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How to find out if a company has purchased government (or other) bonds? | This is in the balance sheet, but the info is not usually that detailed. It is safe to assume that at least some portion of the cash/cash equivalents will be in liquid bonds. You may find more specific details in the company SEC filings (annual reports etc). |
A good investment vehicle for saving for a mortgage down payment? | When you are saving for money you need in 5 years or less the only real option is a savings account. I know the return is nothing at this point, but if you cannot take the risk of losing all of your money that's the only thing I would recommend. Now you could try a good growth stock mutual fund if, when you look up in 2 - 3 years and you have lost money you wait it out until it grows enough to get what you lost back then buy your house. I would not do the second option because I wouldn't want to be stuck renting while waiting for the account to recover, and actually thinking about it that way you have more risk. 3 years from now if you have lost money and don't yet have enough saved you will have to continue paying rent, and no mutual fund will out preform that. |
What's the best application, software or tool that can be used to track time? | I've been using Tick at work now for several months and have really enjoyed it. It's got a nice, simple interface with good time-budgeting and multi-user/project features. It can be used on several platforms, too (website, desktop widgets, and phone apps). |
Accidentally opened a year term CD account, then realized I need the money sooner. What to do? | I did find this information from the US Department of the Treasury: What are the penalties for withdrawing money early from a Time Certificate of Deposit (CD)? Federal law stipulates that all time certificates of deposit (CD) that are cashed out early are subject to a minimum penalty. If you withdraw an amount within the first six days after deposit, the penalty consists of at least seven days' simple interest. Other than that, national banks can set their own penalties; there is no maximum. Additionally, you may want to review the Account Agreement that the bank provided when you opened the account, as it explains the early withdrawal penalties. Check the paperwork to see if there is a short period at the start where the penalty is minimal. Each bank can set their own rules for the maximum penalty. Some base it on x months interest, some as a percentage of the CD, others may use a more complex formula. |
Why are auto leases stubbornly strict about visa status and how to work around that? | Uh, you want to lease a car through a dealer? That is the worst possible way to obtain a car. Dealers love leases because it allows them to sell a car for an unnegotiated price and to hide additional fees. It's the most profitable kind of sale for them. The best option would be to buy a used car off of Craigslist or eBay, then sell it again the same way when you leave. If you sell the car for what you paid, then you get the car for a year for free. If you are determined to go through with the expensive, risky and annoying plan of leasing a car, then you should use a leasing agent. I recommend reading some car buying guides before going out into the wilderness with the tigers and bears. Comment on Leasing Tricks Don't get tricked by the "interest rate" game. The whole interest thing is just a distraction to trick you into think you are getting some kind of reasonable deal. The leasing company makes most of their money from fees. For example, if you get into an accident it is a big payday for them. The average person thinks they will never get into an accident, but the reality is that most people get into an accident sooner or later. They also collect big penalties for "maintenance failures". Forget to change the oil? BOOM! money. Forget to comply with manufacture recall? BOOM! more money. Forget to do the annual service? BOOM! more money. Scratch the car? BOOM! more money. The original car mats are missing? BOOM! you just paid $400 for a set of mats that cost the leasing company $25 bucks. The leasing company is counting on the fact that 99% of people will not maintain the car correctly or will damage it in some way. They also usually have all kinds of other bogus fees, so-called "walk-away fees", "disposition fees", "initiation fees". Whatever they think they can get away with. The whole system is calculated to screw you. |
What are my options for paying off the large balance of my federal, high interest student loans? | As someone with a lot of student loan debt, I can relate - the first thing you should do is read the promissory note on your current loans - there might be information there you can use. For govt loans (stafford, etc) made after July 1, 2006 the interest rate is going to be fixed and even a federal direct consolidation is not going to lower the rates themselves. If anything, consolidation will just increase the repayment period, which means you'll end up paying more in the long run. Most private Loans usually offer variable interest rates, which today are quite low. But unless your financial situation is very comfortable and stable, consolidating out of federally guaranteed loans into private loans might not be the best path. You might lose options like deferment, forbearance, and maybe even things like a death benefit (if you die, your loans die with you). related - if you have a co-signer you don't get that death benefit! But refinancing into a variable rate private loan is going to push a lot of risk to you in terms of interest rate inflation, etc. Most financial professionals will agree that interest rates can only go up in the long run. Keep in mind, student loans are completely unsecured - meaning lenders are taking a fairly large risk in loaning money (and probably why the fed govt has to guarantee most of them). I've heard of people borrowing against their home equity to pay down student loan debt - but I can't think of a reason you'd want to substitute secured for unsecured debt and possibly lose the loan interest tax deduction. The bottom line is you're unlikely to find an alternative lending source at a lower interest rate for an unsecured student loan. Another option may be the income based repayment plan. If you qualify, it caps student loan monthly payments at 15% of your discretionary income (discretionary is your income minus whatever the poverty threshold income amount is). And if that 15% doesn't even cover the interest on the loans, the govt picks up the tab for the difference (for up to 3 years). You have to re-qualify every year by sending in all sorts of documentation, but if you somehow stay on IBR for 25 years, your loans are then forgiven. Obviously the downside here is that you are probably paying little to no principal, but if you do the math and determine that your IBR payment would be next to nothing, and your current situation is barely paying interest-only... well, maybe IBR isn't a bad thing for a couple of years (or 25 if you think you will never have a larger income). Personally, I went through all these options as well and decided that my best option was to just earn more money... a 2nd job or side project here and there helps me pay down the debt faster, and with less risk, than moving to private variable rate loans. |
Retirement formula for annual compound interest with changing principal | I've found the systems that seem to work. Firstly, you need to find how much money is required to pay for the withdrawals after retirement, while still accruing interest. I couldn't seem to do this with an equation, but this bit of javascript worked: yearsToLast: Number of years of yearly withdrawals yearlyWithdrawal: Amount to withdraw each year interest: Decimal form of yearly compounding interest Now that we have how much is required at the beginning of the retirement, to figure out how much to add yearly to hit this mark, you'd use: amount: Previously found required amount to reach interest: Decimal form of yearly compounding interest yearsSaving: Number of years saving till amount needs to be hit I hope this helps some other poor soul, because I could find squat on how to do this. Max |
Whole life insurance - capped earnings | I need to see the policy you are referring to give a more accurate answer. However what could be happening, it’s again the way these instruments are structured; For example if the insurance premium is say 11,000 of which 1000 is toward expenses and Term insurance amount. The Balance 10,000 is invested in growth. The promise is that this will grow max of 9.5% and never below zero. IE say if we are talking only about a year, you can get anything between 10,000 to 10,950. The S & P long-term average return is in the range of 12 -15% [i don't remember correctly] So the company by capping it at 9.5% is on average basis making a profit of 2.5% to 5.5%. IE in a good year say the S & P return is around 18%, the company has pocketed close to 9% more money; On a bad year say the Index gave a -ve return of say 5% ... The Insurance company would take this loss out of the good years. If say when your policy at the S & P for that year has given poor returns, you would automatically get less returns. Typically one enters into Life Insurance on a long term horizon and hence the long term averages should be used as a better reference, and going by that, one would make more money just by investing this in an Index directly. As you whether you want to invest in such a scheme, should be your judgment, in my opinion I prefer to stay away from things that are not transparent. |
Should I Have Received a 1099-G? | If you don't itemize your deductions, your state tax refund is not considered income to you. Even if you didn't receive the actual 1099-G, you know how much refund you got, so you can calculate if you need to add it back to your income this year using the worksheet on page 23 of the instructions. |
Pros & cons of buying gold directly vs. investing in a gold ETF like GLD, IAU, SGOL? | If you want to speculate on gold price you should always buy an ETF/ETC (Exchange Traded Commodity). The reasons are simple: Easy to buy and sell (one mouse click) Cheap to buy and sell (small bank commission), compared to buy real gold (always 6 to 12% comission to the local shop when you buy and when you sell), see this one it's one cheap gold buy/sell shop I found on the internet But if you sometimes feel unsecure that you might one day loose everything due to a major economy collapse event (like an armageddon), or not to have enough money in bad periods or during retirment, and it makes you feel better to know you buried 999 Gold Sovereign in your house backyard (along with a rifle as suggested in comments), then just buy them and live an happy life (as long as you hide your gold in good ways and write a good treasury map). |
How Warren Buffett made his money | There is actually a recent paper that attempted to decompose Buffett's outperformance. I've quoted the abstract below: "Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors." |
What should I do with $4,000 cash and High Interest Debt? | If it were me, I would pay off the 23%er. That is as long as you don't borrow anymore. Please consider "your hair on fire" and get that 26%er paid off as soon as possible. From my calculations your big CC is sitting at 26% has a balance of 20K. Holy cow girl, what in the world? The goal here is to have that paid off in less than one year. Get another job, work more than you have in your life. Others may disagree as it is more efficient to pay down the 26%er. However, if you pay it all of within the year the difference only comes to $260. If you gain momentum, which is important in changing your financial life, that $260 will be meaningless. With focus, intensity, and momentum you can get this mess cleaned up sooner than you think. However, if you are going to continue to rack up credit card debt at these rates, it does not matter what you do. |
Effective interest rate for mortgage loan | With the $2000 downpayment and interest rate of 11.5% nominal compounded monthly the monthly payments would be $970.49 As you state, that is a monthly rate of 0.9583% Edit With the new information, taking the standard loan equation where Let Now setting s = 98000, with d = 990.291 solve for r |
New to investing — I have $20,000 cash saved, what should I do with it? | Just my 2 cents, I read on the book, The WSJ Financial Guidebook for New Parents, that "the average family spends between $11k and $16k raising their child during his first year". So it might be better for you to make a budget including that cost, then decide how much money you feel safe to invest. |
How can I legally and efficiently help my girlfriend build equity by helping with a mortgage? | Have her chip in for the regular expenses, utilities, food, etc., and a bit for "rent." Then tell her to be sure to deposit to her retirement account, preferably a matched 401(k). It's admirable to want her to build 'equity' but it's pretty convoluted. You can't actually give her ownership, and in the event you break up (I know you won't, but this is to help other readers) you'll have to pay her back a lump sum when she moves out. That might not be so easy. |
