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What is the difference between fund and portfolio? | A "Fund" is generally speaking a collection of similar financial products, which are bundled into a single investment, so that you as an individual can buy a portion of the Fund rather than buying 50 portions of various products. e.g. a "Bond Fund" may be a collection of various corporate bonds that are bundled together. The performance of the Fund would be the aggregate of each individual item. Generally speaking Funds are like pre-packaged "diversification". Rather than take time (and fees) to buy 50 different stocks on the same stock index, you could buy an "Index Fund" which represents the values of all of those stocks. A "Portfolio" is your individual package of investments. ie: the 20k you have in bonds + the 5k you have in shares, + the 50k you have in "Funds" + the 100k rental property you own. You might split the definition further buy saying "My 401(k) portfolio & my taxable portfolio & my real estate portfolio"(etc.), to denote how those items are invested. The implication of "Portfolio" is that you have considered how all of your investments work together; ie: your 5k in stocks is not so risky, because it is only 5k out of your entire 185k portfolio, which includes some low risk bonds and funds. Another way of looking at it, is that a Fund is a special type of Portfolio. That is, a Fund is a portfolio, that someone will sell to someone else (see Daniel's answer below). For example: Imagine you had $5,000 invested in IBM shares, and also had $5,000 invested in Apple shares. Call this your portfolio. But you also want to sell your portfolio, so let's also call it a 'fund'. Then you sell half of your 'fund' to a friend. So your friend (let's call him Maurice) pays you $4,000, to invest in your 'Fund'. Maurice gives you $4k, and in return, you given him a note that says "Maurice owns 40% of atp9's Fund". The following month, IBM pays you $100 in dividends. But, Maurice owns 40% of those dividends. So you give him a cheque for $40 (some funds automatically reinvest dividends for their clients instead of paying them out immediately). Then you sell your Apple shares for $6,000 (a gain of $1,000 since you bought them). But Maurice owns 40% of that 6k, so you give him $2,400 (or perhaps, instead of giving him the money immediately, you reinvest it within the fund, and buy $6k of Microsoft shares). Why would you set up this Fund? Because Maurice will pay you a fee equal to, let's say, 1% of his total investment. Your job is now to invest the money in the Fund, in a way that aligns with what you told Maurice when he signed the contract. ie: maybe it's a tech fund, and you can only invest in big Tech companies. Maybe it's an Index fund, and your investment needs to exactly match a specific portion of the New York Stock Exchange. Maybe it's a bond fund, and you can only invest in corporate bonds. So to reiterate, a portfolio is a collection of investments (think of an artist's portfolio, being a collection of their work). Usually, people refer to their own 'portfolio', of personal investments. A fund is someone's portfolio, that other people can invest in. This allows an individual investor to give some of their decision making over to a Fund manager. In addition to relying on expertise of others, this allows the investor to save on transaction costs, because they can have a well-diversified portfolio (see what I did there?) while only buying into one or a few funds. |
Is real (physical) money traded during online trading? | I think you need to define what you mean by "buy currency online using some online forex trading platform" ... In large Fx trades, real money [you mean actual electronic money, as there is not paper that travels these days]... The Fx market is quite wide with all kinds of trades. There are quite a few Fx transactions that are meant for delivery. You have to pay in the currency for full amount and you get the funds electronicall credited to you in other currency [ofcouse you have an account in the other currency or you have an obligation to pay]. This type of transaction is valid in Ismalic Banking. The practise of derivaties based on this or forward contracts on this is not allowed. |
Is it worth it to buy TurboTax Premier over Deluxe if I sold investments in a taxable account? | I have found that using the online version can help determine the correct product. Try Deluxe online, you can upload the data from last year. When you get to the key forms see what happens if you don't switch. Then switch to Premiere. Compare the results. |
How does a financial advisor choose debt funds and equity funds for us? | There are raters of stock and bond funds of which Morningstar's is the best. Standard and Poor's and Value line offer reports that aren't quite as good. If you are able to read and understand these reports yourself, you don't need a professional. Such help is necessary for people who are "rank beginners" in investments. |
Layman's guide to getting started with Forex (foreign exchange trading)? | I definitely can recommend you a site called babypips. Their beginner course section is great to get a good overview what you "could" do in FOREX trading. For starting out I definitely recommend a dummy account! (NEVER use real money in the beginning!) |
More money towards down payment versus long-term investments | Every payment you make on your house will already be increasing your equity in it. For that reason alone, I'd recommend moving additional savings into other long-term funds. |
How much does it cost to build a subdivision of houses on a large plot of land? | A bank may not like loaning money to you for this. That is one snag. You listed 500,000-600,000$ for a monster of a house (3000 sqft is over three times the average size of homes a hundred years ago). Add in the price of the land at 60K (600K divided ten ways). Where I live, there is a 15% VAT tax on new homes. I can't find out if California imposes a VAT tax on new homes. Anyway, returning back to the topic, because of the risk of loaning you 660K for a piece of land and construction, the bank may only let you borrow half or less of the final expected cost (not value). Another huge snag is that you say in a comment to quid "I came up with this conclusion after talking to someone who had his property built in early 2000s in bay area for that average price". Let's apply 3% inflation over 15 years to that number of 200$/sqft. That brings the range for construction costs to 780K-930K. Even at 2% inflation 670K-810K. Edit: OP later expanded the question making it an inquiry on why people don't collaborate to buy a plot of land and build their homes. "Back in the day" this wasn't all that atypical! For example, my pastor's parents did just this when he was a young lad. Apart from the individual issues mentioned above, there are sociological challenges that arrive. Examples: These are the easy questions. |
Pros & cons of buying gold directly vs. investing in a gold ETF like GLD, IAU, SGOL? | Owning physical gold (assuming coins): Owning gold through a fund: |
How are ADRs priced? | Academic research into ADRs seems to suggest that pairs-trading ADRs and their underlying shares reveals that there certainly are arbitrage opportunities, but that in most (but not all cases) such opportunities are quickly taken care of by the market. (See this article for the mexican case, the introduction has a list of other articles you could read on the subject). In some cases parity doesn't seem to be reached, which may have to do with transaction costs, the risk of transacting in a foreign market, as well as administrative & legal concerns that can affect the direct holder of a foreign share but don't impact the ADR holder (since those risks and costs are borne by the institution, which presumably has a better idea of how to manage such risks and costs). It's also worth pointing out that there are almost always arbitrage opportunities that get snapped up quickly: the law of one price doesn't apply for very short time-frames, just that if you're not an expert in that particular domain of the market, it might as well be a law since you won't see the arbitrage opportunities fast enough. That is to say, there are always opportunities for arbitrage with ADRs but chances are YOU won't be able to take advantage of it (In the Mexican case, the price divergence seems to have an average half-life of ~3 days). Some price divergence might be expected: ADR holders shouldn't be expected to know as much about the foreign market as the typical foreign share holder, and that uncertainty may also cause some divergence. There does seem to be some opportunity for arbitrage doing what you suggest in markets where it is not legally possible to short shares, but that likely is the value added from being able to short a share that belongs to a market where you can't do that. |
Can zero-coupon bonds go down in price? | Of course it can. This is a time value of money calculation. If I knew the maturity date, or current yield to maturity I'd be able to calculate the other number and advise how much rates need to rise to cause the value to drop from 18 to 17. For a 10 year bond, a rise today of .1% will cause the bond to drop about 1% in value. This is a back of napkin calculation, finance calculators offer precision. edit - when I calculate present value with 34 years to go, and 5.832% yield to maturity, I get $14.55. At 5.932, the value drops to $14.09, a drop of 3.1%. Edit - Geo asked me to show calculations. Here it goes - A) The simplest way to calculate present value for a zero coupon bond is to take the rate 5.832%, convert it to 1.05832 and divide into the face value, $100. I offer this as the "four function calculator" approach, so one enters $100 divided by 1.05832 and repeat for the number of years left. A bit of precision is lost if there's a fractional year involved, but it's close. The bid/ask will be wider than this error introduced. B) Next - If you've never read my open declaration of love for my Texas Instruments BA-35 calculator, here it is, again. One enters N=34 (for the years) FV = 100, Rate = 5.832, and then CPT PV. It will give the result, $14.56. C) Here is how to do it in Excel - The numbers in lines 1-3 are self evident, the equation in cell B4 is =-PV(B3/100,B1,0,B2) - please note there are tiny differences in the way to calculate in excel vs a calculator. Excel wants the rate to be .05832, so I divided by 100 in the equation cell. That's the best 3 ways I know to calculate present value. Geo, if you've not noticed, the time value of money is near and dear to me. It comes into play for bonds, mortgages, and many aspect of investing. The equations get more complex if there are payments each year, but both the BA-35 and excel are up to it. |
Why invest for the long-term rather than buy and sell for quick, big gains? | The problem is that short-term trends are really unpredictable. There is nobody who can accurately predict where a fund (or even moreso, a single stock or bond) is going to move in a few hours, or days or even months. The long-term trends of the entire market, however, are (more or less) predictable. There is a definite upward bias when you look at time-scales of 5, 10, 20 years and more. Individual stocks and bonds may crash, and different sectors perform differently from year to year, but the market as a whole has historically always risen over long time scales. Of course, past performance never guarantees future performance. It is possible that everything could crash and never come back, but history shows that this would be incredibly unlikely. Which is the entire basis for strategies based on buying and holding (and periodically rebalancing) a portfolio containing funds that cover all market sectors. Now, regarding your 401(k), you know your time horizon. The laws won't let you withdraw money without penalty until you reach retirement age - this might be 40 years, depending on your current age. So we're definitely talking long term. You shouldn't care about where the market goes over a few months if you won't be using the money until 20 years from now. The most important thing for a 401(k) is to choose funds from those available to you that will be as diverse as possible. The actual allocation strategy is something you will need to work out with a financial advisor, since it will be different for every person. Once you come up with an appropriate allocation strategy, you will want to buy according to those ratios with every paycheck and rebalance your funds to those ratios whenever they start to drift away. And review the ratios with your advisor every few years, to keep them aligned with large-scale trends and changes in your life. |
When is the right time to buy a new/emerging technology? | If you're looking for a purely financial answer (ignoring the social/environmental aspects) there are a few different ways you can look at it. For these types of improvements the simplest is a payback calculation. How long would it take you to recoup the initial costs? For example, if the entire installation cost $5,000 (including any tax credits), and you save $100 per month (I'm making both numbers up), you'll pay back your investment in 50 months, or about 4 years. (Note that if you borrow money to do the improvement, then your payback period is longer because you're reducing the amount that you're saving each month by paying interest.) If you're deciding between different uses for the money (like investing, or paying down other debt) then you can look at the return that you're getting. Using the same example, you are spending $5,000 and getting $100 per month back, for a 24% annual return ($1,200 / $5,000), which is better than you can get on almost anything but a 401(k) match (meaning don't stop your 401(k) contributions to do this either). The decision on whether or wait or not then becomes - will the price drop faster than the amount of savings you will realize. So if you will save $100 per month in your electric bill, is the price of the complete installation going down by more than $100 each month? If not, you'd be better off buying now and start paying back the investment sooner. |
