You might find it useful to grab the concept for coding it up yourself. It's VBA, but you can certainly use that info to translate in your language of choice. Or, if you prefer to read Perl, CPAN has a good module, with full source, of course. I find this approach easier than reading a calculus formula, but I'm a better developer than math-geek :) |
Starting with Stocks or Forex? | Stick with stocks, if you are not well versed in forex you will get fleeced or in over your head quickly. The leverage can be too much for the uninitiated. That said, do what you want, you can make money in forex, it's just more common for people to not do so well. In a related story, My friend (let's call him Mike Tyson) can knock people out pretty easy. In fact it's so easy he says all you have to do is punch people in the face and they'll give you millions of dollars. Since we are such good friends and he cares so much about my financial well-being, he's gotten me a boxing match with Evander Holyfield, (who I've been reading about for years). I guess all I have to do is throw the right punches and then I'll have millions to invest in the stock market. Seems pretty easy, right ? |
Downside to temporarily lowering interest rates? | This bit of marketing, like the zero-percent introductory rates some banks offer, is intended to make you more willing to carry a balance, and they're hoping you'll continue that bad habit after the rate goes back up. If you don't think you'll be tempted by the lower rate, yhere's no reason not to accept (unless there's something in the fine print that changes your agreement in other ways; read carefully). But as you say, there's no reason to accept ir either. I'd ignore it. |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | We aim to keep 6 months of expenses. The rationale is that its enough time to recover from most serious illnesses (that you can recover from) or a redundancy or pay for a large unexpected problem not covered by the insurance (e.g. the boiler dying). It also gives us enough time to reorganise finances if needed. For example we could get out of contracts (like mobile phones, sky TV), sell the car, and maybe even find a cheaper house if needed in that time. It will take a good chunk of time to build up that amount and it's worth considering how many commitments you have (kids, wife, mortgage, car...) as the fewer you have the less you need. If you have fewer commitments you can be comfortable with much less contingency. When I lived in rented accomodation and didn't run a car or have many possessions, I just maintained enough cash to cover my bills for about 6 weeks, this would give me enough time to find another job, and if I didn't get one I could always crash round a friend's house. |
2 houses 450k each or one 800k? | Having someone else paying you rent is always going to be the better deal financially. The question is, what does $450k buy in the neighborhood in which you want to live, vs $800k? I'm going to assume you can afford either option (buying a $450k home and not selling, or an $800k home and selling your current one) whether someone's paying you rent or not. Let's make up some numbers here; a $450k home, financed 80/20 (360k principal) at 4% for 30 years will cost you about $1720 in P&I payments per year (plus escrows such as RE taxes, PMI, and homeowners insurance where applicable). An $800k home financed 80/20 (640k principal) at 4% for 30yr will give you payments of about $3,055/mo before taxes and insurance. So, the worst case overall is that you buy a 450k home in the new neighborhood and are not, at any given time, collecting rent on the old property. That would (assuming the mortgage terms on both home loans were comparable) cost you $3440/mo and you'd be living in a $450k home in a neighborhood where 450k may not buy a home as nice as the one you moved out of. The question as I stated above is this; assuming you had a reliable tenant in your home for the entire remaining life of the loan on your current home, which is more acceptable to you: buying $450k of home (which might be a downgrade in sqft or amenities) and paying $2020 in P&I, or paying about a grand more ($3055/mo) for a much nicer home in the new location? Strictly from a money perspective, the renter is going to be the best option, IF you get reliable tenancy for the entire life of the mortgage on that house; you'll be paying $2020/mo for 30 years, which is $727,200, to end up with $950k of total home value (plus adjustments for actual home value appreciation/depreciation). That's the only way you'll come out ahead on any mortgage; have someone else pay most of it for you. If you don't rent, the $800k home will cost you $1,099,800, while two $450k homes will cost you $1,454,400. The percentage of home value over total payments for the 800k home would be 72% (you will have paid 137% of the value of the home), while you will have paid 153% of the value of two 450k homes. |
How to compare the value of a Masters to the cost? | I am a bit unsure of why the interest rate is relevant. Are you intending on borrowing the money to go to school? If you cannot pay cash, then it is very likely a bad idea. Many people are overcome by events when seeking higher education and such a loan on a such a salary could devastate you financially. So I find the cost of the program as a total of 76.6K counting a loss in salary during the program and the first year grant. That is a lot of money, do you intend to borrow that much? Especially when you consider that your salary, after you graduate, will be about equal to where you are now. For that reason I am leaning toward a no, even if you had the cash in hand to do so. There is nothing to say that you will enjoy teaching. Furthermore teaching in low income school is more challenging. All that said, is there a way you can raise your income without going back to school? Washington state can be a very expensive place to live and is one of the reason why I left. I am a WWU alumni (Go Vikings!). Could you cash flow a part time program instead? I would give this a sound no, YMMV. |