How do I evaluate reasonability of home improvement projects? | If you're looking for some formula, I don't think one exists. People talk about this all the time and give conflicting advice. If there was a proven-accurate formula, they wouldn't be debating it. There are basically 3 reasons to do a home improvement project: (a) Correct a problem so that you prevent on-going damage to your home. For example, have a leaking roof patched or replaced, or exterminate termites. Such a job is worthwhile if the cost of fixing the problem is less than the cost of future damage. In the case of my termite and leaking roof examples, this is almost always worth doing. Lesser maintenance problems might be more debatable. Similarly, some improvements may reduce expenses. Like replacing an old furnace with a newer model may cut your heating bills. Here the question is: how long does it take to repay the investment, compared to other things you might invest your money in. Just to make up numbers: Suppose you find that a new furnace will save you $500 per year. If the new furnace costs $2000, then it will take 4 years to pay for itself. I'd consider that a good investment. If that same $2000 furnace will only cut your heating bills by $100 per year, then it will take 20 years to pay for itself. You'd probably be better off putting the $2000 into the stock market and using the gains to help pay your heating bill. (b) Increase the resale value of your home. If you are paying someone else to do the work, the harsh reality here is: Almost no job will increase the resale value by more than the cost of getting the job done. I've seen many articles over the years citing studies on this. I think most conclude that kitchen remodeling comes closet to paying for itself, and bathrooms come next. New windows are also up there. I don't have studies to prove this, but my guesses would be: Replacing something that is basically nice with a different style will rarely pay for itself. Like, replacing oak cabinets with cherry cabinets. Replacing something that is in terrible shape with something decent is more likely to pay back than replacing something decent with something beautiful. Like if you have an old iron bathtub that's rusting and falling apart, replacing it may pay off. If you have a 5-year-old bathtub that's in good shape but is not premium, top of the line, replacing it with a premium bathtub will probably do very little for resale value. If you can do a lot of the work yourself, the story changes. Many home improvement jobs don't require a lot of materials, but do require a lot of work. If you do the labor, you can often get the job done very cheaply, and it's likely that the increase in resale value will be more than what you spend. For example, most of my house has hardwood floors. Lots of people like pretty hardwood floors. I just restained the floors in two rooms. It cost me, I don't know, maybe $20 or $30 for stain and some brushes. I'm sure if I tried to sell the house tomorrow I'd get my twenty bucks back in higher sale value. Realtors often advise sellers to paint. Again, if you do it yourself, the cost of paint may be a hundred dollars, and it can increase the sale price of the house by thousands. Of course if you do the work yourself, you have to consider the value of your time. (c) To make your home more pleasant to live in. This is totally subjective. You have to make the decision on the same basis that you decide whether anything that is not essential to survival is worth buying. To some people, a bottle of fancy imported wine is worth thousands, even millions, of dollars. Others can't tell the difference between a $10,000 wine and a $15 wine. The thing to ask yourself is, How important is this home improvement to me, compared to other things I could do with the money? Like, suppose you're considering spending $20,000 remodeling your kitchen. What else could you do with $20,000? You could buy a car, go on an elaborate vacation, eat out several times a week for years, retire a little earlier, etc. No one can tell you how much something is worth to you. Any given home improvement may involve a combination of these factors. Like say you're considering that $20,000 kitchen remodeling. Say you somehow find out that this will increase the resale value by $15,000. If the only reason you were considering it was to increase resale value, then it's not worth it -- you'd lose $5,000. But if you also want the nicer kitchen, then it is fair to say, Okay, it will cost me $20,000, but ultimately I'll get $15,000 of that back. So in the long run it will only cost me $5,000. Is having a nicer kitchen worth $5,000 to me? Note, by the way, that resale value only matters if and when you sell the house. If you expect to stay in this house for 20 years, any improvements done are VERY long-term investments. If you live in it until you die, the resale value may matter to your heirs. |
I started some small businesses but need help figuring out taxes. Should I hire a CPA? | The only professional designations for people allowed to provide tax advice are Attorney, EA or CPA. Attorney and CPA must be licensed in the State they practice in, EA's are licensed by the Federal government. Tax preparers are not allowed to provide any tax advice, unless they hold any of these designations. They are only allowed to prepare your tax forms for you. So no, tax preparer is not a solution. Yes, you need to talk to a tax adviser (EA/CPA licensed in your State, you probably don't need a tax attorney). You should do that before you start earning money - so that you can plan properly and understand what expenses you can incur and how they're handled with regards to your future income tax payments. You might also want to consider a bookkeeping service (many EA/CPA offices offer the bookkeeping as well). But that you can also do yourself, not all that complicated if you don't have tons of transactions and accounts. |
In a house with shared ownership, if one person moves out and the other assumes mortgage, how do we determine who owns what share in the end? | Market value and assessments are two different things. No matter how amical the agreement seems on buying and selling, the future could result in damaged relationships without an absolute sale. I would strongly recommend getting into an agreement to split the purchase of a house as a means to save money. If it's too late, sell immediately. |
Buying a house for a shorter term | There are two main factors at play to consider. Also, realize that no advice is universal. You need to evaluate your exact situation and do what is best for you. |
When trading put options, is your total risk decreased if you are in a position to exercise the option? | The risk situation of the put option is the same whether you own the stock or not. You risk $5 and stand to gain 0 to $250 in the period before expiration (say $50 if the stock reaches $200 and you sell). Holding the stock or not changes nothing about that. What is different is the consideration as to whether or not to buy a put when you own the stock. Without an option, you are holding a $250 asset (the stock), and risking that money. Should you sell and miss opportunity for say $300? Or hold and risk loss of say $50 of your $250? So you have $250 at risk, but can lock in a sale price of $245 for say a month by buying a put, giving you opportunity for the $300 price in that month. You're turning a risk of losing $250 (or maybe only $50 more realistically) into a risk of losing only $5 (versus the price your stock would get today). |
Why would anyone buy a government bond? | Why would a bank buy government bonds? Why couldn't they just deposit their money in another bank instead? Generally, banks are limited by laws and regulations about how much they must set aside as reserves. Of the money they receive as deposits, they may loan a certain amount, but must keep some as a reserve (this is called "fractional reserve banking"). Different countries have a different amount that they must set aside in reserves. In countries where bank deposits are guaranteed, there is almost always some upper limit to how much is guaranteed. The amount of money that a bank would deposit in another bank would be far greater than the guarantee. |
Effect on Bond asset allocation if Equity markets crash? | what will happen to the valuation of Tom's bond holdings after the equity crash? This is primarily opinion based. What will happen is generally hard to predict. Bond Price Bump due to Demand: Is a possible outcome; this depends on the assumption that the bonds in the said country are still deemed safe. Recent Greece example, this may not be true. So if the investors don't believe that Bonds are safe, the money may move into Real Estate, into Bullion [Gold etc], or to other markets. In such a scenario; the price may not bump up. Bond Price Decline due to Rising Interest Rates: On a rising interest rates, the long-term bonds may loose in value while the short term bonds may hold their value. Related question How would bonds fare if interest rates rose? |
How to invest Rs.10k in India | Rs 10,000 is a small but good amount to begin with. I would suggest you start by investing in some good mutual funds. Do some research, a balance mutual fund is less risky less returns compared to a equity mutual fund. The other option is directly investing in stock market, however this needs some experience and you would need to open demat and trading accounts that would cost money to open and maintain. |
Retirement Options for Income | If you withdraw all (or most) of your pension 25% is tax free but the rest is treated as income upon which you will pay income tax at the usual UK rates. Withdrawing a lump sum to buy property is therefore unlikely to be 10% per annum as you'll spend years making up lost ground on the initial capital investment. If your pension is a self invested personal pension (a SIPP) you could buy property within the pension wrapper itself which would avoid the income tax hit. if you don't have a SIPP you may be able to convert your pension to a SIPP but you would be wise to seek professional advice about that. The UK government is also introducing an additional 3% stamp duty on properties which are not your first home so this may further impact your returns. This would apply whether you withdraw your pension as cash or buy the property within a SIPP. One other alternative to an annuity in the UK is called drawdown where you keep the money invested in your pension as it is now and withdraw an annual income. This means your tax bill is reduced as you get to use your annual allowance each year and will also pay less higher rate tax. The government provides more details on its website. |
What should I do with the change in my change-jar? | In the U.S. at least, a lot of these CoinStar machines are now owned and operated by the store or other venue in which they're placed, as a convenience to customers, and the fee for using it is waived. These machines, even without a fee attached, are still beneficial to the store, for two reasons. First, they bring in potential customers; the machine usually spits out a ticket that you take to the cashier, meaning you pass by all the impulse items they put in the checkout lines, and someone using the change catcher will invariably pick up a pack of gum or a magazine to spend your newfound wealth. The fact that one store has a change machine while another doesn't can also be the difference between choosing that store over the other for a planned shopping trip. Second, and less obvious, a store that owns a CoinStar machine has full access to the change people put in it (hey, they own the machine and are paying out cash on the receipts it spits out). During normal use of a cash drawer or register to take in money, large bills ($20/20€ or larger) are accumulated to be "broken", small to medium bills (1-10 units) stay roughly static in number as payments are made and larger bills are broken, and coins are invariably depleted as change is paid out. This means the average retail store needs a constant incoming supply of coinage, and that generally happens either through armored car service or similar commercial banking (which costs the store money), or through "change catchers" like gumball machines (which usually can't supply all the needed denominations). The Coinstar machine effectively reverses at least a portion of this attrition of coins and accumulation of large bills; the store can now receive coins and pay out large bills as a part of its day to day business, reducing or even eliminating the need to have a bank or armored car perform this service. Anyway, check and see whether the CoinStar machine you last used is still operating on a percentage-fee basis; it might be the case that the store has purchased the machine outright and is offering its services free of charge. If not, look around; other stores may be waiving the CoinStar fee where this one isn't (or they may have similar, non-CoinStar branded machines). Lastly, as other answers have mentioned, if you cash out in the form of a gift card, there's no fee, so you can pick a gift card to a store you're likely to visit anyway; in the U.S. there are a lot of good choices, like home improvement stores, Starbucks, major department stores/clothing retailers, and even an airline. |