If I have $1000 to invest in penny stocks online, should I diversify risk and invest in many of them or should I invest in just in one? | I am voting you up because this is a legitimate question with a correct possible answer. Yes, you shouldn't buy penny stocks, yes you shouldn't speculate, yes people will be jealous that you have money to burn. Your question: how to maximize expected return. There are several definitions of return and the correct one will determine the correct answer. For your situation, $1,000 sounds like disposable income and that you have the human capital to make more income in the future with your productive years. So we will not assume you want to take this money and reinvest the remains until you are dead. This rules out #2. It sounds like you are the sole beneficiary of this fund and that your value proposition is regardless of asset class and competition to other investment opportunities. In other words, you are committed to blowing this $1,000 and would not consider instead putting the money towards paying down credit card debt or other valuable uses. This rules out #3. You are left with #1, expected value. Now there is already evidence that penny stocks are a losing proposition. In fact, some people have been successful in setting up honeypot email accounts and waiting for penny stock spam... then shorting those stocks. So to maximize expected return, invest 0% of your bankroll. But that's boring, let's ignore it. As you have correctly identified, the transaction costs are significant, $14 in tolls on crossing the bridge both ways on a $1,000 investment already exceeds the 5-year US bond rate. Diversification will affect the correlation and overall risk (Kelly Criterion) of your portfolio -- but it has no effect on your expected return. In summary, diversification has zero effect on your expected return and is not justified by the cost. |
How can I improve my auto insurance score? | Move to a small town in an insurance friendly state. - Certian states like Florida are considered high risk for doing business for insurance companies. Get a (relatively)new midsize sedan in white, tan, or brown. These colors are the least likely to get stolen and the modern midsized sedan is considered the safest vehicles to drive. Drive less than 100 miles a month - The less you drive the less likely you are to be involved in an accident Go 9 years with no claims, tickets, or late payments and maintain a valid drivers license and Insurance. Drivers who go for long periods with out incident are more likely to be safe drivers. Have an income in upper middle class. Drivers in this bracket tend to be statistically safer drivers and are the least likely to be involved in fraud. |
How to share income after marriage and kids? | I haven't seen this addressed anywhere else, so I'll make a small answer to add on to the great ones already here. Money isn't the only way a person can contribute to a relationship. Time and effort are valuable contributions. Who runs the household? Who cooks, cleans, does laundry? How will you share these duties? My husband and I have a couple of rules. One of which is that we don't keep count. "I did dishes, so you do laundry". "I made coffee last time, so now it's your turn". "I paid this, so you pay that". That's not allowed. I happen to make ~4x as much as my husband, but I work 4x the hours (he's part time at the moment). So, he does the dishes, he cooks, he does laundry, he runs the household. Do I value him less? No! I value him more, because he is part of the team, and he feeds me coffee while I work (we have our own business). Even though I make so much more than him, we still split everything down the middle. Because his contribution to this relationship, to this household, is so much more than just money. And I value him. I value his contribution. At the end of the day, you are a team - and if you split hairs over finances, you'll find yourself splitting hairs over everything. |
Tax deductions on empty property | If the building has no income, it also probably has minimal expenses. The heat, water and electricity costs are nearly zero. They are letting the value depreciate, and taking it off the taxes. I also suspect the condition of the building is poor, so any effort to make the building productive would be very costly. Many cities combat this by setting the tax on empty buildings or empty lots at a much higher rate. Or they set the value of the property at a high valuation based on what it could generate. Sometimes this is only targeted at some sections of the city to encourage development. They also offer tax breaks when the owner of a house has the house as their principal residence. |
How can a company charge a closed credit card? | Wow, I had never heard of this before but I looked into it a bit and Mikey was spot on. It seems that if you don't pay attention to the fine print when making credit card purchases (as most of us tend to skip) many companies have stipulations that allow continued charges if they are recurring fees (monthly, yearly, etc.) even after you have cancelled the card. |
Is it prudent to sell a stock on a 40% rise in 2 months | Did you buy near the bottom? Suppose you did then the price is still 16% below. 50% fall and then 40% increase leaves a 16% gap. So there could still be upside. However, it appears that you are talking about a small-cap that is volatile. I wouldn't hold it. I would take the money and invest elsewhere. If you have a lot of shares and brokerage is less then sell 60% now and the remaining 40% on either 10-15% jump in price or if it falls by 5% from now. Too risky to hold longer-term. |
Why do people use mortgages, when they could just pay for the house in full? | The advantage of using a mortgage is that you pay for a house at TODAY's price, using TOMORROW's money. Your question suggests that you rightly observed that it was not a good idea around 2006 (the last peak in housing). That was when prices were at their maximum, and had nowhere to go but down. Some experts think that house prices STILL have further to go on the downside. Meanwhile, wages have been going nowhere during that time. This phenomenon seems to happen about every 40 years or so, the 1930s, the 1970s, and around 2010. At MOST other times, say the 1980s, houses are likely to go up for the "foreseeable" future. At those times, you want to buy the house at "today's" price, then pay for it in future dollars when you are earning more money. The irony is that what most people observe as teenagers is usually the wrong thing to do when they are, say, forty. In 2035, it will probably make sense to have a large mortgage in a bull housing market, which is the opposite of what you observed around 2010. So a better rule is to do at age 40 what made sense about the time you were born (in your case, perhaps the 1990s). Whereas the people born in the early 1970s that got "caught" recently, observed the bull market of the 1980s and 1990s in THEIR teens and twenties, rather than the bear market of the 1970s that took place about the time they were born. |
How does a Value Added Tax (VAT) differ from a Sales Tax? | Sales taxes are charged at the point of purchase, while a VAT is assessed during the production process of the item. In the end, the amount paid by the consumer is the same, but with the VAT, the tax was collected from the manufacturer, instead of the consumer. One of the big arguments for VAT is that it prevents lost revenue due to things like smuggling (if sales tax increases past 10% smuggling spikes, so the VAT is a good mechanism if you're looking to implement large taxes on goods). It also keeps the tax burden away from shippers and other tiers of the production process that don't change the intrinsic value of the item. |
Debit card for minor (< 8 y.o.) | I'm not certain if you can get a debit card with it, but if you have a PNC in your area, they have a special kind of account designed around teaching financial literacy to children: https://www1.pnc.com/sisforsavings/tour.html . I'm not sure if you can get a debit card for the child or not, but the custodian gets one I believe, and the child gets a special online login to manage the money, so if you don't mind the name issue, it might be worth looking into. If you don't have PNC, maybe one of the banks in your area have a similar program? |
Is an interest-only mortgage a bad idea? | It seems you understand the risks, it seems like a fine enough idea. Hopefully it works out for you. However, you may want to talk to a few local banks about getting a short term home equity loan. I know someone who was able to do this getting a very low rate for 7 years. At the time of the loan, the prevailing rate for a 15 year was 3.25, but they were able to get the HEL at 2.6 fixed. There was no closing costs. The best part about it was the payment was not that much more. While going from ~1200 to ~1800 is a 50% increase it was not that much in dollars in relationship to his household income. Note that I did not say Home Equity Line of Credit, which are vairable rates and amount borrowed. |
Why do stocks tend to trade at high volumes at the end of (or start) the trading day? | Is it possible that mutual funds account for a significant portion of this volume. Investors may decide to buy or sell anytime within a 24 hour period, but the transaction only happened at the close of the market. Therefore at 3:59 pm the mutual fund knows if they will be buying or selling stocks that day. As nws pointed out the non-market hours are longer and therefore accumulate more news event. Some financial news is specifically given during the time the market is closed. Therefore the reaction to that news has to either be in the morning when the market opens or in the late afternoon if they are trying to anticipate the news. Also in the US market the early morning trader may be reacting to European market activities. |
Cheapest way to wire or withdraw money from US account while living in Europe | I prefer to use a Foreign Exchange transfer service. You will get a good exchange rate (better than from Paypal or from your bank) and it is possible to set it up with no transfer fees on both ends. You can use an ACH transfer from your US bank account to the FX's bank account and then a SEPA transfer in Europe to get the funds into your bank account. Transfers can also go in the opposite direction (Europe to USA). I've used XE's service (www.xe.com) and US Forex's service (www.usforex.com). Transferwise (www.transferwise.com) is another popular service. US Forex's service calls you to confirm each transfer. They also charge a $5 fee on transfers under $1000. XE's service is more convenient: they do not charge fees for small transfers and do not call you to confirm the tramsfer. However, they will not let you set up a free ACH transfer from US bank accounts if you set up your XE account outside the US. In both cases, the transfer takes a few business days to complete. EDIT: In my recent (Summer 2015) experience, US Forex has offered slightly better rates than XE. I've also checked out Transferwise, and for transfers from the US it seems to be a bit of a gimmick with a fee added late in the process. For reference, I just got quotes from the three sites for converting 5000 USD to EUR: |
Is inflation a good or bad thing? Why do governments want some inflation? | Inflation is a bad thing. It makes it much more difficult for people to compare prices and prosperity over a long period of time. This causes people to ignore the wisdom of their elders (who remember prices from a long time ago). Back in my day, you could get a burger and fries for 15 cents -- a dime for the burger, and a nickel for the fries. But the minimum wage was only a quarter an hour! That doesn't help me decide if things have gotten better or worse. How long is "a long period of time"? That depends on the inflation rate. At 1 percent per year, 50 or 100 years is "a long time". At 10 percent per year, 5 or 10 years. At 100 percent per year, a few months. Because of the Spanish conquests of gold and silver mines in Mexico and Peru, prices in the sixteenth century rose by a factor of 5.5 during the century. This inflation was recognized as causing lots of social and governmental problems. Note that this means an average inflation rate of 2 percent per year for a century is known to be a very bad thing. There are several reasons that most governments want some inflation: |
Stock prices using candlesticks | No it does not. Candlesticks really have nothing to do with this, a stock price can open different then the previous day's close. Examining the chart of TSLA provides an example it closed on 1/18 at 238.8 it opened on 1/19 at 243.7 In candlestick parlance is is known as a "gap up". |
What's a good personal finance management web app that I can use in Canada? | Now, keep in mind I'm biased because I'm an engineer at this company, but FutureAdvisor.com provides advice on your savings and investments. We currently help users optimize their portfolios for retirement savings, but plan on rolling our more savings goals in the future. |
Stocks and bonds have yields, but what is a yield? | For bonds bought at par (the face value of the bond, like buying a CD for $1000) the payment it makes is the same as yield. You pay $1000 and get say, $40 per year or 4%. If you buy it for more or less than that $1000, say $900, there's some math (not for me, I use a finance calculator) to tell you your return taking the growth to maturity into account, i.e. the extra $100 you get when you get the full $1000 back. Obviously, for bonds, you care about whether the comp[any or municipality will pay you back at all, and then you care about how much you'll make when then do. In that order. For stocks, the picture is abit different as some companies give no dividend but reinvest all profits, think Berkshire Hathaway. On the other hand, many people believe that the dividend is important, and choose to buy stocks that start with a nice yield, a $30 stock with a $1/yr dividend is 3.3% yield. Sounds like not much, but over time you expect the company to grow, increase in value and increase its dividend. 10 years hence you may have a $40 stock and the dividend has risen to $1.33. Now it's 4.4% of the original investment, and you sit on that gain as well. |
