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Higher auto insurance costs: keep car or switch to public transit? | I'm guessing Toronto? Sell the car! Use public transit. Save a ton of money. You can always rent a car for the day or weekend (or use a service like Uber) when necessary at a fraction of the cost of car ownership, and feel good about it! |
Retirement planning: Pension or personal saving/investing? | with me and my wife coming from different countries, and us both living in a non-native country, we have very little clue where we will eventually settle down. The answer depends on where you reside currently, tax rules and ability to move funds. As well as where you plan to settle down and the tax rules there. From what I understand, once you eventually retire and take an annuity from your pension you are then taxed on it as income anyway? Yes and No. For example if you move from US to India, stay in India for 7 years. You then move your retirement funds from US to India the entire amount would be taxable in India. but would this 'freedom' would come with significant costs in terms of savings at retirement? The cost would be hard to predict. It depends on the tax treatments in the respective countries on the retirement kitty. It also depends on whether the country you are staying in will allow complete withdrawal and transfer of retirement funds without penalty. |
What is today's price of 15 000 Euro given 15 years ago? | What you are positioning as a loan was not a loan at all. Your father bought something to be delivered in the future. Your aunt does not want to deliver it, so she should buy it back at whatever the current market value is. What is the price that your dad believes her share of the inheritance is currently worth? Is that based on actual appraisals and some sort of objective audit? If so, your aunt doesn't have much of a case. If not, then she could seek an audit to bolster her bargaining position. How much did your aunt benefit from having a place to live for the last 15 years. Was that benefit greater than some larger amount of money at an unknown future date? That's probably why she sold her inheritance 15 years ago. Now that the inheritance looks like it is going to be available soon, she wants to trade back after having enjoyed the use of your father's money. That might be okay, but simply paying back the original sum with inflation, but without interest, doesn't seem fair to your father. She may not be able to afford to give any more than what she is offering, in which case, she might want to consider offering the original sum now and some portion of her inheritance as interest on that original sum. I'm not taking sides in this one. If it were one of my siblings, I'd be inclined to give the benefit of the doubt and take a smaller amount back if I felt that the lesson was learned (and if I felt that he/she would make wise use of my gift to him/her). I have no idea what your father's current economic situation is, nor am I aware of any other baggage that might influence his feelings about his sister. It's as likely as not that money isn't really what is bothering him, in which case, the amount she repays may have little to do with bridging the divide between them. You might need to ask different questions in the Interpersonal Skills stack if you want to help your father feel better. |
Can I do periodic rollovers from my low-perfoming 401k to an IRA? | If the difference in performance is worth it, consider "borrowing" from your 401k to put into the Roth. You pay it back, but you can stretch it out over time, and the interest charged is actually yours, because you borrowed from yourself. But you can only borrow half of the account and you have to pay it back before you can do another loan. |
What will happen when a bid price is higher than an ask price? | It depends on the sequence in which the order [bid and ask] were placed. Please read the below question to understand how the order are matched. How do exchanges match limit orders? |
Is there any way to buy a new car directly from Toyota without going through a dealership? | You can buy a new Toyota from a non-dealer, but not from Toyota directly as they have no retail distribution capability. There is no need to buy directly from Toyota if you want to get a new car without going through a dealer. In many cases people buy new cars but have to sell them immediately for one reason or another. |
Self assessment expenses - billing date or payment date? | Unless you're running a self-employed business with a significant turnover (more than £150k), you are entitled to use cash basis accounting for your tax return, which means you would put the date of transactions as the payment date rather than the billing date or the date a debt is incurred. For payments which have a lag, e.g. a cheque that needs to be paid in or a bank transfer that takes a few days, you might also need to choose between multiple payment dates, e.g. when you initiated the payment or when it took effect. You can pick one as long as you're consistent: You can choose how you record when money is received or paid (eg the date the money enters your account or the date a cheque is written) but you must use the same method each tax year. |