Foreign currency conversion for international visitors to ecommerce web site? | You probably can get away with only updating the exchange rates once a day and specify that any prices quoted in units other than your home currency are estimates only. If you're planning to accept more than one currency as payment, I'd (a) see about whatever regulations there are for doing so, and (b) build in a nice spread for yourself if you're allowed to, since it is a service you're providing to your customers. If you Google currency converter the first result is just that: a currency converter. |
When will the U.K. convert to the Euro as an official currency? | I can't see it happening because most of the population seems to be against it, even if their reasoning on the whole is wrong. Theoretically, people are against the Euro here as a result of national pride. If it's the best thing to do for the good of the country then national pride shouldn't be taken into account. It'd be perverse in the sense that you'd be stopping your country from progressing because you love it. That doesn't add up. Personally, I don't think it's possible for an entire continent to have a single currency. There's too many different countries and cultures involved. For it to work you'd have to have centralised fiscal policy and this makes no sense at all for a continent. What works here might not work in France or Germany. What works in Greece might not work here. etc, etc. The make up of each country's economies is different. |
Should I sell my stocks to reduce my debt? | Put yourself in this position - if you had no debts and no investments, would you borrow money at those rates to invest in the stock market? If no, then pay off the debts. If yes, then keep them. |
Understanding stock market terminology | Opening - is the price at which the first trade gets executed at the start of the trading day (or trading period). High - is the highest price the stock is traded at during the day (or trading period). Low - is the lowest price the stock is traded at during the day (or trading period). Closing - is the price at which the last trade gets executed at the end of the trading day (or trading period). Volume - is the amount of shares that get traded during the trading day (or trading period). For example, if you bought 1000 shares during the day and another 9 people also bought 1000 shares each, then the trading volume for the day would be 10 x 1000 = 10,000. |
Should I include my hard assets as part of my net worth? | If the value of these hard assets is significant you probably have them insured, and for significant art work you should have had them appraised as part of getting them insured. Therefore the process of adding them into the net worth calculation would be trivial. Your goals should be a mix of liquid assets, and assets that are harder to sell, such as real estate. It should also include those items you are more reluctant to sell. In some cases these "investments" do need to be included in official calculations, such as applying for a student loan or financial aid, required financial disclosure statements for some government jobs, or applications for government assistance. |
Tax Write-offs and knowing how much I need to spend before the end of the year | (I'm assuming USA tax code as this is untagged) As the comments above suggest there is no "right" answer or easy formula. The main issue is that you likely got into business to make money and if you make money consistently you will pay taxes. Reinvesting generally should be a business decision where the main concern is revenue growth and taxes are an important but secondary concern. Taxes can be complicated, but for a small LLC shouldn't be that bad. I highly recommend that you take some time closely analyze your business and personal taxes for the previous year. Once you understand the problem better, you can optimize around it. If it is a big concern, some companies buy software so they can estimate their taxes periodically through the year and make better decisions. |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | Have you checked to make sure that your card isn't at the limit, or at risk of expiring soon? Maybe PayPal has a policy to reject credit cards with expiry dates that fall within their buyer/seller protection periods? But to answer your question, no, I've never had this happen to me before. |
First time investing in real-estate, looks decent? | This might be a good idea, depending on your personality and inclinations. Key points: How close is the building to you? Do not buy any building that is more than 20 minutes travel from where you are. Do you have any real hard experience with doing construction, building maintenance and repair? Do you have tools? Example: do you have a reciprocating saw? do you know what a reciprocating saw is? If your answer to both those questions is "no", think twice about acquiring a property that involves renovation. Renovation costs can be crushing, especially for someone who is not an experienced carpenter and electrician. Take your estimates of costs and quadruple them. Can you still afford it? Do you want to be a landlord? Being a landlord is a job. You will be called in the middle of the night by tenants who want their toilet to get fixed and stuff like that. Is that what you want to spend your time doing, driving 20 minutes to change lightbulbs and fix toilets? |
Can I use FOREX markets to exchange cash? | As far as I understand, OP seems to be literally asking: "why, regarding the various contracts on various exchanges (CBE, etc), is it that in some cases they are 'cash settled' and in some 'physically settled' -?" The answer is only that "the exchange in question happens to offer it that way." Note that it's utterly commonplace for contracts to be settled out physically, and happens in the billions as a daily matter. Conversely zillions in "cash settled" contracts play out each day. Both are totally commonplace. Different businesses or entities or traders would use the two "varieties" for sundry reasons. The different exchanges offer the different varieties, ultimately I guess because they happen to think that niche will be profitable. There's no "galactic council" or something that enforces which mode of settlement is available on a given offering - ! Recall that "a given futures contracts market" is nothing more than a product offered by a certain exchange company (just like Burger King sells different products). I believe in another aspect of the question, OP is asking basically: "Why is there not, a futures contract, of the mini or micro variety for extremely small amounts, of currency futures, which, is 'physically' settled rather than cash settled ..?" If that's the question the answer is just "whatever, nobody's done it yet". (Or, it may well exist. But it seems extremely unlikely? "physically" settled currencies futures are for entities operating in the zillions.) Sorry if the question was misunderstood. |
Should I pay half a large balance this month before I get my CC statement? | Utilization is near real-time. What that means is that what is reported is what is taken in terms of debt-to-income (DTI) ratios. When a mortgage broker pulls your credit, they will pull the latest balances with the minimum payments. This is what is taken to determine DTI along with your gross monthly income. If you do not pay your account in full before the statement date, then you more than likely will have to wait an additional statement cycle before it reports to the credit bureaus. Therefore, your utilization is dynamic and the history of your utilization month-to-month is not recorded forever. Only the current balance. What is maintained and reported is your payment history. So you want to never be late if you want to be approved anytime soon for a mortgage. A lower DTI will not help your interest rate. As long as you stay away from the maximum DTI for the mortgage vehicle you are attempting to be approved for (VA, FHA, Conventional, etc), then your DTI should not be a concern. If you are borderline at the time of underwriting, you can take the opportunity and pay off the balances. The mortgage company can then do what is called a credit supplement which entails contacting those lenders where you have proven you have a zero balance and manually input the zero balance cards, that have not yet reported to the bureaus, in your final application to the mortgage company for underwriting approval. |
The best credit card for people who pay their balance off every month | For people who are already a Costco member. The American Express TrueEarnings Business Card is a good choice. Note: If you don't own a business, just use your name as the business. The business card is better than the regular TrueEarnings card. Pros: |
Free “Rich Dad” education, with “free gift”: Is it legitimate, or is it a sales ploy? | I have taken the free Kiyosaki evening course, and it does give some good information. It is an upsell to the $500 weekend course, which I also took. That course taught me enough about real-estate investing to get started. I have not yet had the need to pursue his other, more expensive courses. Read his books, take the $500 course, read other people's books on real estate investing, talk to other like-minded individuals, and gain some experience. I understand real estate better than I understand paper assets because I spent more time studying real estate. If you want to invest in real estate, study it first. If you want to invest in paper assets, study those first. |
To rebalance or not to rebalance | An asset allocation formula is useful because it provides a way to manage risk. Rebalancing preserves your asset allocation. The investment risk of a well-diversified portfolio (with a few ETFs or mutual funds in there to get a wide range of stocks, bonds, and international exposure) is mostly proportional to the asset class distribution. If you started out with half-stocks and half-bonds, and stocks surged 100% over the past few years while bonds have stayed flat, then you may be left with (say) 66% stocks and 33% bonds. Your portfolio is now more vulnerable to future stock market drops (the risk associated with stocks). (Most asset allocation recommendations are a little more specific than a stock/bond split, but I'm sure you can get the idea.) Rebalancing can be profitable because it's a formulaic way to enforce you to "buy low, sell high". Massive recessions notwithstanding, usually not everything in your portfolio will rise and fall at the same time, and some are actually negatively correlated (that's one idea behind diversification, anyway). If your stocks have surged, chances are that bonds are cheaper. This doesn't always work (repeatedly transferring money from bonds into stocks while the market was falling in 2008-2009 could have lost you even more money). Also, if you rebalance frequently, you might incur expenses from the trading (depending on what sort of financial instrument you're holding). It may be more effective to simply channel new money into the sector that you're light on, and limit the major rebalancing of the portfolio so that it's just an occasional thing. Talk to your financial adviser. :) |
Accounting for currency depreciation | Yes - it's called the rate of inflation. The rate of return over the rate of inflation is called the real rate of return. So if a currency experiences a 2% rate of inflation, and your investment makes a 3% rate of return, your real rate of return is only 1%. One problem is that inflation is always backwards-looking, while investment returns are always forward-looking. There are ways to calculate an expected rate of inflation from foreign exchange futures and other market instruments, though. That said, when comparing investments, typically all investments are in the same currency, so the effect of inflation is the same, and inflation makes no difference in a comparative analysis. When comparing investments in different currencies, then the rate of inflation may become important. |
The difference between Islamic Banks and Western Banks | To answer your first part, its not an opposition to profit. It's an opposition to usury - the practice of charging excessive interest on loans. There are extensive passages in the Qur'an condemning the practice, and in many cases "excessive interest" is any interest. To the second part of the question, these may well be more risky investments. But if you're trying to build a strong and thriving community financial spirit, one might expect there to be significant social pressures to use the loaned money responsibly. Additionally, while it removes some of the penalty for failure, it doesn't remove the rewards for success. The incentive is still there to succeed. It's merely the penalty for failure is no longer financial ruination. It may also temper the incentive for banks to give money to riskier borrowers, but rather to prudently invest in ventures with an acceptable amount of risk. The question as to whether or not this is a "house of cards" likely depends on the questioner. Whether or not this is also true for the western banking system likely remains to be seen, but it hasn't exactly been doing a sterling job of convincing me it isn't true for the past decade. |