Boyfriend is coowner of a house with his sister, he wants to sell but she doesn't | Rent the property?? Is that a possible solution? Since selling the house is not an option and living in it isn't either, then perhaps renting it is the way to go? Since no explanation for the sister's motives is given, i'd speculate it is a mixture of emotional and financial concerns. Maybe mostly emotional. I imagine letting go of the one physical thing that has memories of you and your parents attached to it is very difficult. I don't think getting a lawyer or doing what's convenient for only your boyfriend is the way to go...But that's my own personal opinion. Clearly, he only has one close family member left alive. Creating permanent wounds in that relationship will cost more along the way. And quite frankly, if the house is owned 50-50, don't you need both owners to sign the deed to sell the house anyways? If renting is not an option, then maybe refinancing the mortgage to lower payments? Or Airbnb it only half the time? Or rent it out for events to help with payments? Or ask the sister for a little money...Not for half the mortgage, but at least a few hundred dollars to maintain the house and heat. If she is indeed concerned with the property, then maintaining it to prevent serious damagae is in her interests, no matter her income. |
I have $100,000 in play money… what to do? | If you want a concrete investment tip, precious metals (e.g. gold, silver) are on a pretty good run these days, personally I still think they have ways to go as there are just too many problems with modern monetary policy of an almost existential nature, and gold and silver are better stores of value than fiat money. Silver is particularly hot right now, but keep in mind that the increased volatility means increased risk. If the Fed keeps its foot on the pedals of the dollar printing press and we get QE3 this summer, that will most likely mean more people piling into the PMs to hedge against inflation. If the Fed starts to tighten it's policy then that's probably bad news for both equities and bonds and so PMs could be seen as a safe haven investment. These are the main reasons why PMs take up a good portion of my portfolio and will continue to do so untill I see how the global economy plays out over the next couple of years. |
Can the purchaser of a stock call option cancel the contract? | I'm adding to @Dilip's basic answer, to cover the additional points in your question. I'll assume you are referring to publicly traded stock options, such as those found on the CBOE, and not an option contract entered into privately between two specific counterparties (e.g. as in an employer stock option plan). Since you are not obligated to exercise a call option you purchased on the market, you don't need to maintain funds on account for possible exercising. You could instead let the option expire, or resell the option, neither of which requires funds available for purchase of the underlying shares. However, should you actually choose to exercise the call option (and usually this is done close to expiration, if at all), you will be required to fund your account much like if you bought the underlying shares in the first place. Call your broker to determine the exact rules and timing for when they need the money for a call-option exercise. And to expand on the idea of "cancelling" an option you purchased: No, you cannot "cancel" an option contract, per se. But, you are permitted to sell the call option to somebody else willing to buy, via the market. When you sell your call option, you'll either make or lose money on the sale – depending on the price of the underlying shares at the time (are they in- or out- of the money?), volatility in the market, and remaining time value. Once you sell, you're back to "no position". That's not the same as "cancelled", but you are out of the trade, whether at profit or loss. Furthermore, the option writer (i.e. the seller who "sold to open" a position, in writing the call in the first place) is also not permitted to cancel the option he wrote. However, the option writer is permitted to close out the original short position by simply buying back a matching call option on the market. Again, this would occur at either profit or loss based on market prices at the time. This second kind of buy order – i.e. made by someone who initially wrote a call option – is called a "buy to close", meaning the purchase of an offsetting position. (The other kind of buy is the "buy to open".) Then, consider: Since an option buyer is free to re-sell the option purchased, and since an option writer (who "sold to open" the new contract) is also free to buy back an offsetting option, a process known as clearing is required to match remaining buyers exercising the call options held with the remaining option writers having open short positions for the contract. For CBOE options, this clearing is performed by the Options Clearing Corporation. Here's how it works (see here): What is the OCC? The Options Clearing Corporation is the sole issuer of all securities options listed at the CBOE, four other U.S. stock exchanges and the National Association of Securities Dealers, Inc. (NASD), and is the entity through which all CBOE option transactions are ultimately cleared. As the issuer of all options, OCC essentially takes the opposite side of every option traded. Because OCC basically becomes the buyer for every seller and the seller for every buyer, it allows options traders to buy and sell in a secondary market without having to find the original opposite party. [...] [emphasis above is mine] When a call option writer must deliver shares to a call option buyer exercising a call, it's called assignment. (I have been assigned before, and it isn't pleasant to see a position called away that otherwise would have been very profitable if the call weren't written in the first place!) Also, re: "I know my counter party cannot sell his shares" ... that's not strictly true. You are thinking of a covered call. But, an option writer doesn't necessarily need to own the underlying shares. Look up Naked call (Wikipedia). Naked calls aren't frequently undertaken because a naked call "is one of the riskiest options strategies because it carries unlimited risk". The average individual trader isn't usually permitted by their broker to enter such an order, but there are market participants who can do such a trade. Finally, you can learn more about options at The Options Industry Council (OIC). |
How can I cash out a check internationally? | This question was asked three years ago, but now that it's 2017 there is actually a relatively easy, cheap and fast solution to at least the first half of your question. To cash the check: I've done this a half dozen times while abroad (from the US) without any problems. |
Can the risk of investing in an asset be different for different investors? | In a perfect market, share prices are by definition a perfect reflection of the true value of a share. Hence, you always get $10 for a share that's worth that much. In reality, the market is imperfect. Prices are somewhat of an average of all different estimates, and there's a cost-of-trading margin between sales and buy prices. Hence, in a perfect market it doesn't matter whether you have a stop loss order at $9.00. That just trades your stock worth $9 for cash worth the same $9. In an imperfect market, that trade nets you less. Furthermore, is risk a linear function of money? Perhaps not, if you bought on margin, need to lend extra and your interest rate increases with the extra credit demand. |
Tenant wants to pay rent with EFT | I'd consider this offer. Keep in mind, any time you write a check, there's the information he's asking for. If it makes you feel comfortable, use the small balance account, or set up a 4th one you'll use for these incoming deposits only. |
How to determine how much to charge your business for rent (in your house)? | In Canada I think you'd do it as a % of square footage. For example: Then you can count 20% of the cost of the of renting the apartment as a business expense. I expect that conventions (i.e. that what's accepted rather than challenged by the tax authorities) may vary from country to country. |
On paper I have 1 share in my company. How can I sell a smaller percentage of my company to another party? | There are 2 basic ways to have someone buy partial ownership of your company: OR If they buy shares that you already own, then their shares will have the same rights as yours (same voting rights, same dividend rights, etc.). If they buy shares newly created from the company, they could be either identical shares to what you already own, or they could be a new class of shares [you may need to adjust the articles of incorporation if you did not plan ahead with multiple share classes]. You really need to talk to a lawyer & tax accountant about this. There are a lot of questions you need to consider here. For example: do you want to use the money in the business, or would you rather have it personally? Are you concerned about losing some control of how the business is run? What are the short term and long-term tax consequences of each method? What does your new partner want in terms of their share class? The answers to these questions will be highly valuable, and likely worth much more than the fees you will need to pay. At the very least, you will likely need a lawyer and accountant anyway to ensure the filings & taxes are done correctly, so better to involve them now, rather than later. There are many other situations to consider here, and an online forum is not the best place to get advice that might put you in a sticky legal situation later on. |
How can I decide whether do a masters even if I have go into debt after doing it? | What should I do? Weigh your options and decide which education investment lines up better with your goals. Some of the costs from pursuing a degree at the more reputable university may include: However there are probably some benefits to pursuing a degree at this university: You will know best which of these apply to you in addition to any pros or cons not mentioned. You need to evaluate each one in order to make a decision. |
Paid cash for a car, but dealer wants to change price | Lets look at it this way. Your son bought the car and then 2 days later, he wants to change the price. Will the dealership let him do that after all the paperwork is signed? |
What evidence do I need to declare tutoring income on my income tax? | I have been a private tutor on and off for about 30 years, in three countries, so I understand your concerns! I always kept records as though it was a real business - even if I only had one student I kept records of dates/times/names, and also tracked where the money went (I never spent it straight up - it always got deposited to complete the paper trail; yes, this is paranoia on my part). I've never been asked to prove anything with regards this income (although I have no Canadian experience). It's always been a case of tell the tax folks and make sure my arse is covered if they come asking questions. Hope this helps. |
Buy on dip when earnings fail? | What is cheap? A stock may fall from $20 per share to $10 per share, but it may have gone from making a $100M profit last year to a $100M loss this year. So now at $10 per share it may still be considered expensive. You need to be very careful when to consider that a stock is cheap or not, you'll have to look at more than just the share price. |
Would it ever be a bad idea to convert a traditional IRA to a Roth IRA with the following assumptions? | Taking all your assumptions: With Roth, you take $6112 from work, (let's call you tax rate 10%) pay $612 in taxes, and contribute $5500 (the max if you are younger than 50). This $5500 will grow to $21,283 in 20 years at 7% annual growth ($5500*(1.07^20)), and you will pay no additional taxes on it. With the traditional IRA, you take $6112 from work, pay $612 in taxes, and contribute $5500. You will receive a tax deduction at tax time of $612 for the contribution. This money will also grow to $21,283. This will be taxed at your ordinary income rate (which we're calling 10%), costing you $2123 at the time of withdrawal. You will have $19,155 left over. EDIT: If you invest your tax savings from every contribution to the Traditional IRA, then the numbers wash out. Perhaps a pivotal question is whether you believe you will have greater taxable earnings from your investments in retirement than you have in taxable earnings today -- affecting the rate at which you are taxed. |
What are the pros and cons of buying an item on installments with zero percent interest? | One small advantage to paying ahead is having an outstanding installment plan may preclude unlocking the phone for use on other carriers, for example during international travel. If unlocking is important, researching the particulars would be in order. I am more familiar with T-Mobile, and will use as a specific example. If I pay upfront, I can purchase the phone from Apple totally unlocked, and T-Mobile has no say in whether I use it on another carrier or not. (This actually costs a little more, because the phone from Apple doesn't come with a SIM, and T-Mobile charges for the SIM. At least as of iPhone 5s.) Looking at "Unlock your mobile wireless device, Unlock Requirements" on T-Mobile's website, at least some payment plans do not allow unlock until the phone is paid off. Obviously phones purchased for full price from T-Mobile start out paid off. |
Do developed country equities have a higher return than emerging market equities, when measured in the latter currency? | First of all, the answer to your question depends on your starting dates and ending dates. So developed markets returns are higher over one period, and emerging markets returns over other periods. So far, there does not appear to be a systematic tilt in favor of one or the other. The reasons are as you said. Emerging markets tend to have higher returns in nominal terms, but developed markets currency movements (sometimes) cancel this out. So watch out for periods of strong and weak developed markets (e.g. U.S) currencies. In "strong" currency periods (such as those of the past five years or so), you want U.S. market exposure, and in "weak" currency periods, the larger nominal local returns will be fully reflected in dollar terms as well. |