Is it a good practice to keep salary account and savings account separate? | I can't immediately think of a reason to keep your paycheck and spending account separate, unless it be because you want to keep your savings in a money market or savings account and you deposit your paycheck into a checking account. However, I do have one reason from my experience to keep the bulk of your savings away from accounts that you transfer stuff out of. I used to keep all my cash savings in an account from which I transferred money into my brokerage account (my paycheck was also deposited there). A couple of years back a state that I haven't lived in since I was a child took $40,000 out of my account. The broker mistakenly told the state I lived there and the state made some mistakes about how much tax I would owe. Without either one telling me, the state helped themselves to my checking account to cover the bill. When I called, both acknowledged that they were wrong, but it still took a long time (many months) and lots of letters and threats (I was close to paying a lawyer) before they returned my money. It was worse because this was my savings for a down payment on a home and having it taken and not returned affected my ability to buy the house I wanted. If I hadn't had my money in that account, they would have tried to garnish my wages, and would have immediately stopped their attempt once they found out they were in the wrong. Now I keep cash savings in an account that I never pay taxes out of and do not use to transfer money directly to any broker or anyone who might give my account number to an inept government. |
What tax software automatically determines the best filing status, etc? | Rob - I'm sorry your first visit here has been unpleasant. What you are asking for is beyond the capability of most software. If you look at Fairmark.com, you find the standard deduction for married filing joint is $12,200 in 2012, and $12,400 in 2013. I offer this anecdote to share a 'deduction' story - The first year I did my MIL's taxes, I had to explain that she didn't have enough deductions to itemize. Every year since, she hands me a file full of paper substantiating medical deductions that don't exceed 7.5% of her income. In turn, I give her two folders back, one with the 5 or so documents I needed, and the rest labeled "trash". Fewer than 30% of filers itemize. And a good portion of those that do, have no question that's the right thing to do. e.g. my property tax is more than the $12K, so anything else I have that's a deduction adds right to the number. It's really just those people who are at the edge that are likely frustrated. I wrote an article regarding Standard Deduction vs Itemizing, in which I describe a method of pulling in one's deductible expenses into Odd years, reducing the number in Even years, to allow a bi-annual itemization. If this is your situation, you'll find the concept interesting. You also ask about filing status. Think on this for a minute. After pulling in our W2s (TurboTax imports the data right from ADP), I do the same for our stock info. The stock info, and all Schedule A deductions aren't assigned a name. So any effort to split them in search of savings by using Married Filing Separate, would first require splitting these up. TurboTax has a 'what-if' worksheet for this function, but when the 'marriage penalty' was lifted years ago, the change in status had no value. Items that phaseout over certain income levels are often lost to the separate filer anyway. When I got married, I found my real estate losses each year could not be taken, they accumulated until I either sold, or until our income dropped when the Mrs retired. So, while is respect your desire for these magic dials within the software, I think it's fair to say they would provide little value to most people. If this thread stays open, I'd be curious if anyone can cite an example where filing separately actually benefits the couple. |
Where should I park my money if I'm pessimistic about the economy and I think there will be high inflation? | Typically in a developed / developing economy if there is high overall inflation, then it means everything will rise including property/real estate. The cost of funds is low [too much money chasing too few goods causes inflation] which means more companies borrow money cheaply and more business florish and hence the stock market should also go up. So if you are looking at a situation where industry is doing badly and the inflation is high, then it means there are larger issues. The best bet would be Gold and parking the funds into other currency. |
Why is there so much interest on home loans? | APR stands for "annual percentage rate." This means when you see a loan with a 6% rate, it is 6% per year. On a $100,000 mortgage, where you aren't paying much of the principal down at first, a 6% rate would have you paying nearly $6,000 in interest in the first year alone. |
Is selling put options an advisable strategy for a retiree to generate stable income? | This is a really bad idea. You are asking to be forced to pay for something at a time when you most likely NOT want to buy it. Why? There is no stability (much less any degree of predictability) to give up the right to control when and for how much you would be willing to own the S&P500. Just don't do it....."generate stable income" and "selling puts" is an oxymoron. ===retired investment advisor |