I'm 23 and was given $50k. What should I do? | The best option for maximizing your money long-term is to contribute to the 401(k) offered by your employer. If you park your inheritance in a savings account you can draw on it to augment your income while you max out your contributions to the 401(k). You will get whatever the employer matches right off the bat and your gains are tax deferred. In essence you will be putting your inheritance into the 401(k) and forcing your employer to match at whatever rate they do. So if your employer matches at 50 cents on the dollar you will turn your 50 thousand into 75 thousand. |
Taxes on foreign and local dividends held in a TFSA | As far as I read in many articles, all earnings (capital gains and dividends) from Canadian stocks will be always tax-free. Right? There's no withholding tax, ie. a $100 dividend means you get $100. There's no withholding for capital gains in shares for anybody. You will still have to pay taxes on the amounts, but that's only due at tax time and it could be very minor (or even a refund) for eligible Canadian dividends. That's because the company has already paid tax on those dividends. In contrast, holding U.S. or any foreign stock that yields dividends in a TFSA will pay 15% withholding tax and it is not recoverable. Correct, but the 15% is a special rate for regular shares and you need to fill out a W8-BEN. Your broker will probably make sure you have every few years. But if you hold the same stock in a non-registered account, this 15% withholding tax can be used as a foreign tax credit? Is this true or not or what are the considerations? That's true but reduces your Canadian tax payable, it's not refundable, so you have to have some tax to subtract it from. Another consideration is foreign dividends are included 100% in income no mater what the character is. That means you pay tax at your highest rate always if not held in a tax sheltered account. Canadian dividends that are in a non-registered account will pay taxes, I presume and I don't know how much, but the amount can be used also as a tax credit or are unrecoverable? What happens in order to take into account taxes paid by the company is, I read also that if you don't want to pay withholding taxes from foreign > dividends you can hold your stock in a RRSP or RRIF? You don't have any withholding taxes from US entities to what they consider Canadian retirement accounts. So TFSAs and RESPs aren't covered. Note that it has to be a US fund like SPY or VTI that trades in the US, and the account has to be RRSP/RRIF. You can't buy a Canadian listed ETF that holds US stocks and get the same treatment. This is also only for the US, not foreign like Europe or Asia. Also something like VT (total world) in the US will have withholding taxes from foreign (Europe & Asia mostly) before the money gets to the US. You can't get that back. Just an honourable mention for the UK, there's no withholding taxes for anybody, and I hear it's on sale. But at some point, if I withdraw the money, who do I need to pay taxes, > U.S. or Canada? Canada. |
Should I finance a used car or pay cash? | I'd pay cash. Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way. |
Which kind of investment seems feasible to have more cashflow every week or month? | I'll mirror what the others have said in that your expectations for returns are wildly out of line with reality. If you could achieve that with only moderate risk hopefully you can see that you could ladder those returns by re-investing them and become a billionaire in short order. You may have noticed that there are a lot of really financially savvy people who are not billionaires. So the math for your plan falls apart somewhere, obviously. However, in the spirit of being helpful, and with the caveat that super high returns involve super high risk I'll try and point you in the direction where this is theoretically possible, even if the odds would be better buying lottery tickets. One way to get more leverage from your money than just buying stocks is to buy options. With an options strategy your return/loss will be magnified greatly compared to buying stocks. That is, you can lose or gain a much higher multiplier of your original investment. That said, I don't advise doing that with any money that you can't afford to lose every penny of, because you likely will. |
Is there anything I can do to prepare myself for the tax consequences of selling investments to buy a house? | Don't let tax considerations be the main driver. That's generally a bad idea. You should keep tax in mind when making the decision, but don't let it be the main reason for an action. selling the higher priced shares (possibly at a loss even) - I think it's ok to do that, and it doesn't necessarily have to be FIFO? It is OK to do that, but consider also the term. Long term gain has much lower taxes than short term gain, and short term loss will be offsetting long term gain - means you can lose some of the potential tax benefit. any potential writeoffs related to buying a home that can offset capital gains? No, and anyway if you're buying a personal residence (a home for yourself) - there's nothing to write off (except for the mortgage interest and property taxes of course). selling other investments for a capital loss to offset this sale? Again - why sell at a loss? anything related to retirement accounts? e.g. I think I recall being able to take a loan from your retirement account in order to buy a home You can take a loan, and you can also withdraw up to 10K without a penalty (if conditions are met). Bottom line - be prepared to pay the tax on the gains, and check how much it is going to be roughly. You can apply previous year refund to the next year to mitigate the shock, you can put some money aside, and you can raise your salary withholding to make sure you're not hit with a high bill and penalties next April after you do that. As long as you keep in mind the tax bill and put aside an amount to pay it - you'll be fine. I see no reason to sell at loss or pay extra interest to someone just to reduce the nominal amount of the tax. If you're selling at loss - you're losing money. If you're selling at gain and paying tax - you're earning money, even if the earnings are reduced by the tax. |
Indian equivalent of Vanguard S&P 500 | Also, when they mean SP500 fund - it means that fund which invests in the top 500 companies in the SP Index, is my understanding correct? Yes that is right. In reality they may not be able to invest in all 500 companies in same proportion, but is reflective of the composition. I wanted to know whether India also has a company similar to Vanguard which offers low cost index funds. Almost all mutual fund companies offer a NIFTY index fund, both as mutual fund as well as ETF. You can search for index fund and see the total assets to find out which is bigger compared to others. |
Is the gross amount of US debt dangerous for the small investor? | Not a lot, directly. Your biggest direct risk is that you could buy the debt, and buy it at too high a price (i.e. too low an interest rate) and not make as much money as you ought (and maybe not enough to cover inflation, especially if you buy long-term bonds at low interest rates.) The indirect risks are mostly that the debt could weigh on economic growth: There is also a question of monetary policy, inflation, and interest rates set by the Federal Reserve. Theoretically the government could be tempted to keep interest rates low (to save money) and buy its own bonds ("printing money"), which could cause inflation. Theoretically, they shouldn't, as price stability is one of the Fed's primary mandates. But if they did, inflation makes everything less predictable and is generally obnoxious, which makes everything more risky and drags on the economy. Also, if the nominal value of an asset rises due to inflation, you will likely need to pay taxes on that at some point if you sell it, even though its real value is the same. |
Why do most banks in Canada charge monthly fee? | You have to check your contract to be sure what is it you're paying for. Typically, you get some of the following features which can be unavailable to you in banks which don't charge a monthly fee: Arguably, these expenses could be paid by the interest rates your money earn to the bank. Notice how banks which don't charge a fee usually require you to have a minimum amount of cash in your account or a minimum monthly cash flow. When you pay for your bank's services in cash, there's no such restrictions. I'm not sure if typical banks in the UK would take away your credit card if you lose your job and don't qualify for that kind of card any more, but I do know banks who would. The choice is yours, and while it's indeed sad that you don't have this kind of choice in Canada, it's also not like you're paying solely for the privilege of letting them invest your money behind your back. |
First time home buyer. How to negotiate price? | Often, if your realtor and the selling realtor know each other, your realtor will "discover" what price the seller really wants. (Don't worry about how this is done. There will be no evidence it occurred!) Your realtor will then drop hints that you should aim for that price to ensure the deal goes smoothly. That sounds like what your realtor is doing when he says "If you want to play ball offer them $80k." He won't stop you from bidding lower, but he knows where you'll end up. Price is just one part of the transaction, however. You can offer $80K, to meet their price, but also request that the seller make recommended repairs or credit you the cost. You can request that the seller cover closing costs or transfer taxes or any other costs. In short, offering the seller X doesn't mean you will pay X. I personally try to avoid credits, because although they make your effective price lower, the actual purchase price still drives things such as your loan, and in many places, your property taxes and other taxes. I would rather reduce the price than get credits. But you do what you have to do if you want the deal. You can also request that certain appliances be included, such as a refrigerator or a washing machine and dryer. You can ask for furniture, or statues in the backyard, or anything else you liked when you saw the house. In short, you offer X for the house, but you also get a bunch of other stuff that you need or want. |
Death and Capital Gains Taxes (United States) | My understanding is that when you die, the stocks are sold and then the money is given to the beneficiary or the stock is repurchased in the beneficiaries name. This is wrong, and the conclusion you draw from michael's otherwise correct answer follows your false assumption. You seem to understand the Estate Tax federal threshold. Jersey would have its own, and I have no idea how it works there. If the decedent happened to trade in the tax year prior to passing, normal tax rules apply. Now, if the executor chooses to sell off and liquidate the estate to cash, there's no further taxable gain, a $5M portfolio can have millions in long term gain, but the step up basis pretty much negates all of it. If that's the case, the beneficiaries aren't likely to repurchase those shares, in fact, they might not even know what the list of stocks was, unless they sifted through the asset list. But, that sale was unnecessary, assets can be divvied up and distributed in-kind, each beneficiary getting their fraction of the number of shares of each stock. And then your share of the $5M has a stepped up basis, meaning if you sell that day, your gains are near zero. You might owe a few dollars for whatever the share move in the time passing between the step up date and date you sell. I hope that clarifies your misunderstanding. By the way, the IRS is just an intermediary. It's congress that writes the laws, including the tangled web of tax code. The IRS is the moral equivalent of a great customer service team working for a company we don't care for. |
Should I wait to save up 20% downpayment on a 500k condo? | As I've crunched numbers towards what my family could afford for a down payment (in an area with similar housing costs - don't you hate that high cost of living?), I've come up with the following numbers: We may be missing some area of expenses, but in general I think we are being fairly conservative. You should consider making a similar list to determine your comfort level. Spend some time with an interest calculator to know the serious pain of each dollar you are paying interest on to a lender. Also know that the bigger your down payment, the more likely the seller is to accept your offer. It shows you are serious. |
Should I deduct or capitalize the cost to replace a water heater in my rental property? (details Below) | If you're repairing an existing appliance - its an expense. If you're replacing an existing appliance with a new one - that's disposing of one capital asset and putting in service another. You depreciate the new one and you dispose of the old one (if not fully depreciated - talk to your tax adviser how to handle the remaining value). The additional costs of the fixes that are not related to the installation of the new appliance are regular maintenance expenses, so you have to get an itemized invoice from the plumber to know what to expense and what to capitalize. |