What is a decent rate of return for investing in the markets? | What do you think is a reasonable rate of return? A reasonable rate really breaks down into three things: opportunity cost, what you need, and risk appetite. Opportunity cost comes into play because whatever returns you make should at least exceed, after expenses, the next best option. Typically the "next best option" is the risk free return you can get somewhere else, which is typically a savings account or some other (safe) investment vehicle (e.g. a guaranteed investment certificate/GIC, bonds, etc). But, this opportunity cost could also be an alternative investment (e.g. an index ETF), which is not necessarily risk free (but it may represent the next best option). Risk appetite comes down to the amount of risk you are willing to take on any investment, and is completely subjective. This is typically "how much can you sleep with losing" amount. What you need is the most subjective element. All things being equal (e.g. identical risk profiles, access to same next-best-thing to invest in), if your cost of living expenses are only expected to go up 2% per year, but mine are expected to go up 3% per year, then my reasonable rate of return must exceed 3%, but yours must only exceed 2%. That said, an appropriate return is whatever works for you, period. Nobody can tell you otherwise. For your own investing, what you can do is measure yourself against a benchmark. E.g. if your benchmark is the S&P 500, then the S&P 500 SPDR ETF is your opportunity cost (e.g. what you would have made if you didn't do your own investing). In that way, you are guaranteed the market return (caveat: the market return is not guaranteed to be positive). As an aside.. Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money. There is nothing wrong with letting someone else handle your money, provided you can live with the triple constraint above. Investing takes time and effort, and time and effort equals opportunity. If you can do something better with the time and effort you would spend to do your own investing, then by all means, do it. Think about it: if you have to spend 1 day a month managing your own investments, but that day costs you $100 in foregone income (e.g. you are a sole proprietor, so every day is a working day), that is $1,200 per year. But if you can find an investment advisor who will manage your books for you, and costs you only $500 per year, what is the better investment? If you do it yourself, you are losing $1,200. If you pay someone, you are losing $500. Clearly, it is cheaper to outsource. Despite what everyone says, not everyone can be an investor. Not everyone wants to live with the psychological, emotional, and mental effort of looking up stocks, buying them, and then second guessing themselves; they are more than happy to pay someone to do that (which also lets them point the finger at that person later, if things go sideways). |
What does it mean that stocks are “memoryless”? | This is an interesting question that may actually be better suited to Quant.SE. First of all, stock prices are random variables, or, to be more precise, stochastic processes (a time-ordered string of random variables). The alternative to being stochastic is being deterministic, and I doubt you believe that stock prices are deterministic (meaning, they are fully knowable in advance). The fact that real world events drive the randomness has no bearing on whether or not it is random. So, to start, I think you have confused the technical definition of random with a colloquial concept. Now, the heart of the question is whether stock prices are memoryless. Ultimately, this is an empirical question that has been addressed in many academic studies. The conclusion of most of this research is that stock prices are "almost" memoryless, in the sense that the distribution of future stock prices displays very little dependence upon past realizations, although a few persistent anomalies remain. One of the most robust deviations from memorylessness is the increase in the volatility of a stock following large declines. Another is persistence in volatility. In general, in fact, the volatility is far more predictable than the mean of stock price changes. Hence "memorylessness" is a far stronger assumption than the efficient markets hypothesis. The bottom line, however, is that the deviations from memorylessness are relatively small. As such, despite its limitations, it is a decent working assumption in some contexts. |
Interest on security deposits paid to landlords, in Michigan? | No. The full text of the Landlord-Tenant Act (specifically, section 554.614 of Act 348 of the year 1972) makes no mention of this. Searching the law for "interest" doesn't yield anything of interest (pardon the pun). Specifically, section 554.604 of the same law states that: (1) The security deposit shall be deposited in a regulated financial institution. A landlord may use the moneys so deposited for any purposes he desires if he deposits with the secretary of state a cash bond or surety bond written by a surety company licensed to do business in this state and acceptable to the attorney general to secure the entire deposits up to $50,000.00 and 25% of any amount exceeding $50,000.00. The attorney general may find a bond unacceptable based only upon reasonable criteria relating to the sufficiency of the bond, and shall notify the landlord in writing of his reasons for the unacceptability of the bond. (2) The bond shall be for the benefit of persons making security deposits with the landlord. A person for whose benefit the bond is written or his legal representative may bring an action in the district, common pleas or municipal court where the landlord resides or does business for collection on the bond. While it does sound like the landlord is required to deposit the money in a bank or other secured form, e.g. the Secretary of State, he/she isn't required to place it in an account that will earn interest. |
What can I do when the trading price of a stock or ETF I want to buy is too high? | For equities, buy direct from the transfer agent. You have to buy one full share at a minimum but after that dividend reinvestment is free. There are others like share builder and foliofn that let you buy fractional shares. As the other poster said their roster is limited so you cannot buy every ETF out there. With your example of not wanting to spend $200 I agree with the others that you should invest in a mutual fund. Vanguard will have every index fund you need and can invest as little as $50, as long as you sign up for a systematic investment draft from your bank. Plus vanguard typically has the lowest fees in the industry. The most important thing is to start investing as soon as possible and as regular as possible. "Pay yourself first" |
Does keeping 'long-term' safety net in bonds make sense? | The answer to your question depends very much on your definition of "long-term". Because let's make something clear: an investment horizon of three to six months is not long term. And you need to consider the length of time from when an "emergency" develops until you will need to tap into the money. Emergencies almost by definition are unplanned. When talking about investment risk, the real word that should be used is volatility. Stocks aren't inherently riskier than bonds issued by the same company. They are likely to be a more volatile instrument, however. This means that while stocks can easily gain 15-20 percent or more in a year if you are lucky (as a holder), they can also easily lose just as much (which is good if you are looking to buy, unless the loss is precipitated by significantly weaker fundamentals such as earning lookout). Most of the time stocks rebound and regain lost valuation, but this can take some time. If you have to sell during that period, then you lose money. The purpose of an emergency fund is generally to be liquid, easily accessible without penalties, stable in value, and provide a cushion against potentially large, unplanned expenses. If you live on your own, have good insurance, rent your home, don't have any major household (or other) items that might break and require immediate replacement or repair, then just looking at your emergency fund in terms of months of normal outlay makes sense. If you own your home, have dependents, lack insurance and have major possessions which you need, then you need to factor those risks into deciding how large an emergency fund you might need, and perhaps consider not just normal outlays but also some exceptional situations. What if the refrigerator and water heater breaks down at the same time that something breaks a few windows, for example? What if you also need to make an emergency trip near the same time because a relative becomes seriously ill? Notice that the purpose of the emergency fund is specifically not to generate significant interest or dividend income. Since it needs to be stable in value (not depreciate) and liquid, an emergency fund will tend towards lower-risk and thus lower-yield investments, the extreme being cash or the for many more practical option of a savings account. Account forms geared toward retirement savings tend to not be particularly liquid. Sure, you can usually swap out one investment vehicle for another, but you can't easily withdraw your money without significant penalties if at all. Bonds are generally more stable in value than stocks, which is a good thing for a longer-term portion of an emergency fund. Just make sure that you are able to withdraw the money with short notice without significant penalties, and pick bonds issued by stable companies (or a fund of investment-grade bonds). However, in the present investment climate, this means that you are looking at returns not significantly better than those of a high-yield savings account while taking on a certain amount of additional risk. Bonds today can easily have a place if you have to pick some form of investment vehicle, but if you have the option of keeping the cash in a high-yield savings account, that might actually be a better option. Any stock market investments should be seen as investments rather than a safety net. Hopefully they will grow over time, but it is perfectly possible that they will lose value. If what triggers your financial emergency is anything more than local, it is certainly possible to have that same trigger cause a decline in the stock market. Money that you need for regular expenses, even unplanned ones, should not be in investments. Thus, you first decide how large an emergency fund you need based on your particular situation. Then, you build up that amount of money in a savings vehicle rather than an investment vehicle. Once you have the emergency fund in savings, then by all means continue to put the same amount of money into investments instead. Just make sure to, if you tap into the emergency fund, replenish it as quickly as possible. |
Compute average price even if I do not have the prices before | What I do have is this (sample only): Stock X: Average Price of all I purchased before = 80 Total Shares = 200 So if Stock X's price today is 100 how do I know how much my average price will be? Using your sample if you buy 100 new shares and the price is 85 for the purpose of this example your previous total cost is $16,000 ($80 average cost * 200 shares). With the new example you are adding $8500 to your total cost (100 new shares * $85 example cost per share) that gives us a total cost of $24,500 and 300 shares. $24,500/300 gives us an average cost of $81.67 per share. As long as you have the average cost and the number of shares you can calculate a new average without knowing what the price was for each transaction. It may still become important to find the price information for tax purposes if you do not sell all of those shares at once and use FIFO for your taxes. |
Good book-keeping software? | You can try Wave Accounting. Its a free software for Small Business and web-based. http://waveaccounting.com/ |
Why do people use mortgages, when they could just pay for the house in full? | A $100K house and $100K are not equivalent assets. Here's a hypothetical... You and I both work for the same company, and both get a $100K bonus (yes, I said it's hypothetical). You decide to use the $100K to pay off your house. I put the money in the bank. Six months later, our company lays both of us off. I have $100K in the bank. I can last for quite a while with that much money in the bank. You have a house, but you can't get a mortgage or home equity loan, because you don't have a job. The only way you can access the money is by selling the house, which requires you to pay money to a real estate agent and perhaps taxes, and leaves you looking for a place to live. That assumes there isn't something systemic going on - like the credit crash - and there is credit available for somebody else to buy your house. |
Loan holder wants a check from the insurance company that I already cashed and used to repair my car | What would happen if you was to cash a check, didn’t realize it was to you and your finance company, take it to a local business that has a money center, they cash the check without even having you sign let alone having the finance companies endorsement on it . The money cleared my account like a couple months ago and it was just brought up now .. ? The reason why the check was made out the owner and the lender is to make sure the repairs were done on the car. The lender wants to make sure that their investment is protected. For example: you get a six year loan on a new car. In the second year you get hit by another driver. The damage estimate is $1,000, and you decide it doesn't look that bad, so you decide to skip the repair and spend the money on paying off debts. What you don't know is that if they had done the repair they would have found hidden damage and the repair would have cost $3,000 and would have been covered by the other persons insurance. Jump ahead 2 years, the rust from the skipped repair causes other issues. Now it will cost $5,000 to fix. The insurance won't cover it, and now a car with an outstanding loan balance of $4,000 and a value of $10,000 if the damage didn't exist needs $5,000 to fix. The lender wants the repairs done. They would have not signed the check before seeing the proof the repairs were done to their satisfaction. But because the check was cashed without their involvement they will be looking for a detailed receipt showing that all the work was done. They may require that the repair be done at a certified repair shop with manufacturer parts. If you don't have a detailed bill ask the repair shop for a copy of the original one. |