How to find a reputable company to help sell a timeshare? | You own something with very little market value - even if you paid a large price for it initially. Your cost to sell may be more than the price you get. Like any other item that has limited resale value, your best option may be to donate it. A quick Google search will turn up some options. This will likely be less hassle than selling. Also, you have a potential tax write-off. |
What are the best software tools for personal finance? | I just switched (from the abandoned, but good MS Money) to Moneydance 2010 |
Do my 401k/Roth accounts benefit from compounding? | You buy a share of something for $100. It goes up by 10% over a year, and you now have $110 in value. It goes up by 10% next year and you now have $121. That original $10 increase was compounded even though you're not earning interest because the gains are measured as a percentage. If, instead, you'd only invested the second year you'd have less value. Assuming the markets average a positive gain (above inflation) you see greater gains the earlier you're invested. |
stock for a particular brand | If you want to invest in the Windows Phone, then you go and find out who makes the Windows Phone i.e. Microsoft. Then you go and decide if Windows Phone is successful will the share price of Microsoft go up (own research/deduction) and if you think that the price of Microsoft has a positive correlation with the Windows Phone, then you could buy shares of Microsoft. There is no way to invest directly in individual products on stock exchanges, you are generally investing in the companies that produce them. You find the ticker of a company by googling. NASDAQ: MSFT |
What happened to buyers of ABT right before the split? | The trades after that date were Ex-DIV, meaning after 5 pm Dec 12, new trades did not include the shares that were to be spun out. The process is very orderly, no one pays $60 without getting the spinoff, and no one pays $30 but still gets it. The real question is why there's that long delay nearly three weeks to make the spinoff shares available. I don't know. By the way, the stock options are adjusted as well. Someone owning a $50 put isn't suddenly in the money on 12/13. Edit - (I am not a hoarder. I started a fire last night and realized I had a few Barron's in the paper pile) This is how the ABT quote appeared in the 12/24 issue of Barron's. Both the original quote, and the WI (when issued) for the stock less the spin off company. |
What choices should I consider for investing money that I will need in two years? | Never invest money you need in the short term. As already suggested, park your money in CDs. |
How to reconcile performance with dividends? | Just look at the published annualized returns, which are inclusive of distributions and fees. From the Vanguard website: Average annual returns include changes in share price and reinvestment of dividends and capital gains. |
What are the best software tools for personal finance? | I like You Need A Budget (YNAB) Pros: Cons: |
Why have I never seen a stock split? | Are you sure you're not just looking at prices that are adjusted for the split, e.g. Yahoo? For example, Gilead Sciences (GILD) split a few months ago, but if you look at a price chart, there isn't an interruption even though the split is clearly marked. (Look in the past six months; it split in January). However, you could also simply be watching companies that happen to not split, for a variety of reasons. This isn't a criticism, but rather just a consequence of whatever stocks you happen to be watching. However, a quick search for information on stock splits yields a few articles (mainly from the Motley Fool) that argue that fewer companies are performing stock splits in recent years; the articles mainly talk about tech companies, and they make the argument that even though the shares in Google and Apple have a high stock price: Google and Apple aren't all that expensive by traditional valuation metrics. Google trades at just 15 times next year's projected profitability. Apple fetches a mere 13 times fiscal 2012's bottom-line estimates. These articles are a bit dated in terms of the stock prices, but the rationale is probably still good. Similar logic could apply for other companies; for example, since May 2009, Panera's stock price has climbed by almost a factor of 4 without splitting. The articles also make the point that stock splits were traditionally seen as bullish signs because: Companies splitting to bring their share prices back down to more accessible levels were optimistic in building those sand castles back up. One could make a fair argument that the overall economic climate isn't as bullish as it used to be, although I would only be convinced that this was affecting stock splits if data could be gathered and tested. A stock split can also raise the price of a stock because if small investors feel the stock is suddenly more accessible to them, they purchase more of it and might therefore drive up the price. (See the Investopedia article on stock splits for more information). Companies might not see the necessity in doing this because their stock price isn't high enough to warrant a split or because the price isn't high enough to outprice smaller investors. One interesting point to make, however, is that even though stock splits can drive small investors to buy more of the stock, this isn't always a gain for the company because professional investors (firms, institutions, etc.) have a tendency to sell after a split. The paper is a bit old, but it's still a very neat read. It's possible that more and more companies no longer see any advantage to splitting because it might not affect their stock price in the long run, and arguably could even hurt it. Considering that large/professional investors likely hold a higher percentage of a company's shares than smaller investors, if a stock split triggers a wave of selling by the former, the increasing propensity to buy of the latter may not be enough to offset the decline in price. Note: My answer only refers to standard stock splits; the reasons above may not apply to a decrease in the number of reverse stock splits (which may not be a phenomenon; I don't know). |