Are limit orders safe? | Limit orders are generally safer than market orders. Market orders take whatever most-favorable price is being offered. This can be especially dangerous in highly volatile stocks which have a significant spread between the bid and ask. That being said, you want to be very careful that you enter the price you intend into a limit order. It is better to be a bit slower at entering your orders than it is to make a terrible mistake like the one you mention in your question. |
Setting a trailing stop loss at $39.70 bid price, stock sold at $41 | Is this due to the delay? Yes, but the delay is caused by your broker and its affiliates. Trailing Stop Order is not exchange native, meaning that the broker is responsible for keeping track of whether the stop price has been reached, and the broker is responsible for sending the subsequent Market Order to the exchange. For certain exchange, even Stop Order or Stop Limit Order is not exchange native. Is it common to be so different? No, only in times of extreme volatility. |
I'm currently unemployed and have been offered a contract position. Do I need to incorporate myself? How do I do it? | I am co-owner of a business, and we incorporated federally. (Mostly to limit liability.) There is some excellent information above, and most of my wisdom I got from a trusted lawyer and accountant (find experts you trust in these two areas, they will prove invaluable in so many areas.) The one point I would add is that if you decide to incorporate, you can do so federally or provincially. We were all set to go provincially, when our lawyer asked "Is there any chance you might move the business? Any chance you might want to do work in other provinces? What about next year? Five years?" If you are going through the expenses to set up a corporation, consider doing so federally, the extra costs were insignificant, but someday you might be glad you don't have to start from scratch. In this day and age, many people end up moving out of province for work, family concerns, etc. |
I have $10,000 sitting in an account making around $1 per month interest, what are some better options? | What is your risk tolerance? Personally I invest about $5k in digital currency as an experiment. A lot of people told me I am stupid, which I agree at some point. I plan to let the money sit for 5~10 years. I can tell you there is a lot of emotion in the digital currency though. |
Should I pay cash or prefer a 0% interest loan for home furnishings? | Read the terms and conditions very carefully. Many zero percent deals have a requirement that you pay back at a certain date, and if you don't, you'll have to pay some enormous percentage. Nobody will remind you of the date, because the lender has the secret hope that you will forget. |
How do I account for 100 percent vendor discounts in GnuCash 2.6.5 | I am no expert on the situation nor do I pretend to act like one, but, as a business owner, allow me to give you my personal opinion. Option 3 is closest to what you want. Why? Well: This way, you have both the record of everything that was done, and also IRS can see exactly what happened. Another suggestion would be to ask the GnuCash maintainers and community directly. You can have a chat with them on their IRC channel #gnucash, send them an email, maybe find the answer in the documentation or wiki. Popular software apps usually have both support people and a helpful community, so if the above method is in any way inconvenient for you, you can give this one a try. Hope this helps! Robert |
Should you check to make sure your employer is paying you the correct superannuation amount? [Australia] | As poolie mentioned, you should get online access to your account. This will do a couple of things: Also, consolidate any super you have with different companies. Now. |
Starting with Stocks or Forex? | This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, "both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market." This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice. |
How to get a down payment for your next home? Use current home as the down payment on the new one? | I know you've clarified that you're in the US, but in case anyone else comes across this question: in the UK this is completely normal (including if you still have outstanding mortgage on your current home). We end up with long "chains" of buyers and sellers all completing / moving on the same day so that the proceeds from one sale can be used as the downpayment on the next. |
Is Stock Trading legal for a student on F-1 Visa doing CPT in USA? | There are no legal reasons preventing you from trading as a F-1 visa holder, as noted in this Money.SE answer. Per this article, here are the things you need to set up an account: What do I need to have for doing Stock trading as F1 student ? Typically, most of the stock brokerage firms require Social Security Number (SSN) for stock trading. The reason is that, for your capital gains, it is required by IRS for tax purposes. If you work on campus, then you would already get SSN as part of the job application process…Typically, once you get the on-campus job or work authorization using CPT or OPT , you use that offer letter and take all your current documents like Passport, I-20, I-94 and apply for SSN at Social Security Administration(SSA) Office, check full details at SSA Website . SSN is typically used to report job wages by employer for tax purposes or check eligibility of benefits to IRS/Government. I do NOT have SSN, Can I still do stock trading as F1 student ? While many stock brokerage firms require SSN, you are not out of luck, if you do not have one…you will have to apply for an ITIN Number ( Individual Taxpayer Identification Number ) and can use the same when applying for stock brokerage account. While some of the firms accept ITIN number, it totally depends on the stock brokering firm and you need to check with the one that you are interested in. The key thing is that you'll need either a SSN or ITIN to open a US-based brokerage account. |
Why is short-selling considered more “advanced” than a simple buy? | The margin rules are also more complicated. A simple buy on a non-margin account will never run into margin rules and you can just wait out any dips if you have confidence the stock will recover. A "simple" short sell might get you a call from your broker that you have a margin call, and you can't wait it out without putting more money in. Personally I have trouble keeping the short sale margin rules straight in my head, at least compared to a long sale. I got in way over my head shorting AMZN once, and lost a lot of money because I thought it was overvalued at the time, but it just kept going up and I wanted it to go down. I've never gotten stuck like that on a long position. |
What are “preferred” stocks? How are they different from normal (common) stocks? | It is just a different category of stock issued by a company that gives its owners different treatment when it comes to dividend payment and a few other financial transactions. Preferred stock holders get treated with some preference with regard to the company's profits and assets. For example, dividends are typically guaranteed to preferred stock holders whereas the leadership in the company can elect at any time not to pay dividends to common stockholders. In the event the company is liquidated, the preferred stockholders also get to be in line ahead of common stockholders when the assets are distributed. |
Does it make sense to buy a house in my situation? | I'm confused why you think you need a $450k house. That seems extremely high in today's market except perhaps in certain major urban locations. If you're going to live in suburbia or a smaller town/city, you should be able to find a nice 3br house for well under $300k. Before you rule out buying a house, I'd spend some time researching the real estate listings in your area, foreclosures, properties owned by bankruptcy court, etc. - you might be surprised to find a great home for as low as $150-200k. Of course if you live in a place where what I'm saying is completely off-base, please disregard my answer. |
Can I buy put options on an ADR? | Some ADRs have standardized options that trade on US exchanges. If your stock/ADR is one of those, then you find the put option through most brokerages that deal with stock options and trade the option like you would on a regular stock. If your ADR does not have standardized options, then your options will depend on where the ADR trades. If it's OTC, you might not even be able to short it. If it trades on a major exchange, the shorting the ADR may be a viable choice. |
W2 vs 1099 Employee status | Another thing to consider, however, is the deductibility of business expenses. Let's assume that the employer can legitimately hire you as a 1099 contractor. (Would you be able to telecommute? Would you have a high degree of control over when you worked and when you didn't? These factors also affect whether you're a true independent 1099 contractor or not.) As a legit 1099 contractor, you're able to deduct certain business expenses directly from your income. (You can find a list of the rules at irs.gov.) As a W2 employee, by contrast, can deduct only business expenses that exceed 2% of the your AGI (adjusted gross income). So, you also have to consider your personal circumstances in making the calculus and comparing whether a legitimate 1099 contractor job is or is not good for you. It's not just a comparison of what they'd pay W2 employees versus what they'd pay 1099 contractors. |
I spend too much money. How can I get on the path to a frugal lifestyle? | As others have said, doing a monthly budget is a great idea. I tried the tracking expenses method for years and it got me nowhere, I think for these reasons: If budgeting isn't your cup of tea, try the "pay yourself first" method. Here, as soon as you get a paycheck take some substantial portion immediately and use it to pay down debt, or put it in savings (if you have no debt). Doing this will force you to spend less money on impulse items, and force you to really watch your spending. If you take this option, be absolutely sure you don't have any open credit accounts, or you'll just use them to make up the difference when you find yourself broke in the middle of the month. The overall key here is to get yourself into a long term mind set. Always ask yourself things like "Am I going to care that I didn't have this in 10 years? 5 years? 2 months? 2 days even? And ask yourself things like "Would I perfer this now, or this later plus being 100% debt free, and not having to worry if I have a steady paycheck". I think what finally kicked my butt and made me realize I needed a long term mind set was reading The Millionaire Next Door by Tom Stanley. It made me realize that the rich get rich by constantly thinking in the long term, and therefore being more frugal, not by "leveraging" debt on real estate or something like 90% of the other books out there tell you. |
Effective returns on investment in housing vs other financial instruments | The assumption that house value appreciates 5% per year is unrealistic. Over the very long term, real house prices has stayed approximately constant. A house that is 10 years old today is 11 years old a year after, so this phenomenon of real house prices staying constant applies only to the market as a whole and not to an individual house, unless the individual house is maintained well. One house is an extremely poorly diversified investment. What if the house you buy turns out to have a mold problem? You can lose your investment almost overnight. In contrast to this, it is extremely unlikely that the same could happen on a well-diversified stock portfolio (although it can happen on an individual stock). Thus, if non-leveraged stock portfolio has a nominal return of 8% over the long term, I would demand higher return, say 10%, from a non-leveraged investment to an individual house because of the greater risks. If you have the ability to diversify your real estate investments, a portfolio of diversified real estate investments is safer than a diversified stock portfolio, so I would demand a nominal return of 6% over the long term from such a diversified portfolio. To decide if it's better to buy a house or to live in rental property, you need to gather all of the costs of both options (including the opportunity cost of the capital which you could otherwise invest elsewhere). The real return of buying a house instead of renting it comes from the fact that you do not need to pay rent, not from the fact that house prices tend to appreciate (which they won't do more than inflation over a very long term). For my case, I live in Finland in a special case of near-rental property where you pay 15% of the building cost when moving in (and get the 15% payment back when moving out) and then pay a monthly rent that is lower than the market rent. The property is subsidized by government-provided loans. I have calculated that for my case, living in this property makes more sense than purchasing a market-priced house, but your situation may be different. |