Are there any market data providers that provide a query language? | You can give YQL a try. I'm not sure it can do the query you want, but for example you can do: (try it here) And this best thing about it - it's free. |
What are “equity assets”? | If I hold a bond then I have a debt asset. If I hold physical silver then I have a commodity asset. If I hold the stock of an individual company then I have an equity asset. Equities, commodities and debts are the three kinds of assets that a person can hold. Edit: I forgot one other kind of asset; monetary asset. If I stuff my mattress with cash (USD) I am holding a monetary asset. Short-term Treasury Bills really behave more like a monetary asset than a bond. So besides actual, physical, currency I would categorize T-bill as a monetary asset. https://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm |
Ray Dalio - All Weather Portfolio | Here are the specific Vanguard index funds and ETF's I use to mimic Ray Dalio's all weather portfolio for my taxable investment savings. I invest into this with Vanguard personal investor and brokerage accounts. Here's a summary of the performance results from 2007 to today: 2007 is when the DBC commodity fund was created, so that's why my results are only tested back that far. I've tested the broader asset class as well and the results are similar, but I suggest doing that as well for yourself. I use portfoliovisualizer.com to backtest the results of my portfolio along with various asset classes, that's been tremendously useful. My opinionated advice would be to ignore the local investment advisor recommendations. Nobody will ever care more about your money than you, and their incentives are misaligned as Tony mentions in his book. Mutual funds were chosen over ETF's for the simplicity of auto-investment. Unfortunately I have to manually buy the ETF shares each month (DBC and GLD). I'm 29 and don't use this for retirement savings. My retirement is 100% VSMAX. I'll adjust this in 20 years or so to be more conservative. However, when I get close to age 45-50 I'm planning to shift into this allocation at a market high point. When I approach retirement, this is EXACTLY where I want to be. Let's say you had $2.7M in your retirement account on Oct 31, 2007 that was invested in 100% US Stocks. In Feb of 2009 your balance would be roughly $1.35M. If you wanted to retire in 2009 you most likely couldn't. If you had invested with this approach you're account would have dropped to $2.4M in Feb of 2009. Disclaimer: I'm not a financial planner or advisor, nor do I claim to be. I'm a software engineer and I've heavily researched this approach solely for my own benefit. I have absolutely no affiliation with any of the tools, organizations, or funds mentioned here and there's no possible way for me to profit or gain from this. I'm not recommending anyone use this, I'm merely providing an overview of how I choose to invest my own money. Take or leave it, that's up to you. The loss/gain incured from this is your responsibility, and I can't be held accountable. |
Table of how many years it takes to make a specified return on the stock market? | Well depends but "on average" the stock market has historically returned somewhere around 10% per year. Note, this can vary wildly from year to year see http://en.wikipedia.org/wiki/S%26P_500#Market_statistics So it would be roughly 2.8 years to get your 30% if you happen to get the average market return for those 3 years, but the chances of that happening exactly are slim to none. You could end up with +50% or -30% over that ~3 year period of time - so the calculation doesn't do you that much good for that short period of time, but if you are talking a span of 30 years then you could plan using that as a very rough ballpark. Good rule of thumb is you shouldn't put any money in the stock market you think you will need anytime in the next 5 years. Formula to figure out total gain would be Principal x (1+ rate of return) ^ years |
What to do if a state and federal refund is denied direct deposit? | It is not allowed to pay refunds to anyone other than the taxpayer. This is due to various tax return fraud schemes that were running around. Banks are required to enforce this. If the direct deposit is denied, a check will be issued. In her name, obviously. What she does with it when she gets it is her business - but I believe that tax refund checks may not be just "endorsed", the bank will likely want to see her when you deposit it to your account, even if it is endorsed. For the same reason. |
How smart is it really to take out a loan right now? | You are not "the economy". The economy is just the aggregate of what is going on with everyone else. You should make the decision based on your own situation now and projected into the future as best you can. Loan rates ARE at historical lows, so it is a great time to take a loan if you actually need one for some reason. However, I wouldn't go looking for a loan just because the rates are low for the same reason it doesn't make sense to buy maternity clothes if you are a single guy just because they are on sale. |