Intentions of Deductible Amount for Small Business | If your sole proprietorship losses exceed all other sources of taxable income, then you have what's called a Net Operating Loss (NOL). You will have the option to "carry back" and amend a return you filed in the last 2 years where you owed tax, or you can "carry forward" the losses and decrease your taxes in a future year, up to 20 years in the future. For more information see the IRS links for NOL. Note: it's important to make sure you file the NOL correctly so I'd advise speaking with an accountant. (Especially if the loss is greater than the cost of the accountant...) |
For the first time in my life, I'm going to be making real money…what should I do with it? | Your attitude is great, but be careful to temper your (awesome) ambition with a dose of reality. Saving is investing is great, the earlier the better, and seeing retirement at a young age with smooth lots of life's troubles; saving is smart and we all know it. But as a college junior, be honest with yourself. Don't you want to screw around and play with some of that money? Your first time with real income, don't you want to blow it on a big TV, vacation, or computer? Budget out those items with realistic costs. See the pros and cons of spending that money keeping in mind the opportunity cost. For example, when I was in college, getting a new laptop for $2000 (!) was easily more important to me than retirement. I don't regret that. I do regret buying my new truck too soon and borrowing money to do it. These are judgment calls. Here is the classic recipe: Adjust the numbers or businesses to your personal preferences. I threw out suggestions so you can research them and get an idea of what to compare. And most importantly of all. DO NOT GET INTO CREDIT CARD DEBT. Use credit if you wish, but do not carry a balance. |
Are mutual funds safe from defaults? | There are very strict regulations that requires the assets which a fund buys on behalf of its investors to be kept completely separate from the fund's own assets (which it uses to pay its expenses), except for the published fees. Funds are typically audited regularly to ensure this is the case. So the only way in which a default of the fund could cause a loss of invstor money would be if the fund managers broke the regulations and committed various crimes. I've never heard of this actually happening to a normal mutual fund. There is of course also a default risk when a fund buys bonds or other non-equity securities, and this may sometimes be non-obvious. For example, some ETFs which are nominally based on a stock index don't actually buy stocks; instead they buy or sell options on those stocks, which involves a counterparty risk. The ETF may or may not have rules that limit the exposure to any one counterparty. |
In a reverse split, what happens to odd lots? | Usually five shares and some cash. |
How do brokers make money from margin accounts? | Your broker will charge you commissions and debit interest on your "overdraft" of $30,000. However it is very likely that your contract with the broker also contains a rehypothecation clause which allows your broker to use your assets. Typically, with a debt of $30,000, they would probably be entitled to use $45-60,000 of your stocks. In short, that means that they would be allowed to "borrow" the stocks you just bought from your account and either lend them to other clients or pledge them as collateral with a bank and receive interest. In both cases they will make money with your stocks. See for example clause #14 of this typical broker's client agreement. Applied to your example: In other words they will make $60 + $450 + $1,800 = $2,310 the first year. If the stock is expensive to borrow and they manage to lend it, they will make a lot more. There are by the way a few important consequences: |
How does start-up equity end up paying off? | I agree with all the people cautioning against working for free, but I'll also have a go at answering the question: When do I see money related to that 5%? Is it only when they get bought, or is there some sort of quarterly payout of profits? It's up to the shareholders of the company whether and when it pays dividends. A new startup will typically have a small number of people, perhaps 1-3, who between them control any shareholder vote (the founder(s) and an investor). If they're offering you 5%, chances are they've made sure your vote will not matter, but some companies (an equity partnership springs to mind) might be structured such that control is genuinely distributed. You would want to check what the particular situation is in this company. Assuming the founders/main investors have control, those people (or that person) will decide whether to pay dividends, so you can ask them their plans to realise money from the company. It is very rare for startups to pay any dividends. This is firstly because they're rarely profitable, but even when they are profitable the whole point of a startup is to grow, so there are plenty of things to spend cash on other than payouts to shareholders. Paying