What are the opportunities/implications of having a designated clearing bank in my home country? | For an individual there will not be much impact immediately. This arrangement will help Corporates and Banks settle payments more easily. - It would typically help companies dealing with Yuan [Buying or selling to China or Countries that accept Yuan as payment] to make payments at a cheaper cost & in less time. - In the near future it would make it easier for companies to invest more into China financial markets - It would also open up / create new market for derivatives and other allied products - It would also make Singapore a market place for Yuan outside China [and Hong Kong] resulting in more money and related product. In a related move this would make it easy for Singapore Central Bank to invest in China. Once the markets matures more, there could be some products for Individuals. |
If I take a loss when I sell my car, can I claim a capital loss deduction on my income tax return? | While you'd need to pay tax if you realized a capital gain on the sale of your car, you generally can't deduct any loss arising from the sale of "personal use property". Cars are personal use property. Refer to Canada Revenue Agency – Personal-use property losses. Quote: [...] if you have a capital loss, you usually cannot deduct that loss when you calculate your income for the year. In addition, you cannot use the loss to decrease capital gains on other personal-use property. This is because if a property depreciates through personal use, the resulting loss on its disposition is a personal expense. There are some exceptions. Read up at the source links. |
How to make a decision for used vs new car if I want to keep the car long term? | New cars are sold for about $500 over their blue book value. They drop in value by about 20% their first year. Used cars are sold for about $2,500 above their blue book. They depreciate like normal. My advice based on my personal experience is to get a new car. When buying a used car, remember that the previous owner sold it for a reason. You are buying someone else's problems. Average car is flipped every 4 years when it takes 5 years to pay it off. Don't do that...keep it for 5+ years if you get a new car. My knowledge comes from being a Chevrolet car salesman. This info is generalized and about 10 years old. |
How would I go about selling the stock of a privately held company? | The easiest way to find a buyer should be to ask the company to connect you to some of their other shareholders. I imagine they are much more likely to take those shares off you than a random investor on the street. Otherwise, well, talk to people. At a golf club, maybe? :) Valuation is not going to be very straightforward. Basically you'll get whatever someone is willing to pay. That's what FMV means when there's no real "market". Realistically, the price is mainly going to be based on divididend history and the company's assets, discounted for risk and liquidity (you're currently feeling the reason for the latter discount). |
Merits of buying apartment houses and renting them | I am not going to argue the merits of investing in real estate (I am a fan I think it is a great idea when done right). I will assume you have done your due diligence and your numbers are correct, so let's go through your questions point by point. What would be the type of taxes I should expect? NONE. You are a real estate investor and the US government loves you. Everything is tax deductible and odds are your investment properties will actually manage to shelter some of your W2(day job) income and you will pay less taxes on that too. Obviously I am exaggerating slightly find a CPA (certified public accountant) that is familiar with real estate, but here are a few examples. I am not a tax professional but hopefully this gives you an idea of what sort of tax benifits you can expect. How is Insurance cost calculated? Best advice I have call a few insurance firms and ask them. You will need landlord insurance make sure you are covered if a tenant gets hurt or burns down your property. You can expect to pay 15%-20% more for landlord insurance than regular insurance (100$/month is not a bad number to just plug in when running numbers its probably high). Also your lease should require tenants to have renters insurance to help protect you. Have a liability conversation with a lawyer and think about LLCs. How is the house price increase going to act as another source of income? Appreciation can be another source of income but it is not really that useful in your scenario. It is not liquid you will not realize it until you sell the property and then you have to pay capital gains and depreciation recapture on it. There are methods to get access to the gains on the property without paying taxes. This is done by leveraging the property, you get the equity but it is not counted as capital gains since you have to pay it back a mortgage or home equity lines of credit (HELOC) are examples of this. I am not recommending these just making sure you are aware of your options. Please let me know if I am calculating anything wrong but my projection for one year is about $8.4k per house (assuming no maintenance is needed) I would say you estimated profit is on the high side. Not being involved in your market it will be a wild guess but I would expect you to realize cash-flow per house per year of closer to $7,000. Maybe even lower given your inexperience. Some Costs you need to remember to account for: Taxes, Insurance, Vacancy, Repairs, CapEx, Property Management, Utilities, Lawn Care, Snow Removal, HOA Fees. All-in-all expect 50% or your rental income to be spent on the property. If you do well you can be pleasantly surprised. |
At tax time, what is the proper way to report cryptocurrency earnings and fiat income when you've started with “nothing”? | In 2014 the IRS announced that it published guidance in Notice 2014-21. In that notice, the answer to the first question describes the general tax treatment of virtual currency: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. As it's property like any other, capital gains if and when you sell are taxed. As with any capital gains, you're taxed on the "profit" you made, that is the "proceeds" (how much you got when you sold) minus your "basis" (how much you paid to get the property that you sold). Until you sell, it's just an asset (like a house, or a share of stock, or a rare collectible card) that doesn't require any reporting. If your initial cryptocurrency acquisition was through mining, then this section of that Notice applies: Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities? A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income. That is to say, when it was mined the market value of the amount generated should have been included in income (probably on either Line 21 Other Income, or on Schedule C if it's from your own business). At that point, the market value would also qualify as your basis. Though I doubt there'd be a whole lot of enforcement action for not amending your 2011 return to include $0.75. (Technically if you find a dollar bill on the street it should be included in income, but usually the government cares about bigger fish than that.) It sounds like your basis is close enough to zero that it's not worth trying to calculate a more accurate value. Since your basis couldn't be less than zero, there's no way that using zero as your basis would cause you to pay less tax than you ought, so the government won't have any objections to it. One thing to be careful of is to document that your holdings qualify for long-term capital gains treatment (held longer than a year) if applicable. Also, as you're trading in multiple cryptocurrencies, each transaction may count as a "sale" of one kind followed by a "purchase" of the other kind, much like if you traded your Apple stock for Google stock. It's possible that "1031 like kind exchange" rules apply, and in June 2016 the American Institute of CPAs sent a letter asking about it (among other things), but as far as I know there's been no official IRS guidance on the matter. There are also some related questions here; see "Do altcoin trades count as like-kind exchanges?" and "Assuming 1031 Doesn't Apply To Cryptocurrency Trading". But if in fact those exchange rules do not apply and it is just considered a sale followed by a purchase, then you would need to report each exchange as a sale with that asset's basis (probably $0 for the initial one), and proceeds of the fair market value at the time, and then that same value would be the basis of the new asset you're purchasing. Using a $0 basis is how I treat my bitcoin sales, though I haven't dealt with other cryptocurrencies. As long as all the USD income is being reported when you get USD, I find it unlikely you'll run into a lot of trouble, even if you technically were supposed to report the individual transactions when they happened. Though, I'm not in charge of IRS enforcement, and I'm not aware of any high-profile cases, so it's hard to know anything for sure. Obviously, if there's a lot of money involved, you may want to involve a professional rather than random strangers on the Internet. You could also try contacting the IRS directly, as believe-it-or-not, their job is in fact helping you to comply with the tax laws correctly. Also, there are phone numbers at the end of Notice 2014-21 of people which might be able to provide further guidance, including this statement: The principal author of this notice is Keith A. Aqui of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information about income tax issues addressed in this notice, please contact Mr. Aqui at (202) 317-4718 |
Asset allocation when retirement is already secure | he general advice I get is that the younger you are the more higher risk investments you should include in your portfolio. I will be frank. This is a rule of thumb given out by many lay people and low-level financial advisors, but not by true experts in finance. It is little more than an old wive's tale and does not come from solid theory nor empirical work. Finance theory says the following: the riskiness of your portfolio should (inversely) correspond to your risk aversion. Period. It says nothing about your age. Some people become more risk-averse as they get older, but not everyone. In fact, for many people it probably makes sense to increase the riskiness of their portfolio as they age because the uncertainty about both wealth (social security, the value of your house, the value of your human capital) and costs (how many kids you will have, the rate of inflation, where you will live) go down as you age so your overall level of risk falls over time without a corresponding mechanical increase in risk aversion. In fact, if you start from the assumption that people's aversion is to not having enough money at retirement, you get the result that people should invest in relatively safe securities until the probability of not having enough to cover their minimum needs gets small, then they invest in highly risky securities with any money above this threshold. This latter result sounds reasonable in your case. At this point it appears unlikely that you will be unable to meet your minimum needs--I'm assuming here that you are able to appreciate the warnings about underfunded pensions in other answers and still feel comfortable. With any money above and beyond what you consider to be prudent preparation for retirement, you should hold a risky (but still fully diversified) portfolio. Don't reduce the risk of that portion of your portfolio as you age unless you find your personal risk aversion increasing. |
Taxes on selling stock | You realise a capital gain as soon as you sell the stock. At that point, you will have to pay taxes on the profits when you fill in your tax return. The fact that you used the money to subsequently purchase other stocks is not relevant, unless you sell those stocks within the same tax year. For example, purchase $5000 of stock A in 2010. Sell for $6000 in 2010. Purchase $6000 of stock B in 2010. Sell stock B for $6500 in 2010. Purchase $6500 of stock C in 2010. Sell stock C for $7000 in 2011. You owe capital gains on ($6000 - $5000) + ($6500 - $6000) = $1500 for tax year 2010. You owe capital gains on ($7000 - $6500) = $500 for 2011. |