Oversimplify it for me: the correct order of investing | All of the provided advice is great, but a slightly different viewpoint on debt is worth mentioning. Here are the areas that you should concentrate your efforts and the (rough) order you should proceed. Much of the following is predicated upon your having a situation where you need to get out of debt, and learn to better budget and control your spending. You may already have accomplished some of these steps, or you may prioritize differently. Many people advise prioritizing contributing to a 401(k) savings plan. But with the assumption that you need advise because you have debt trouble, you are probably paying absurd interest rates, and any savings you might have will be earning much lower rates than you are paying on consumer debt. If you are already contributing, continue the plan. But remember, you are looking for advice because your financial situation is in trouble, so you need to put out the fire (your present problem), and learn how to manage your money and plan for the future. Compose a budget, comprised of the following three areas (the exact percentages are fungible, fit them to your circumstances). Here is where planning can get fun, when you have freed yourself from debt, and you can make choices that resonate with your individual goals. Once you have "put out the fire" of debt, then you should do two things at the same time. As you pay off debt (and avoid further debt), you will find that saving for both independence and retirement become easier. The average American household may have $8000+ credit card debt, and at 20-30%, the interest payments are $150-200/month, and the average car payment is nearly $500/month. Eliminate debt and you will have $500-800/month that you can comfortably allocate towards retirement. But you also need to learn (educate yourself) how to invest your money to grow your money, and earn income from your savings. This is an area where many struggle, because we are taught to save, but we are not taught how to invest, choose investments wisely and carefully, and how to decide our goals. Investing needs to be addressed separately, but you need to learn how. Live in an affordable house, and pay off your mortgage. Consider that the payment on a mortgage on even a modest $200K house is over $1000/month. Combine saving the money you would have paid towards a mortgage payment with the money you would have paid towards credit card debt or a car loan. Saving becomes easy when you are freed from these large debts. |
How to get a down payment for your next home? Use current home as the down payment on the new one? | This is of course a perfectly normal thing to happen. People trade up to a bigger house every day. When you've found a bigger house you want to move to and a buyer for your existing one, you arrange 'closing dates' for both i.e. the date on which the sale actually happens. Usually you make them very close, either on the same day or with an overlap of a few weeks. You use the equity (i.e. the difference between the house value and the mortgage) in the old house as the down payment on the new house. You can't of course use the part of the old house that is mortgaged. If the day you buy the new and sell the old is the same, your banks and lawyers do everything for you on that day. If there is an overlap then you need something called 'bridge financing' to cover the period when you own two houses. Banks are used to doing this, and it's not really that expensive when you take into account all the other costs of moving house. Talk to them for details. As a side note, it is generally reckoned not to be worth buying a house if you only intended to live there one or two years. The costs involved in the process of buying, selling and moving usually outweigh any gains in house value. You may find yourself with a higher down payment if you rent for a year or two and save up a down payment for your 'bigger' house instead. |
Best way to make most of savings with ISA and Offset mortgage | I am not a Financial Advisor, but I an tell you what I did in exactly this situation - which is pretty much what you are proposing. I put money into the offset savings account until I had only a small amount of mortgage "balance" left (less than a year's worth of mortgage payments), then I set it up so that each month I did the transfer from the offset savings pot into the mortgage itself. This depleted the offset savings in line with the mortgage debt, and the interest on the two balanced out almost to zero. This was self-sustaining and meant that I kept the same margin owing over time (i.e. if I was in this situation for 5 years, for the whole 5 years I would effectively have 1 year remaining on the mortgage). Meanwhile, since I now didn't have any mortgage outgoings from my regular income, I put any spare money into ISA savings. No need to withdraw money from the mortgage to move to the ISA. The benefits of this (as opposed to just paying off the damn mortgage already) were that I kept the full liquidity of the mortgage amount - I could withdraw all the offset savings pot if I wanted to, although I would then have to have funded the mortgage payments differently, and as that liquidity went down over time I was building up other savings in parallel. It worked well for me. It almost doesn't matter what the offset mortgage rate is since you are effectively paying it off by keeping the offset savings pot so high. |
Will a stop order get triggered if the floor is hit and trading is halted? | During a circuit breaker, no trading occurs. These policies have been implemented to maintain exchange liquidity since the NYSE nearly went bankrupt during the 1987 crash because many members had become insolvent. If an order is filled before the halt, it will stand unless busted. During the Flash Crash, many orders were busted. |
What home improvements are tax deductible? | In general, for a home you live in, there's maintenance, which is just that, you pay to keep your house in good repair. There's also real improvements. I spend $xxx to turn my poured cement basement into living space. Here, I keep my receipts and the cost (although not my labor) is added to the basis of my home when I sell. The couple things that may offer a deduction have to do with energy. When I insulated my basement, there was a state tax credit which I got back when I filed taxes. There are also credits for installing solar panels. What you've described in your question just sounds like one of the small joys of home ownership. |
Unable to understand logic behind why there is no exit load on liquid fund | I think you are having trouble understanding what 'liquid' means. Liquidity refers to how easily an asset can be converted to cash. More liquid = more easily converted to cash, less liquid, less so. Any kind of exit load is going to make an asset less liquid due to the penalties associated with making the sale. So, the whole point of liquid funds is to give people the option of selling quickly if they need to. Since an exit load is meant to discourage this behavior, liquid funds tend not to have one. The point isn't what the financial institution 'gets', it's about offering a service to clients with a particular investment need. |
Is giving my girlfriend money for her mortgage closing costs and down payment considered fraud? | There is not any fraud involved. Anybody can gift money to another person. |
Free/open source Unix software that pulls info from all my banks/brokers/credit cards? | As far as I can tell there are no "out-of-the-box" solutions for this. Nor will Moneydance or GnuCash give you the full solution you are looking for. I imaging people don't write a well-known, open-source, tool that will do this for fear of the negative uses it could have, and the resulting liability. You can roll-you-own using the following obscure tools that approximate a solution: First download the bank's CSV information: http://baruch.ev-en.org/proj/gnucash.html That guy did it with a perl script that you can modify. Then convert the result to OFX for use elsewhere: http://allmybrain.com/2009/02/04/converting-financial-csv-data-to-ofx-or-qif-import-files/ |
How might trading volume affect future share price? | As said previously, most of the time volume does not affect stock prices, except with penny stocks. These stocks typically have a small volume in the 3 or 4 figure range and because of this they typically experience very sharp rises and drops in stock prices, contrasting normal stocks that go up and down constantly every minute. Volume is not one thing you should be looking at when analyzing a stock in most cases, since it is simply the number of people of trades made in a day. That has no effect on the value of the company, whereas looking at P/E ratios, dividend growth, etc all can be analyzed to see if a company is growing and is doing well in its field. If I buy an iPhone, it doesn't matter if 100 other people or 100,000 other people have bought it as well, since they won't really affect my experience with the product. Whereas the type of iPhone I buy will. |
Is there any instance where less leverage will get you a better return on a rental property? | QUICK ANSWER When it comes to fixed income assets, whether rental real estate or government bonds, it's unusual for highly-leveraged assets to yield less than the same asset unleveraged or lowly-leveraged. This is especially so in countries where interest costs are tax deductible. If we exclude capital losses (i.e. the property sells in future at a price less than it was purchased) or net rental income that doesn't keep up with maintenance, regulatory, taxation, inflation and / or other costs, there is one primary scenario where higher leverage results in lower yields compared to lower leverage, even if rental income keeps up with non-funding costs. This occurs when variable rate financing is used and rates substantially increase. EXPLANATION Borrowers and lenders in different countries have different mortgage rate customs. Some are more likely to have long-term fixed rates; some prefer variable rates; and others are a hybrid, i.e. fixed for a few years and then become variable. If variable rates are used for a mortgage and the reference rates increase substantially, as they did in the US during the 1970s, the borrower can easily become "upside-down," i.e. owe more on the mortgage than the property is then worth, and have mortgage service costs that exceed the net rental income. Some of those costs aren't easy to pass along to renters, even when there are periodic lease renewals or base rent increases referencing inflation rates. Central banks set policies for what would be the lowest short-term rates in a country that has such a bank. Private sector rates are established broadly by supply and demand for credit and can thus diverge markedly from central bank rates. Over time, the higher finance-carrying-cost-to-net-rental-income ratio should abate as (1) rental market prices change to reflect the costs and (2) the landlord can reinvest his net rental income at a higher rate. In the short-term though, this can result in the landlord having to "eat" the costs making his yield on his leveraged fixed income asset less than what he would have without leverage, even if the property was later sold at same price regardless of financing method. ========== Interestingly, and on the flip side, this is one of the quirks in finance where an accounting liability can become, at least in part, an economic asset. If a landlord borrows at a high loan-to-value ratio for a fixed interest rate for the life of the mortgage and rates, variable and fixed, were to increase substantially, the difference between his original rate and the present rates accrues to him. If he's able to sell the property with the loan attached (which is not uncommon for commercial, industrial and sometimes municipal real estate), the buyer will be assuming a liability with a lower carrying cost than his present alternatives and will hence pay a higher price for the property than if it were unleveraged. With long-term rates in many economically advanced countries at historic lows, if a borrower today were to take a long-term fixed rate loan and rates shortly after increased substantially, he may have an instant profit in this scenario even if his property hasn't increased in value. |
Is it true that 90% of investors lose their money? | The game is not zero sum. When a friend and I chop down a tree, and build a house from it, the house has value, far greater than the value of a standing tree. Our labor has turned into something of value. In theory, a company starts from an idea, and offers either a good or service to create value. There are scams that make it seem like a Vegas casino. There are times a stock will trade for well above what it should. When I buy the S&P index at a fair price for 1000 (through an etf or fund) and years later it's 1400, the gain isn't out of someone else's pocket, else the amount of wealth in the world would be fixed and that's not the case. Over time, investors lag the market return for multiple reasons, trading costs, bad timing, etc. Statements such as "90% lose money" are hyperbole meant to separate you from your money. A self fulfilling prophesy. The question of lagging the market is another story - I have no data to support my observation, but I'd imagine that well over 90% lag the broad market. A detailed explanation is too long for this forum, but simply put, there are trading costs. If I invest in an S&P ETF that costs .1% per year, I'll see a return of say 9.9% over decades if the market return is 10%. Over 40 years, this is 4364% compounded, vs the index 4526% compounded, a difference of less than 4% in final wealth. There are load funds that charge more than this just to buy in (5% anyone?). Lagging by a small fraction is a far cry from 'losing money.' There is an annual report by a company named Dalbar that tracks investor performance. For the 20 year period ending 12/31/10 the S&P returned 9.14% and Dalbar calculates the average investor had an average return of 3.83%. Pretty bad, but not zero. Since you don't cite a particular article or source, there may be more to the story. Day traders are likely to lose. As are a series of other types of traders in other markets, Forex for one. While your question may be interesting, its premise of "many experts say...." without naming even one leaves room for doubt. Note - I've updated the link for the 2015 report. And 4 years later, I see that when searching on that 90% statistic, the articles are about day traders. That actually makes sense to me. |
Does Implied Volatilty factor in all known future events? | From every article I've encountered, the chicken and egg aspect suggests that IV is produced by looking at options pricing, and calculating the IV from that. The implication is that whatever is known at that time is included in the price. And that when you see a particular option trade an unusual number of contracts at a given price, the implication is that someone thinks they know something that's not already priced in, i.e. that the current price is not accurate, they can profit on the future event. |