anything out to shareholders is the opposite of receiving investment. So unless you're in the very unusual position of a startup that will quickly make so much money that it doesn't need investment, and is planning to pay out to shareholders rather than spend on growth, then no, it will not pay out. One way for a shareholder to exit is to be bought out by other shareholders. For example if they want to get rid of you then they might make you an offer for your 5%. This can be any amount they think you'll take, given the situation at the time. If you don't take it, there may be things they can do in future to reduce its value to you (see below). If you do take it then your 5% would pay you once, when you leave. If the company succeeds, commonly it will be wholly or partly sold (either privately or by IPO). At this point, if it's wholly sold then the soon-to-be-ex-shareholders at the time will receive the proceeds of the sale. If it's partly sold then as with an investment round it's up for negotiation what happens. For example I believe the cash from an IPO of X% of the company could be taken into the company, leaving the shareholders with no immediate direct payout but (100-X)% of shares in their names that they're more-or-less free to sell, or retain and receive future dividends. Alternatively, if the company settles down as a small private business that's no longer in startup mode, it might start paying out without a sale. If the company fails, as most startups do, it will never pay anything. It's very important to remember that it's the shareholders at the time who receive money in proportion to their holding (or as defined by the company articles, if there are different classes of share). Just because you have 5% now doesn't mean you'll have 5% by that time, because any new investment into the company in the mean time will "dilute" your shareholding. It works like this: Note that I've assumed for simplicity that the new investment comes in at equal value to the old investment. This isn't necessarily the case, it can be more or less according to the terms of the new investment voted for by the shareholders, so the first line really is "nominal value", not necessarily the actual cash the founders put in. Therefore, you should not think of your 5% as 5% of what you imagine a company like yours might eventually exit for. At best, think of it as 5% of what a company like yours might exit for, if it receives no further investment whatsoever. Ah, but won't the founders also have their holdings diluted and lose control of the company, so they wouldn't do that? Well, not necessarily. Look carefully at whether you're being offered the same class of shares as the founders. If not consider whether they can dilute your shares without diluting their own. Look also at whether a new investor could use the founders' executive positions to give them new equity in the same way they gave you old equity, without giving you any new equity. Look at whether the founders will themselves participate in future investment rounds using sacks of cash that they own from other ventures, when you can't afford to keep up. Look at whether new investors will receive a priority class of share that's guaranteed at exit to pay out a certain multiple of the money invested before the older, inferior classes of shares receive anything (VCs like to do this, at least in the UK). Look at any other tricks they can legally pull: even if the founders aren't inclined to be tricky, they may eventually be forced to consider pulling them by a future new investor. And when I say "look", I mean get your lawyer to look. If your shareholding survives until exit, then it will pay out at exit. But repeated dilutions and investors with priority classes of shares could mean that your holding doesn't survive to exit even if the company does. Your 5% could turn into a nominal holding that hasn't really "survived", that entitles you to 0.5% of any sale value over $100 million. Then if the company sells for $50 million you get $0, while other investors are getting a good return. All of this is why you should not work for equity unless you can afford to work for free. And even then you need to lawyer up, now and during any future investment, so your lawyer can explain to you what your investment actually is, which almost certainly is different from what it looks like at a casual uninformed glance. |
How does 1099 work with my own company | Can I work on 1099 from my own company instead of on W2? The reason is on W2 I can't deduct my commute, Health Insurance and some other expenses while on 1099 I think I can able do that. Since I am going to client place to work not at my own office, I am not sure whether I should able to do that or not. If you have LLC, unless you elected to tax it as a corporation, you need neither 1099 nor W2. For tax purposes the LLC is disregarded. So it is, from tax perspective, a sole proprietorship (or partnership, if multiple members). Being a W2 employee of your own LLC is a bad idea. For all these above expenses, which can I use company's debit/credit card or I need to use only my personal debit/credit card? It would be better to always use a business account for business purposes. Doesn't matter much for tax per se, but will make your life easier in case of an audit or a legal dispute (limited liability protection may depend on it). If I work on 1099, I guess I need to file some reasonable taxes on quarterly basis instead of filing at year end. If so, how do I pay my tax on quarterly basis to IRS? I mean which forms should I file and how to pay tax? Unless you're a W2 employee, you need to do quarterly estimate payments using form 1040-ES. If you are a W2 employee (even for a different job, and even if it is not you, but your spouse with whom you're filing jointly) - you can adjust your/spouse's withholding using form W4 to cover the additional tax liability. This is, IMHO, a better way than paying estimates. There are numerous questions on this, search the site or ask another one for details. |