If stock price drops by the amount of dividend paid, what is the use of a dividend | Victor, Yes the drop in price does completely cancel the dividend at first. However, as others have noted, there are other forces working on the price as well. If dividends were pointless then the following scenario would be true: Let's assume, hypothetically, two identical stocks, only one of which pays a 2% annual dividend quarterly. At the end of the year we would expect the share price of the dividend stock to be 2% lower than the non-dividend stock. And an equal investment in both stocks would yield exactly the same amount of money. So that is a hypothetical, and here is real market example: I compared, i.e. took the ratio of Vanguard's S&P 500 ETF (VOO) closing price to the S&P 500 Index closing price from sep 9, (2010-2014), after accounting for the VOO 2013 split. The VOO pays a quarterly dividend(about 2%/year), the S&P is an index, hence no dividend. The VOO share price, reduced each quarter by the dividend, still grew more than the S&P each year except 2012 to 2013, but looking at the entire 4yr period the VOO share price grew 80.3987% while S&P grew 80.083% (1/3 of 1% more for VOO). VOO does drop about 1/2% relative to S&P on every ex date, but obviously it makes it up. There are other forces working on VOO. VOO is trade-able, therefore subject to supply/demand pressures, while the S&P 500 is not. So for the VOO ETF the data does not indicate pointless dividends but instead implies dividends are free money. StockCharts.com supports this. S&P500 for last 1244 days (9/8/2010) shows 90% growth http://stockcharts.com/freecharts/perf.php?%24SPX while VOO for last 1244 days shows 105% growth http://stockcharts.com/freecharts/perf.php?VOO |
Calculating Future and Present value into mortgage comparisons | Using the fact that you'd save $160/mo by spending $7000, I'd look at it this way - If I were to lend you the $7000 at 12%/yr, $160 would pay it off in 58 months. At 18%/yr, 72 months or just 6 years. You can run spreadsheets to get breakeven scenarios, and mhoran is on track with his answer, but breakeven is just one point to consider. Beyond that date, it's free money. My approach is to look at it with a question - "How much interest could I afford to pay to make that monthly savings worthwhile?" |
Diversification reduces risk, but does this base on the assumption that expected return of each asset is always in proportion to its risk? | If you have 100% of your money in one security that is inherently more risky than splitting your money 50/50 between two securities, regardless of the purported riskiness of the two securities. The calculations people use to justify their particular breed of diversification may carry some assumptions related risk/reward calculations. But these particular justifications don't change the fact that spreading your money across different assets protects your money from value variances of the individual assets. Splitting your $100 between Apple and Microsoft stock is probably less valuable (less well diversified) than splitting your money between Apple and Whole Foods stock but either way you're carrying less risk than putting all $100 in to Apple stock regardless of the assumed rates of return for any of these companies stock specifically. Edit: I'm sure the downvotes are because I didn't make a big deal about correlation and measuring correlation and standard deviations of returns and detailed portfolio theory. Measuring efficacy and justifying your particular allocations (that generally uses data from the past to project the future) is all well and good. Fact of the matter is, if you have 100% of your money in stock that's more stock risk than 25% in cash, 25% in bonds and 50% in stock would be because now you're in different asset classes. You can measure to your hearts delight the effects of splitting your money between different specific companies, or different industries, or different market capitalizations, or different countries or different fund managers or different whatever-metrics and doing any of those things will reduce your exposure to those specific allocations. It may be worth pointing out that currently the hot recommendation is a plain vanilla market tracking S&P 500 index fund (that just buys some of each of the 500 largest US companies without any consideration given to risk correlation) over standard deviation calculating actively managed funds. If you ask me that speaks volumes of the true efficacy of hyper analyzing the purported correlations of various securities. |
How do I bring money overseas? | I'm an Australian who just got back from a trip to Malaysia for two weeks over the New Year, so this feels a bit like dejavu! I set up a 28 Degrees credit card (my first ever!) because of their low exchange rate and lack of fees on credit card transactions. People say it's the best card for travel and I was ready for it. However, since Malaysia is largely a cash economy (especially in the non-city areas), I found myself mostly just withdrawing money from my credit card and thus getting hit with a cash advance fee ($4) and instant application of the high interest rate (22%) on the money. Since I was there already and had no other alternatives, I made five withdrawals over the two weeks and ended up paying about $21 in fees. Not great! But last time I travelled I had a Commonwealth Bank Travel Money Card (not a great idea), and if I'd used that instead on this trip and given up fees for a higher exchange rate, I would have been charged an extra $60! Presumably my Commonwealth debit card would have been the same. This isn't even including mandatory ATM fees. If I've learned anything from this experience and these envelope calculations I'm doing now, it's these: |
What are some good, easy to use personal finance software? [UK] | Update: I am now using another app called toshl and I am very satisfied with it. In fact, I am a paying customer. It is web based, but it has clients for iPhone, Android and Windows Phone as well. Another one, I tried is YNAB. Did you consider trying an online app? I am using Wesabe and I am happy with it. I found it much better these web-based ones because I can access my data from anywhere. |
Dry cleaners lost $160 pants, what should I do? | Do you have the claim ticket? I'll assume yes. Do a Google search for "Dry Cleaner Regulations for [state you live in]" and see if there is a regulatory agency because some states have them, although that might just be for environmental concerns. Worth a shot to call one and ask if they handle customer complaints. Otherwise, the goal is to have them either find your pants or compensate you for the loss. I'd try one last time on the phone or in person. If that fails: Send them a nastygram in the mail demanding $160 by x date or you will pursue "further actions". Keep the letter short and sweet. You can use Google to find example demand letters. After they ignore the letter, file in small claims court. It will cost you ~$50 in filing fees which will be included in the judgement if you win. Go to court, explain why you feel they owe you $160. Bring the claim ticket, the matching suit jacket, and proof that replacing it will cost $160. Step 4: win! Or if that sounds like too much work, you can just write a nasty review on Yelp. You won't get your pants back but it'll feel good. I'd avoid the complaining to the BBB because they have no teeth and the dry cleaner is not obligated to respond to a BBB complaint. Standing right outside their door handing out pamphlets might be a bad idea since it's likely private property and they'll make you leave. But you could always do the labor union thing and hold a "shame on the drycleaners for losing my pants!" sign out by the street or entrance to the parking lot. (That seems like a lot of effort, although it'll look great on your Facebook feed!) |
Due Diligence - Dilution? | Your best bet is to just look at comparative balance sheets or contact the company itself. Otherwise, you will need access to a service like PrivCo to get data. |
What to consider before buying (exercising) a family member's private company employee stock options, about to expire? | First, you mentioned your brother-in-law has "$100,000 in stock options (fully vested)". Do you mean his exercise cost would be $100,000, i.e. what he'd need to pay to buy the shares? If so, then what might be the estimated value of the shares acquired? Options having vested doesn't necessarily mean they possess value, merely that they may be exercised. Or did you mean the estimated intrinsic value of those options (estimated value less exercise cost) is $100,000? Speaking from my own experience, I'd like to address just the first part of your question: Have you treated this as you would a serious investment in any other company? That is, have you or your brother-in-law reviewed the company's financial statements for the last few years? Other than hearing from people with a vested interest (quite literally!) to pump up the stock with talk around the office, how do you know the company is: BTW, as an option holder only, your brother-in-law's rights to financial information may be limited. Will the company share these details anyway? Or, if he exercised at least one option to become a bona-fide shareholder, I believe he'd have rights to request the financial statements – but company bylaws vary, and different jurisdictions say different things about what can be restricted. Beyond the financial statements, here are some more things to consider: The worst-case risk you'd need to accept is zero liquidity and complete loss: If there's no eventual buy-out or IPO, the shares may (effectively) be worthless. Even if there is a private market, willing buyers may quickly dry up if company fortunes decline. Contrast this to public stock markets, where there's usually an opportunity to witness deterioration, exit at a loss, and preserve some capital. Of course, with great risk may come great reward. Do your own due diligence and convince yourself through a rigorous analysis — not hopes & dreams — that the investment might be worth the risk. |
How to determine whether 1099-MISC income is from self-employment? | These kinds of questions can be rather tricky. I've struggled with this sort of thing in the past when I had income from a hobby, and I wanted to ensure that it was indeed "hobby income" and I didn't need to call it "self-employment". Here are a few resources from the IRS: There's a lot of overlap among these resources, of course. Here's the relevant portion of Publication 535, which I think is reasonable guidance on how the IRS looks at things: In determining whether you are carrying on an activity for profit, several factors are taken into account. No one factor alone is decisive. Among the factors to consider are whether: Most of the guidance looks to be centered around what one would need to do to convince the IRS that an activity actually is a business, because then one can deduct the "business expenses", even if that brings the total "business income" negative (and I'm guessing that's a fraud problem the IRS needs to deal with more often). There's not nearly as much about how to convince the IRS that an activity isn't a business and thus can be thrown into "Other Income" instead of needing to pay self-employment tax. Presumably the same principles should apply going either way, though. If after reading through the information they provide, you decide in good faith that your activity is really just "Other income" and not "a business you're in on the side", I would find it likely that the IRS would agree with you if they ever questioned you on it and you provided your reasoning, assuming your reasoning is reasonable. (Though it's always possible that reasonable people could end up disagreeing on some things even given the same set of facts.) Just keep good records about what you did and why, and don't get too panicked about it once you've done your due diligence. Just file based on all the information you know. |
Calculating required rate of return for an income-generating savings account | Line one shows your 1M, a return with a given rate, and year end withdrawal starting at 25,000. So Line 2 starts with that balance, applies the rate again, and shows the higher withdrawal, by 3%/yr. In Column one, I show the cumulative effect of the 3% inflation, and the last number in this column is the final balance (903K) but divided by the cumulative inflation. To summarize - if you simply get the return of inflation, and start by spending just that amount, you'll find that after 20 years, you have half your real value. The 1.029 is a trial and error method, as I don't know how a finance calculator would handle such a payment flow. I can load the sheet somewhere if you'd like. Note: This is not exactly what the OP was looking for. If the concept is useful, I'll let it stand. If not, downvotes are welcome and I'll delete. |
For very high-net worth individuals, does it make sense to not have insurance? | Let's face it: most people pay more in insurance premiums than they "get back" in claims. I put "get back" in quotes because, with very few exceptions, the money paid out in claims does not go to the insured, but to others, such as doctors and hospitals. But even if you ignore the question who does the money actually go to, it's a losing proposition for most people. The exceptions are those who have a major loss, greater than what they put in over the years. But never forget: these are exceptions. The return on your money, on the average, is only a little better than playing the lottery. The usual counter-argument to the above is, but what if you are one of the exceptions? I for one refuse to let my life be dictated by worries of unlikely events that might happen. If you're the sort who obsesses on what could (but probably won't) happen, then maybe you should have insurance. Just don't tell me I need to do the same. When I lived in California, they had a program where you could deposit $25,000 with the State, and then you could drive, legally, without insurance. I did this for a while, didn't have any accidents, and exited the system (when I moved out of state) a few years later with more money (interest) than I put in. You don't accomplish that with insurance. But let's get back to rich people. Unless you get into an accident with you at fault and the other guy needing a head transplant as a result (joke), you could probably absorb the cost of an accident without blinking an eye. Those in the upper-middle-class might do well with high-deductible insurance that only pays out if there's an extreme accident. Then again if you have to borrow to buy something expensive (making monthly payments), they will usually demand you buy insurance with it. This is a way for the lender to protect himself at your expense, and if you refuse, good luck getting a loan somewhere else. I hate the idea of insurance so much I would make an act of insurance punishable by law. |