What are my options to deal with Student Loan debt collectors? | @littleadv has said most of what I'd say if they had not gotten here first. I'd add this much, it's important to understand what debt collectors can and cannot do, because a lot of them will use intimidation and any other technique you can think of to get away with as much as you will let them. I'd start with this PDF file from the FTC and then start googling for info on your state's regulations. Also it would be a very very good idea to review the documents you signed (or get a copy) when you took out the loan to see what sort of additional penalties etc you may have already agreed to in the event you default. The fee's the collector is adding in could be of their own creation (making them highly negotiable), or it might be something you already agreed to in advance(leaving you little recourse but to pay them). Do keep in mind that in many cases debt collectors are ausually llowed at the very least to charge you simple interest of around 10%. On a debt of your size, paid off over several years, that might amount to more than the $4K they are adding. OTOH you can pretty much expect them to try both, tacking on 'fees' and then trying to add interest if the fees are not paid. Another source of assistance may be the Department of Education Ombudsman: If you need help with a defaulted student loan, contact the Department of Education's Ombudsman at 877-557-2575 or visit its website at www.fsahelp.ed.gov. But first you must take steps to resolve your loan problem on your own (there is a checklist of required steps on the website), or the Ombudsman will not assist you. |
Business Investment Loss from prior year | You need to give specific dates! In the United States, you have three years to file an amended tax return. https://www.irs.gov/uac/Newsroom/Ten-Facts-about-Amended-Tax-Returns Did the restaurant fail in 2012? If so, that's probably the year to take the loss. If you need to amend your 2012 return, which you filed in 2013, you should have until 2016 to file this. The exact date may be based on when you filed 2012 taxes! |
Taking out a loan to pay down a mortgage | You're not crazy, but the banks are. Here's the problem: You're taking 100% LTV on property A - you won't be able to get a second mortgage for more than 80% total (including the current mortgage) LTV. That's actually something I just recently learned from my own experience. If the market is bad, the banks might even lower the LTV limit further. So essentially, at least 20% of your equity in A will remain on the paper. Banks don't like seeing the down-payment coming from anywhere other than your savings. Putting the downpayment from loan proceeds, even if not secured by the property which you're refinancing, will probably scare banks off. How to solve this? Suggest to deal with it as a business, putting both properties under a company/LLC, if possible. It might be hard to change the titles while you have loans on your properties, but even without it - deal with it as if it is a business. Approach your bank for a business loan - either secured by A or unsecured, and another investment loan for B. Describe your strategy to the banker (preferably a small community bank in the area where the properties are), and how you're going to fund the properties. You won't get rates as low as you have on A (3.25% on investment loan? Not a chance, that one is a keeper), but you might be able to get rid of the balloon/variable APR problem. |
Why does gold have value? | Because people are willing to trade for it. People are willing to trade for Gold because: The value of gold goes up because the demand for it goes up, while the supply has been basically static (or growing at a low static rate) for a long time. The demand is going up because people see it as a safe place to put their money. Another reason Gold's value in dollars goes up, is because the value of the item it's traded against (dollars, euros, yen, etc) goes down, while its own value stays roughly the same. You point out Gold is not as liquid as cash, but gold (both traded on an exchange, and held physically) is easily sold. There is always someone willing to trade you cash for gold. Compare this to some of the bank stocks during the first part of our current recession. People were not willing to give much of anything for your shares. As the (annoying, misleading) advertisements say, "Gold has never been worth zero". |
Real estate agent best practice | This question is a bit off-topic, might be better moved to another SE site. But I'll answer anyway: Sounds like the problem is that your wife is potentially being taken advantage of by people who may not really be prospects. Keep in mind no one can take advantage of you without your permission. There are also some things you and she can do to reduce the amount of wasted time while minimizing the risk of giving up on a potential sale. Qualify your leads: make sure these potential clients are really, truly potential customers. Ask whatever questions you have to ask in order to qualify them as real house hunters. It doesn't have to be binary: you can have hot leads ready to buy now, and lukewarm leads who may not buy for 12 months or more. Treat each one accordingly. Set limits: a lukewarm lead is not allowed to call you 20 times a day. Answer their calls just once per day. By answering the phone every time they call you are training them to call as often as they like! If you only return calls once per day they'll quickly learn to save their questions up and ask them all at once. Showing 10 houses sounds a bit silly. How can you remember any details after seeing 10 houses? By asking more questions and learning more about what your clients want in a house, you can reduce the footwork. Me, I'd flat out limit it to three houses per outing, and I wouldn't even hesitate to tell the client why. I think all these things will come in time. Like any new venture, she needs some experience to learn how to maximize her efficiency and effectiveness. Keep in mind it's better to have the phone ringing too much than not at all! |
Principal 401(k) managed fund fees, wow. What can I do? | In my opinion, the fee is criminal. There are ETFs available to the public that have expenses as low as .05%. The index fund VIIIX an institution level fund available to large 401(k) plans charges .02%. I'll pay a total of under 1% over the next 50 years, Consider that at retirement, the safe withdrawal rate has been thought to be 4%, and today this is considered risky, perhaps too high. Do you think it's fair, in any sense of the word to lose 30% of that withdrawal? Another angle for you - In my working years, I spent most of those years at either the 25% or 28% federal bracket taxable income. I should spend my retirement at 15% marginal rate. On average, the purpose of my 401(k) was to save me (and my wife) 10-13% in tax from deposit to withdrawal. How long does it take for an annual 1.1% excess fee to negate that 10% savings? If one spends their working life paying that rate, they will lose half their wealth to those managing their money. PBS aired a show in its Frontline series titled The Retirement Gamble, it offers a sobering look at how such fees are a killer to your wealth. |
How's the graph of after/pre markets be drawn? | the data source is the same as the live market trading. pre and after market trading are active markets and there are actual buyers and sellers getting their orders matched. |
Is it true that 90% of investors lose their money? | Very likely this refers to trading/speculating on leverage, not investing. Of course, as soon as you put leverage into the equation this perfectly makes sense. 2007-2009 for example, if one bought the $SPX at its highs in 2007 at ~$1560.00 - to the lows from 2009 at ~$683.00 - implicating that with only 2:1 leverage a $1560.00 account would have received a margin call. At least here in Europe I can trade index CFD's and other leveraged products. If i trade lets say >50:1 leverage it doesn’t take much to get a margin call and/or position closed by the broker. No doubt, depending on which investments you choose there’s always risk, but currency is a position too. TO answer the question, I find it very unlikely that >90% of investors (referring to stocks) lose money / purchasing power. Anyway, I would not deny that where speculators (not investors) use leverage or try to trade swings, news etc. have a very high risk of losing money (purchasing power). |
Shouldn't a Roth IRA accumulate more than 1 cent of interest per month? | The term 'interest' tends to be used loosely when discussing valuation of stocks. Especially when referring to IRAs which are generally the purvey of common-folk who aren't in the finance industry. Often it is used colloquially to include: Using this definition (which is what I'm guessing your IRA Calculator is doing), your stock would have increased in value by a total of $26 over the course of 10 months. Still not terribly good (only a couple percent increase), but certainly not a couple cents. |
Are COBRA premiums deductible when self-employed? | http://www.ehow.com/about_4625753_cobra-as-selfemployed-health-insurance.html This link makes it clear... it has to be itemized, and is subject to the > than 7.5% AGI rule. |
How can my dad (grandpa) transfer shares to my 2 year old son? | The most common way to handle this in the US is with a UTMA account. UTMA is the Uniform Transfers / Gifts to Minors Act ("UTMA" or "UGMA") which is a standard model law that most states have passed for special kinds of accounts. Once you open an account, anyone can contribute. Usually parents and grandparents will contribute $13,000 or less per year to make it a tax free transfer, but you can transfer more. The account itself would just be a standard brokerage account of any sort, but the title of the account would include your son's name, the applicable law depending on your state, and the name of the custodian who would control the account until your son turned 18. When your son does turn 18, the money is his. Until then, the money is his, but you control how it's invested. I'm a huge fan of Vanguard for UTMA/UGMAs. You may prefer to diversify a bit away from one company by selling the GE shares and buying an index mutual fund so that your child's education is not jeopardized by a rogue trader bringing down General Electric sometime in the next decade... |
What is a negotiable security and how are they related to derivatives? | The price for securities is negotiable. You totally have a right to make a lower offer when buying or ask for a higher price when selling. Securities don't trade at a fixed price, the price goes up and down throughout the day based on the price offers made by buyers and sellers and where they find agreement. If a stock last traded for $10, someone can put out an offer to buy the stock at $9.50, if they find someone who wants to sell and will accept that price, then a deal is made. unless something is falling rapidly in price however, an offer that far below the last price is not terribly likely to be accepted. Now if you want to be assured of making a sale or purchase, you generally trade 'at the market' and for small time players that is very much encouraged as it makes it easier for everyone. |
Saving tax for long term stock investment capital gain by quiting my current job? | The capital gain is counted as part of your income. So with a million capital gain you will be in a high tax bracket, and have to pay the corresponding capital gains tax rate on the million. |
IRA for work and my business | Yes, you can have both. You'll need business income to contribute to a SEP IRA though. |
Why is everyone saying how desperately we need to save money “in this economy”? | This was called Financial repression by Edward S. Shaw and Ronald I. McKinnon from Stanford (https://en.wikipedia.org/wiki/Financial_repression). Financial repression is the situation, when government is stealing from people, who rely heavily on saving, rather then on spending. Meaning that your saving rates will be a lot worse then inflation rate. Financial markets are artificially hot and interest rates artificially low (average historical interest rate is 10%). This could be a possible predictor state to hyper-inflation. |
Are Certificates of Deposit worth it compared to investing in the stock market? | Another factor to consider, beyond the fact that growth and volatility go together, is that the times when many people will need to liquidate their investments will correlate with the times that many other people need to liquidate their investments, and such correlation will push down the immediate value of those investments. While certificates of deposit have penalties for early withdrawal, one can establish up front what the worst-case penalty would be for cashing it in at the most inopportune time. By contrast, stocks offer no such assurance. Stocks sometimes have weird downward spikes that may be short-lived, but if life circumstances force one to liquidate stocks during such a downward spike the "penalty" can be much larger than on a CD. |
How do I calculate the dwelling coverage I need from the information I have? | You can't compare the different quotes unless they have the same numbers to work with. The big companies should use similar models to come up with values for the contents. In many cases they will assume some standard values for things like appliances. Yes you have a stove, but unless it is commercial grade they won't care when giving you a quote. If you have very expensive items you may need a rider to cover them. There is not relationship between the county assessment and the cost to rebuild. The insurance doesn't cover the land. You have to make sure that all quotes include the same riders: cost to put you in a motel, flood insurance... and the same deductibles. Your state may have an insurance office that can help answer your question. Here is the one for Virginia. |