Is there a general guideline for what percentage of a portfolio should be in gold? | It depends on what your goals are, your age, how much debt you have, etc. Assuming -- and we all know what happens when you assume -- that your financial life is otherwise in order, the 5% to 10% range you're talking about isn't overinvesting. You won't have a lot of company; most people don't own any. One comment on this part: I have some gold (GLD), but not much ... Gold and GLD are not the same thing at all. Owning shares of the SPDR Gold Trust is not the same thing as owning gold coins or bars. You're achieving different ends by owning GLD shares as opposed to the physical yellow metal. GLD will follow the spot price of gold pretty closely, but it isn't the same thing as physical ownership. |
What does “Income generated in the U.S.” mean? | It means you must pay federal (and possibly state) tax on any income you produce in America -- including Internet and mail-order sales. Tax treaties may keep you from having to pay tax on it again in your own country, or may not. |
How to safely earn interest on business profits (UK) | Deposit it in a business savings account. The following below show you some options you can choose from. Next you can invest it in the market i.e. shares, bonds etc. If you have a more risky side, can go for peer to peer lending. If you are feeling really lucky and want to invest in the long term, then buy a property as a buy-to-let landlord. There are loads of options, you only need to explore. |
What is the theory behind Rick Van Ness's risk calculation in the video about diversification? | He's calculating portfolio variance. The general formula for the variance of a portfolio composed of two securities looks like this: where w_a and w_b are the weights of each stock in the portfolio and the sigmas represent the standard deviation/risk of each asset or portfolio. In the case of perfect positive or negative correlation, applying some algebra to the formula relating covariance to the correlation coefficient (rho, the Greek letter that looks like "p"): tells us that the covariance we need in the original formula is simply the product of the standard deviations and the correlation coefficient (-1 in this case). Combining that result with our original formula yields this calculation: Technically we've calculated the portfolio's variance and not it's standard deviation/risk, but since the square root of 0 is still 0, that doesn't matter. The Wikipedia article on Modern Portfolio Theory has a section that describes the mathematical methods I used above. The entire article is worth a read, however. |
Buy home and leverage roommates, or split rent? | There is a term for this. If you google "House Hacking" you will get lots of articles and advice. Some of it will pertain to multifamily properties but a good amount should be owner occupied and renting bedrooms. I would play with a mortgage calculator like Whats My Payment. Include Principle, interest, taxes and insurance see how much it will cost. At 110k your monthly fixed payments will depend on a number of factors (down payment, interest, real estate tax rate and insurance cost) but $700-$1000 would be a decent guess in my area. Going off that with two roommates willing to pay $500 a month you would have no living expenses except any maintenance or utilities. With your income I would expect you could make the payment alone if needed (and it may be needed) so it seems fairly low risk from my perspective. You need somewhere to live you are used to roommates and you can pay the entire cost yourself in a worst case. Some more things to consider.. Insurance will be more expensive, you want to ensure you as the landlord you are covered if anything happens. If a tenant burns down your house or trips and falls and decides to sue you insurance will protect you. Capital Expenses (CapEx) replacing things as they wear out. On a home the roof, siding, flooring and all mechanicals(furnace, water heater, etc.) have a lifespan and will need to be replaced. On rental properties a portion of rent should be set aside to replace these things in the future. If a roof lasts 20yrs,costs $8,000 and your roof is 10years old you should be setting aside $70 a month so in the future when this know expense comes up it is not a hardship. Taxes Yes there is a special way to report income from an arrangement like this. You will fill out a Schedule E form in addition to your regular tax documents. You will also be able to write off a percent of housing expenses and depreciation on the home. I have been told it is not a simple tax situation and to consult a CPA that specializes in real estate. |
How to get started with options investing? | One answer in four days tells you this is a niche, else there should be many replies by now. The bible is McMillan on Options Note - I link to the 1996 edition which starts at 39 cents, the latest revision will set you back $30 used. The word bible says it all, it offers a great course in options, everything you need to know. You don't get a special account for option trading. You just apply to your regular broker, so depending what you wish to do, the amount starts at You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience. You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience. |
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