Terminology: What are the labels associated with a share called? | If the first one is literally a company name, then 'company name' is fine. However, companies can issue shares more than once, and those shares might be traded separately, so you could have 'Google ordinary', 'Google preference', 'Google ordinary issue B'. Seeing the name spelled out in full like this isn't as common as just the company name, but I'd normally see it referred to as 'display name'. The second one is 'symbol', 'ticker', 'ID', and others. Globally, there are many incompatible ways of referring to a stock, depending on where it's listed (companies can have dual listings, and different exchanges have different conventions), and who's referring to it (Bloomberg and Reuters have different sets of IDs, with no predictable mapping between them). So there's no one shorthand name, and the word you use depends on the context. However, 'symbol' or 'ticker' is normally fine. |
What do the terms par value, purchase price, call price, call date, and coupon rate mean in the context of bonds? | Bonds are valued based on all of this, using the concept of the "time value of money". Simply stated, money now is worth more than money later, because of what you can do with money between now and later. Case in point: let's say the par value of a bond is $100, and will mature 10 years from this date (these are common terms for most bonds, though the U.S. Treasury has a variety of bonds with varying par values and maturation periods), with a 0% coupon rate (nothing's paid out prior to maturity). If the company or government issuing the bonds needs one million dollars, and the people buying the bonds are expecting a 5% rate of return on their investment, then each bond would only sell for about $62, and the bond issuer would have to sell a par value of $1.62 million in bonds to get its $1m now. These numbers are based on equations that calculate the "future value" of an investment made now, and conversely the "present value" of a future return. Back to that time value of money concept, money now (that you're paying to buy the bond) is worth more than money later (that you'll get back at maturity), so you will expect to be returned more than you invested to account for this time difference. The percentage of rate of return is known as the "yield" or the "discount rate" depending on what you're calculating, what else you take into consideration when defining the rate (like inflation), and whom you talk to. Now, that $1.62m in par value may be hard for the bond issuer to swallow. The issuer is effectively paying interest on interest over the lifetime of the bond. Instead, many issuers choose to issue "coupon bonds", which have a "coupon rate" determining the amount of a "coupon payment". This can be equated pretty closely with you making interest-only payments on a credit card balance; each period in which interest is compounded, you pay the amount of interest that has accrued, to avoid this compounding effect. From an accounting standpoint, the coupon rate lowers the amount of real monies paid; the same $1m in bonds, maturing in 10 years with a 5% expected rate of return, but with a 5% coupon rate, now only requires payments totalling $1.5m, and that half-million in interest is paid $50k at a time annually (or $25k semi-annually). But, from a finance standpoint, because the payments made in the first few years are worth more than the payments made closer to and at maturity, the present value of all these coupon payments (plus the maturity payout) is higher than if the full payout happened at maturity, and so the future value of the total investment is higher. Coupon rates on bonds thus allow a bond issuer to plan a bond package in less complicated terms. If you as a small business need $1m for a project, which you will repay in 10 years, and during that time you are willing to tolerate a 5% interest rate on the outstanding money, then that's exactly how you issue the bonds; $1 million worth, to mature in 10 years and a 5% coupon rate. Now, whether the market is willing to accept that rate is up to the market. Right now, they'd be over the moon with that rate, and would be willing to buy the bonds for more than their face value, because the present value would then match the yield they're willing to accept (as in any market system, you as the seller will sell to the highest bidder to get the best price available). If however, they think you are a bad bet, they'll want an even higher rate of return, and so the present value of all coupon and maturity payments will be less than the par value, and so will the purchase price. |
Is expense to freelancers tax deductible? | If it's a legitimate cost of doing business, it's as deductible as any other cost of doing business. (Reminder: be careful about the distinctions between employee and contractor; the IRS gets annoyed if you don't handle this correctly.) |
How can a U.S. citizen open a bank account in Europe? | Each country will have different rules. I can only speak about the Netherlands. There, there are two options as a resident to open an account. You needed a BSN (Dutch ID number) or a strong reference from an international company sponsoring your residence there at a bank branch that dealt frequently with foreign customers. It was not possible to open an account as a nonresident although high wealth customers probably get special treatment. Recent US reporting requirements have made European banks very unwilling to deal with US people. I have received a letter from my Dutch bank saying they will continue my current products but not offer me anything new. If I call the bank, the normal staff cannot see anything about my accounts. I need to call a special international department even for mundane questions. |
Basic questions about investing in stocks | What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your "cost basis" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules. |
Do I make money in the stock market from other people losing money? | There is one other factor that I haven't seen mentioned here. It's easy to assume that if you buy a stock, then someone else (another stock owner) must have sold it to you. This is not true however, because there are people called "market makers" whose basic job is to always be available to buy shares from those who wish to sell, and sell shares to those who wish to buy. They could be selling you shares they just bought from someone else, but they also could simply be issuing shares from the company itself, that have never been bought before. This is a super oversimplified explanation, but hopefully it illustrates my point. |
Investment strategy for retired couple | After retirement nobody want to get low on cash. So, the best way to stay safe is to make some investments. Compare the saving with regular expenses and invest the rest. You can put some money in short-term reserves such as bank accounts, market funds, and deposit certificates. You will not be able to make much money on it but, it will ensure the financing of at least two to three years. There’s no need to take the money out from stocks but, if the stocks are doing good and there is a possibility that there will be no further profits then you can think of taking them out otherwise leave it alone. |
Can a non dividend-paying product (say ETF) suddenly start paying dividends? | Yes, absolutely. Consider Microsoft, Updated Jan. 17, 2003 11:59 p.m. ET Software giant Microsoft Corp., finally bowing to mounting pressure to return some of its huge cash hoard to investors, said it will begin paying a regular annual dividend to shareholders. From Wall Street Journal. Thus, for the years prior to 2003, the company didn't pay dividends but changed that. There can also be some special one-time dividends as Microsoft did the following year according to the Wall Street Journal: The $32 billion one-time dividend payment, which comes to $3 for each share of Microsoft stock, could be a measurable stimulus to the U.S. economy -- and is expected to arrive just in time for holiday shopping. Course companies can also reduce to stop dividends as well. |
Why do 10 year-old luxury cars lose so much value? | They are overpriced to begin with. One reason is the fact that they are luxury cars. A second, related reason, is that they tend to push the technology envelope. All cars depreciate drastically the minute they are driven off the lot. This a good argument for buying a car that is 1-2 years old. The higher you are, the more you can fall. Repairs and maintenance are typically still expensive on these cars, due to relative rarity and the lack of necessary expertise. Here is where that advanced technology bites you. This is a reason that a 5 year old Civic may be worth more than than a 10 year old Benz. It may simply not be worth the hassle of maintaining/repairing a luxury car. This is especially true for an aging luxury car. There are some people that only buy domestic, precisely because of the maintenance costs. Also, a 10 year old car is still a 10 year old car, regardless of the make. (There are a few notable exceptions, like the NSX.) Hondas and Toyotas have a great reputation for reliability and (long-term) total cost of ownership. "Better" is a subjective issue, that depends on a variety of variables. A Civic is certainly not better in terms of technology, comfort, etc. But, it is likely better in terms of maintenance, reliability, etc. Which "better" you focus on, is up to you. |
As an American working in the UK, do I have to pay taxes on foreign income? | Short answer: it's complicated. The UK govt pages on foreign income are probably your best starting point: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/LeavingOrComingIntoTheUK/DG_10027480 As you can see, it depends on your precise residence status here. (There is a tax treaty between the UK and the US so you wouldn't be double taxed on the income either way. But there might still be reporting obligations). |
Why do credit cards have minimum limits? | They have a minimum to discourage applications for that particular card. Every application costs them money because they have to pay the credit agencies to pull the applicant's credit history. So one way they save money and reduce their cost of business is to discourage people from applying if they're not creditworthy enough for that product. Credit card companies tailor their products into different income/credit brackets. Those who have less creditworthiness would be better suited for a different product than what you're referring, similar to those with greater creditworthiness. |
Most common types of financial scams an individual investor should beware of? | Anything where the initial step of someone trying to get you into anything financial is to send you an e-mail. There are valid situations in which e-mails may be used to introduce you to a financial product or offer, such as if you have signed up for an electronic newsletter that includes such information. But in that particular case, the e-mail isn't the first step; rather, whatever caused you to sign up for the newsletter was. Even in a valid, legitimate scenario, you should obviously still perform due diligence and research the offer before committing any of your money. But the odds that someone is contacting you out of the blue via e-mail with a legitimate financial offer are tiny. The odds that a lawyer, a banker or someone similar in a remote country would initially contact you via e-mail are yet smaller; I'd call those odds infinitesimal. Non-zero, but unlikely enough that it is probably more likely that you would win the grand prize in the state lottery four times in a row. Keep in mind that responding in any way to spam e-mails will simply confirm to the sender that your e-mail address is valid and is being read. That is likely to cause you to receive more spam, not less, no matter the content of your response. Hence, it is better to flag the e-mail as spam or junk if your e-mail provider offers that feature, or just delete it if they don't. The same general principles as above also apply to social media messaging and similar venues, but the exact details are highly likely to differ somewhat. |
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