Buying a small amount (e.g. $50) of stock via eToro “Social Trading Network” using a “CFD”? | Concerning the Broker: eToro is authorized and registered in Cyprus by the Cyprus Securities Exchange Commission (CySEC). Although they are regulated by Cyprus law, many malicious online brokers have opened shop there because they seem to get along with the law while they rip off customers. Maybe this has changed in the last two years, personally i did not follow the developments. eToro USA is regulated by the Commodity Futures Trading Commission (CFTC) and thus doing business in a good regulated environment. Of course the CFTC cannot see into the future, so some black sheep are getting fined and even their license revoked every now and then. It has no NFA Actions: http://www.nfa.futures.org/basicnet/Details.aspx?entityid=45NH%2b2Upfr0%3d Concerning the trade instrument: Please read the article that DumbCoder posted carefully and in full because it contains information you absolutely have to have if you are to do anything with Contract for difference (CFD). Basically, a CFD is an over the counter product (OTC) which means it is traded between two parties directly and not going through an exchange. Yes, there is additional risk compared to the stock itself, mainly: To trade a CFD, you sign a contract with your broker, which in almost all cases allows the broker A CFD is just a derivative financial instrument which allows speculating / investing in an asset without trading the actual asset itself. CFDs do not have to mirror the underlying asset's price and price movement and can basically have any price because the broker quotes you independently of the underlying. If you do not know how all this works and what the instrument / vehicle actually is and how it works; and do not know what to look for in a broker, please do not trade it. Do yourself a favor and get educated, inform yourself, because otherwise your money will be gone fast. Marketing campaigns such as this are targeted at people who do not have the knowledge required and thus lose a significant portion (most of the time all) of their deposits. Answer to the actual question: No, there is no better way. You can by the stock itself, or a derivative based on it. This means CFDs, options or futures. All of them require additional knowledge because they work differently than the stock. TL;DR: DumbCoder is absolutely right, do not do it if you do not know what it is about. EDIT: Revisiting this answer and reading the other answers, i realize this sounds like derivatives are bad in general. This is absolutely not the case, and i did not intend it to sound this way. I merely wanted to emphasize the point that without sufficient knowledge, trading such products is a great risk and in most cases, should be avoided. |
How to spend more? (AKA, how to avoid being a miser) | I spend hours researching two comparable products to try to save $3. Me too! I have also argued for hours with customer support to get $5/month off a bill (that's $60/year!), and I feel guilty every time I eat out or do something remotely luxurious, like getting fries with my $1 McChicken. Geez, even when I play video games, I hate spending the in-game currency. For me, it's obsessive-compulsive traits that cause it, but please note that I'm not claiming @Eddie has them. Just speaking for myself here, but I hope it helps. I still struggle with my miserliness, but I can share what works for me and what doesn't. I don't think I'm valuing my time nearly as much as I should. Me neither, but knowing that doesn't help; it makes it worse. For me, putting a dollar amount on how much I value my time does not work because that just complicates the problem and amplifies how much time I spend solving that multi-variable optimization problem. Consider trying to convince Monk not to avoid germs in order to build antibodies; it just makes him think more about germs, raising anxiety and making easy decisions (use a handkerchief to touch doorknobs) into a hard decision (should I touch it or should I not?). It also amplifies the regret whenever you finally make a certain choice ("what if I did the calculation wrong?" or "what if I'm going to get sick tomorrow because I touched that doorknob?"). Making the problem more complicated isn't the solution. So how to make it simpler? Make the decision ahead of time! For me, budgets are the key to reducing the anxiety associated with financial decision making. Every six months or so, my wife and I spend hours deciding how much to spend per month on things. We can really take our time analyzing it because we only have to do it occasionally. Once we set $50/month for restaurants, I no longer have to feel like a loser every time we eat out -- similarly for discretionary spending and everything else. TBH, I'm not sure exactly why it works -- why I don't regret the dollar amounts we put on every budget -- but it really does help. I join my coworkers for lunch on Fridays because I already decided that was okay. At that point, I can focus my OC-tendencies on eating every last gram of organic matter on my plate. Without directly touching the ketchup bottle, of course. :) Again, just speaking for myself, but having budgets has done wonders for my stress level with respect to finances. For me, budgets are less about restricting my spending and more about permitting me to spend! It's not perfect, but it helps. (Not that it's relevant, but I reworded this answer about 20 times and only hit 'Post' with great effort to suppress the need to keep editing it! I'll be refreshing every 30 seconds for updates.) |
How smart is it to really be 100% debt free? | 100% debt free is an objective. Being there is good, but as long as you have a plan to get there, are sticking to it and it's moving you towards it at a reasonable rate (e.g. "I will be debt free by the end of 2011."), you should be in good shape. It's when you don't ever expect to be debt free that you have a problem. Going into debt is one question and a very situation dependent one. Getting back out is another and a very easy one: pay off all debts as a fast as you reasonably can, starting with the highest interest ones. OTOH this doesn't imply that you should forgo every optional expense (including things like savings and entertainment) to pay off debts, that would be unreasonable, but just that paying down debts should always be considered when thinking about what to do with money. |
Are there any risks from using mint.com? | Mint.com uses something called OFX (Open Financial Exchange) to get the information in your bank account. If someone accessed your mint account they would not be able to perform any transactions with your bank. All they would be able to do is view the same information you do, which some of it could be personal <- that's up to you. Generally the weakest point in security is with the user. An "attacker" is far more likely to get your account information from you then he is from the site your registered with. Why you're the weakest point: When you enter your account information, your password is never saved exactly how you enter it. It's passed through what is called a "one way function", these functions are easy to compute one way but given the end-result is EXTREMELY difficult to compute in reverse. So in a database if someone looked up your password they would see it something like this "31435008693ce6976f45dedc5532e2c1". When you log in to an account your password is sent through this function and then the result is checked against what is saved in the database, if they match you are granted access. The way an attacker would go about getting your password is by entering values into the function and checking the values against yours, this is known as a brute force attack. For our example (31435008693ce6976f45dedc5532e2c1) it would take someone 5 million years to decry-pt using a basic brute force attack. I used "thisismypassword" as my example password, it's 12 characters long. This is why most sites urge you to create long passwords with a mix of numbers, uppercase, lowercase and symbols. This is a very basic explanation of security and both sides have better tools then the one explained but this gives you an idea of how security works for sites like these. You're far more likely to get a virus or a key logger steal your information. I do use Mint. Edit: From the Mint FAQ: Do you store my bank login information on your servers? Your bank login credentials are stored securely in a separate database using multi-layered hardware and software encryption. We only store the information needed to save you the trouble of updating, syncing or uploading financial information manually. Edit 2: From OFX About Security Open Financial Exchange (OFX) is a unified specification for the electronic exchange of financial data between financial institutions, businesses and consumers via the Internet. This is how mint is able to communicate with even your small local bank. FINAL EDIT: ( This answers everything ) For passwords to Mint itself, we compute a secure hash of the user's chosen password and store only the hash (the hash is also salted - see http://en.wikipedia.org/wiki/Sal... ). Hashing is a one-way function and cannot be reversed. It is not possible to ever see or recover the password itself. When the user tries to login, we compute the hash of the password they are attempting to use and compare it to the hashed value on record. (This is a standard technique which every site should use). For banking credentials, we generally must use reversible encryption for which we have special procedures and secure hardware kept in our secure and guarded datacenter. The decryption keys never leave the hardware device (which is built to destroy the key material if the tamper protection is attacked). This device will only decrypt after it is activated by a quorum of other keys, each of which is stored on a smartcard and also encrypted by a password known to only one person. Furthermore the device requires a time-limited cryptographically-signed permission token for each decryption. The system (which I designed and patented) also has facilities for secure remote auditing of each decryption. Source: David K Michaels, VP Engineering, Mint.com - http://www.quora.com/How-do-mint-com-and-similar-websites-avoid-storing-passwords-in-plain-text |
Tax benefits of recycling | They are certainly only suggesting that the money you pay to recycle the bulbs is tax deductible as a donation, assuming that they are indeed a 501(c)(3) non-profit. Donations of goods are only deductible at fair market value. Light bulbs that no longer light up have no market value, so only the payment could possibly be deductible. |
Will depositing $10k+ checks each month raise red flags with the IRS? | Contractors regularly deposit checks like this; if the income is legitimate don't worry. Report it to the IRS as income whether or not the customer issues you a 1099. With deposits like this you should be making quarterly payments to the IRS for your projected income. |
Pros and Cons of Interest Only Loans | The main disadvantage is that interest rates are higher for the interest-only loan. It's higher risk to the bank, since the principal outstanding is higher for longer. According to the New York Times, "Interest rates are usually an eighth- to a half-percentage point higher than on fully amortized jumbo loans." They're also tougher to qualify for, and fewer lenders offer them, again due to the risk to the bank. Since you can always put extra towards the principal, strictly speaking, these are the only downsides. The upside, of course, is that you can make a lower payment each month. The question is what are you doing with this? If this is the only way you can afford the payments, there's a good chance the house is too expensive for you. You're not building equity in the home, and you have the risk of being underwater if the house price goes down. If you're using the money for other things, or you have variable income, it might be a different story. For the former, reinvesting in a business you own might be a reason, if you're cognizant of the risks. For the latter, salespeople on commission, or financial industry types who get most of their income in bonuses, can benefit from the flexibility. |
What is a clearing bank, in specific, what does RMB clearing bank do? | Clearing means processing unsettled transactions. Specifically - all the money transfers between the banks, in this case. Clearing Bank for RMB business means that all RMB transactions will be cleared through that specific bank. If bank A in Hong Kong gets a check drawn on Bank B in Hong Kong, and the check is in RMB - A will go to the BoC with the check and will get the money, and BoC will take the money from B. That obviously requires both A and B have accounts with BoC. "Sole" clearing house means there's only one. I.e.: in our example, A and B cannot settle the check through C where they both happen to have accounts, or directly with each other. They MUST utilize the services of BoC. |
Is interest on a personal loan tax deductible? | When you pay interest on a loan used to fund a legitimate investment or business activity, that interest becomes an expense that you can deduct against related income. For example, if you borrowed $10k to buy stocks, you could deduct the interest on that $10k loan from investment gains. In your case, you are borrowing money to invest in the stock of your company. You would be able to deduct the interest expense against investment gain (like selling stock or receiving dividends), but not from any income from the business. (See this link for more information.) You do not have to pay taxes on the interest paid to your father; that is an expense, not income. However, your father has to pay taxes on that interest, because that is income for him. |
Why would a car company lend me money at a very low interest rate? | In addition to the other answers, also consider this: Federal bond interest rates are nowhere near the rates you mentioned for short term bonds. They are less than 1% unless you're talking about terms of 5-10 years, and the rates you mentioned are for 10 to 30-years terms. Dealer financed car loans are usually 2-5 years (the shorter the term - the lower the rate). In addition, as said by others, you pay more than just the interest if you take a car loan from the dealer directly. But your question is also valid for banks. |
Are there contracts for fixed pay vs. fixed pay rates? | Software Contractors are not employees of the company that is procuring the software. Software Contractors necessarily work for another legal business entity. There is a business to business relationship between the procurer of the software and the entity producing the software. Therefore, the company procuring the software is not required to pay a minimum wage, or adhere to any other employment law. When any individual or company orders a software product and agrees to pay for it, that is a fixed priced contract. This happens millions of times a day. The amount of time taken to produce the software has no direct bearing on price. For instance, there is no minimum price for Microsoft Word based on the number of hours taken to produce it. Generally a Software Contractor will be a director and shareholder of a limited liability corporation. Directors are exempt from the standard protection offered under employment law. If the company producing the software was employing non-directors to produce the software, rather than sub-contracting to another business then employment law would apply. |
Why do interest rates increase or decrease? | My answer is specific to the US because you mentioned the Federal Reserve, but a similar system is in place in most countries. Do interest rates increase based on what the market is doing, or do they solely increase based on what the Federal Reserve sets them at? There are actually two rates in question here; the Wikipedia article on the federal funds rate has a nice description that I'll summarize here. The interest rate that's usually referred to is the federal funds rate, and it's the rate at which banks can lend money to each other through the Federal Reserve. The nominal federal funds rate - this is a target set by the Board of Governors of the Federal Reserve at each meeting of the Federal Open Market Committee (FOMC). When you hear in the media that the Fed is changing interest rates, this is almost always what they're referring to. The actual federal funds rate - through the trading desk of the New York Federal Reserve, the FOMC conducts open market operations to enforce the federal funds rate, thus leading to the actual rate, which is the rate determined by market forces as a result of the Fed's operations. Open market operations involve buying and selling short-term securities in order to influence the rate. As an example, the current nominal federal funds rate is 0% (in economic parlance, this is known as the Zero Lower Bound (ZLB)), while the actual rate is approximately 25 basis points, or 0.25%. Why is it assumed that interest rates are going to increase when the Federal Reserve ends QE3? I don't understand why interest rates are going to increase. In the United States, quantitative easing is actually a little different from the usual open market operations the Fed conducts. Open market operations usually involve the buying and selling of short-term Treasury securities; in QE, however (especially the latest and ongoing round, QE3), the Fed has been purchasing longer-term Treasury securities and mortgage-backed securities (MBS). By purchasing MBS, the Fed is trying to reduce the overall risk of the commercial housing debt market. Furthermore, the demand created by these purchases drives up prices on the debt, which drives down interest rates in the commercial housing market. To clarify: the debt market I'm referring to is the market for mortgage-backed securities and other debt derivatives (CDO's, for instance). I'll use MBS as an example. The actual mortgages are sold to companies that securitize them by pooling them and issuing securities based on the value of the pool. This process may happen numerous times, since derivatives can be created based on the value of the MBS themselves, which in turn are based on housing debt. In other words, MBS aren't exactly the same thing as housing debt, but they're based on housing debt. It's these packaged securities the Fed is purchasing, not the mortgages themselves. Once the Fed draws down QE3, however, this demand will probably decrease. As the Fed unloads its balance sheet over several years, and demand decreases throughout the market, prices will fall and interest rates in the commercial housing market will fall. Ideally, the Fed will wait until the economy is healthy enough to absorb the unloading of these securities. Just to be clear, the interest rates that QE3 are targeting are different from the interest rates you usually hear about. It's possible for the Fed to unwind QE3, while still keeping the "interest rate", i.e. the federal funds rate, near zero. although this is considered unlikely. Also, the Fed can target long-term vs. short-term interest rates as well, which is once again slightly different from what I talked about above. This was the goal of the Operation Twist program in 2011 (and in the 1960's). Kirill Fuchs gave a great description of the program in this answer, but basically, the Fed purchased long-term securities and sold short-term securities, with the goal of twisting the yield curve to lower long-term interest rates relative to short-term rates. The goal is to encourage people and businesses to take on long-term debt, e.g. mortgages, capital investments, etc. My main question that I'm trying to understand is why interest rates are what they are. Is it more of an arbitrary number set by central banks or is it due to market activity? Hopefully I addressed much of this above, but I'll give a quick summary. There are many "interest rates" in numerous different financial markets. The rate most commonly talked about is the nominal federal funds rate that I mentioned above; although it's a target set by the Board of Governors, it's not arbitrary. There's a reason the Federal Reserve hires hundreds of research economists. No central bank arbitrarily sets the interest rate; it's determined as part of an effort to reach certain economic benchmarks for the foreseeable future, whatever those may be. In the US, current Fed policy maintains that the federal funds rate should be approximately zero until the economy surpasses the unemployment and inflation benchmarks set forth by the Evans Rule (named after Charles Evans, the president of the Federal Reserve Bank of Chicago, who pushed for the rule). The effective federal funds rate, as well as other rates the Fed has targeted like interest rates on commercial housing debt, long-term rates on Treasury securities, etc. are market driven. The Fed may enter the market, but the same forces of supply and demand are still at work. Although the Fed's actions are controversial, the effects of their actions are still bound by market forces, so the policies and their effects are anything but arbitrary. |
I have about 20 000 usd. How can invest them to do good in the world? | I'd suggest you to separate "doing good" from "earning profit". Look at the guys like Warren Buffett and Bill Gates (or Carnegie and Ford for that matters). They understand that you can't reconcile the two goals, so they donate for free what they earned for profit. If you want to make a social impact with your money, you can check the charity programs that have a confirmed record of a positive impact on people's lives. Non-profits that studied such programs publish their results extensively: AidGrade compiles this research and suggests direct donations to the programs that demonstrated best outcomes per dollar invested: |
In what circumstances will a bank waive the annual credit card fee? | See if the bank has other credit cards they offer. Many banks have multiple ones: some cards have great benefits, others do not; some cards have high rates, some do not; some cards are secured, some do not. If they have a card that you like ask them to switch you to the card you want. They should be able to do so very easily. Your card number will change, but they will treat it is a replacement so that your credit score will not take a hit during the switch. It may be possible to get them to waive the annual fee, but most won't because each card type they offer are separate products so they only allow you to pick one of their options. If they don't have a card to your liking apply for a card from anther bank that has the benefits and annual fees (zero) that you are looking for. It may be that the new card will start with a lower limit, but it will increase over time, especially as you shift more of your business to the new card. When you cancel the old card before the next year rolls around you will take a small short hit to your credit score, but that is ok. |
Should I try to hedge my emergency savings against currency and political concerns? | You have to balance several concerns here. The primary problem is that if you go to the effort of saving your money you want to also be sure that your savings will not lose too much of its value to inflation. Ukraine had a terrible inflation spike in 2015 for obvious reasons. Even as inflation has settled down in 2016, it is stabilizing around 12% which is very high Exchange rates are your next concern. If you lose a large percentage of the value of your money just in the process of exchanging it, that also eats away at the value of your money. If you accept the US Federal Reserve target of 2% inflation, then you should only exchange money that you will hold long enough that both exchange fees will outweigh the 10% inflation advantage. Even in cases where you have placed your money in a foreign currency, there's a chance that your government could freeze accounts denominated in foreign currencies, so there's always the political risk that you have to factor in. For that reason keeping foreign currency in cash also has some appeal because it cannot be confiscated as easily. You could still certainly be robbed, so keeping all of your savings in cash isn't a great solution either. All in all, you are diversifying your savings if you use the strategy of balancing all three methods. Splitting it evenly to 5% for each method isn't the most important. I would suggest taking advantage of good exchange rates (as they appear) to time when you buy foreign currency. |
Discussing stock and stock index movement: clarifying percentage vs. points? | As I write this, the NASDAQ Composite is at 2790.00, down 6.14 points from yesterday. To calculate the percentage, you take 6.14 and divide by yesterday's close of 2796.14 to yield 0.22%. In your example, if SPY drops from 133.68 to 133.32, you use the difference of -0.36 and divide by the original, i.e. -0.36/133.68 = -0.27%. SPY is an ETF which you can invest in that tracks the S&P 500 index. Ideally, the index would have dropped the same percentage as SPY, but the points would be different (~10x higher). To answer your question about how one qualifies a point, it completely depends on the index being discussed. For example, the S&P 500 is a market-capitalization weighted index of the common stock of 500 large-cap US public companies. It is as if you owned every share of each of the 500 companies, then divide by some large constant to create a number that's easily understood mentally (i.e. 1330). The NASDAQ Composite used the same methodology but includes practically all stocks listed on the NASDAQ. Meanwhile, the Dow Jones Industrial Average is a price-weighted index of 30 large-cap companies. It's final value is modified using a divisor known as the Dow Divisor, which accounts for stock splits and similar events that have occurred since a stock has joined the index. Thus, points when referring to an index do not typically represent dollars. Rather, they serve as a quantitative measure of how the market is doing based on the performance of the index constituents. ETFs like SPY add a layer of abstraction by creating an investible vehicle that ideally tracks the value of the underlying index directly. Finally, neither price nor index value is related to volume. Volume is a raw measurement of the total number of shares traded for a given stock or the aggregate for a given exchange. Hope this helps! |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | You're asking if lottery ticket can ever produce a positive expected value (EV). The short answer is, "no". There's an interesting article that goes into the details and is heavy on the math and graphs. The key point: Even if you think you have a positive expected value due to the size of the jackpot being larger than the number of possible numbers, as more tickets are purchased (and the jackpot grows larger) the odds of someone else picking the winner goes up and your EV goes down. The article concludes: [It] ... paints a grim picture for anyone still holding out hope that a lottery ticket can ever be an economically rational investment. As the jackpot grows in value, the number of people who try to win it grows super-linearly. This human behavior has a mathematical consequence: even though the jackpot itself can theoretically grow without bound, there is a point at which the consequent ticket-buying grows to such a fever pitch that the expected value of the jackpot actually starts going down again. |
How to sell a stock in a crashing market? | It is typically possible to sell during a crash, because there are enough people that understand the mechanics behind a crash. Generally, you need to understand that you don't lose money from the crash, but from selling. Every single crash in history more than recovered, and by staying invested, you wouldn't have lost anything (this assumes you have enough time to sit it out; it could take several years to recover). On the other side of those deals are people that understand that, and make money by buying during a crash. They simply sit the crash out, and some time later they made a killing from what you panic-sold, when it recovers its value. |
NYSE vs. Nasdaq - can I tell what exchange a ticker traded on, based solely on the ticker? | You cannot determine this solely by the ticker length. However, there are some conventions that may help steer you there. Nasdaq has 2-4 base letters BATS has 4 base letters NYSE equity securities have 1-4 base letters. NYSE Mkt (formerly Amex) have 1-4 base letters. NYSE Arca has 4 base letters OTC has 4 base letters. Security types other than equities may have additional letters added, and each exchange (and data vendors) have different conventions for how this is handled. So if you see "T" for a US-listed security it would be only be either NASDAQ, NYSE or NYSE Mkt. If you see "ANET" then you cannot tell which exchange it is listed on. (In this case, ANET Arista Networks is actually a NYSE stock). For some non-equity security types, such as hybrids, and debt instruments, some exchanges add "P" to the end for "preferreds" (Nasdaq and OTC) and NYSE/NYSE Mkt have a variety of methods (including not adding anything) to the ticker. Examples include NYSE:TFG, NYSEMkt:IPB, Nasdaaq: AGNCP, Nasdaq:OXLCN. It all becomes rather confusing given the changes in conventions over the years. Essentially, you require data that provides you with ticker, listing location and security type. The exchanges allocate security tickers in conjunction with the SEC so there are no overlaps. eg. The same ticker cannot represent two different securities. However, tickers can be re-used. For example, the ticker AB has been used by the following companies: |
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