What are the advantages/disadvantages of a self-directed IRA? | Our company does a lot of research on the self-directed IRA industry. We also provide financial advice in this area. In short, we have seen a lot in this industry. You mentioned custodian fees. This can be a sore spot for many investors. However, not all custodians are expensive, you should do your research before choosing the best one. Here is a list of custodians to help with your research Here are some of the more common pros and cons that we see. Pros: 1) You can invest in virtually anything that is considered an investment. This is great if your expertise is in an area that cannot be easily invested in with traditional securities, such as horses, private company stock, tax liens and more. 2) Control- you have greater control over your investments. If you invest in GE, it is likely that you will not have much say in the running of their business. However, if you invest in a rental property, you will have a lot of control over how the investment should operate. 3) Invest in what you know. Peter lynch was fond of saying this phrase. Not everyone wants to invest in the stock market. Many people won't touch it because they are not familiar with it. Self-directed IRAs allow you to invest in assets like real estate that you know well. Cons: 1) many alternative investments are illiquid. This can present a problem if you need to access your capital for withdrawals. 2) Prohibited transactions- This is a new area for many investors who are unfamiliar with how self-directed IRAs work 3) Higher fees- in many cases, the fees associated with self-directed IRA custodians and administrators can be higher. 4) questionable investment sponsors tend to target self-directed IRA owners for fraudulent investments. The SEC put out a good PDF about the risks of fraud with self-directed IRAs. Self Directed IRAs are not the right solution for everyone, but they can help certain investors focus on the areas they know well. |
Should I change 401k investment options to prepare for rising interest rates? | As others have pointed out your bond funds should have short durations, preferably not more than about 2 years. If you are in a bond fund for the long haul meaning you do not have to draw on your bond fund a short time after interest rates have gone up, it is not a big issue. The fund's holdings will eventually turn over into higher interest bearing paper. If bonds do go down, you might want to add more to the fund(s) (see my comment on age-specific asset allocation below). Keep in mind that some stocks are interest sensitive, for example utility stocks which are used as an income source and their dividends compete with rates on CDs which are much safer. Right now CD rates are very low. This could change. It's possible that we may be in an unusually sensitive interest rate period that might have large effects on the stock market, yet to be determined. The reason is that rates have been so low for such a long time that folks that normally would have obtained income streams from bonds have turned to dividend bearing stocks. Some believe that recent market rises are due to such people seeking dividends to enhance cash inflows. If, and emphasis on if, this is true, we could see a sharp drop in the market as sell offs occur as those who want cash streams move from stocks to ultra safe, government insured CDs. Only time will tell if this is going to play out. If retirement for you is 15+ years in the future and the market goes down (bonds or equities), good stuff - it's a buying opportunity in whatever category has dropped. Most important is to keep an eye on your asset allocation and make sure it is appropriate to your age. You did not state the percentages in each category, so further discussion is impossible on that topic. With more than 15 years to go, I personally would be heavily weighted on the equity side, mostly mid-cap and some small equity funds or ETFs in both domestic and international markets. As you age, shuffle some equities into fixed income (bonds, CDs and the like). Work up an asset allocation plan - start thinking about it now. Don't wait. |
I cosigned for a friend who is not paying the payment | I would like to add one minor point for clarity: Cosigning means that you, alongside your friend, enter into a contract with the bank. It does not necessarily mean that you now have a contract with your friend, although that could implicitly be concluded. If the bank makes use of their contracted right to make you pay your friend's debts with them, this has no effect on your legal relationship with your friend. Of course, you can hold him or her liable for your damages he or she has caused. It is another question whether this would help you in practice, but that has been discussed before. |
Why do banks require small businesses to open a business bank account instead of a cheaper personal one? | You could, but the bank won't let you... If you're a sole proprietor - then you could probably open a personal account and just use it, and never tell them that is actually a business. However, depending on your volume of operations, they may switch you on their own to business account by the pattern of your transactions. For corporations, you cannot use a personal account since the corporation is a separate legal entity that owns the funds. Also, you're generally required to separate corporate and personal funds to keep the limited liability protection (which is why you have the corporation to begin with). Generally, business accounts have much higher volumes and much more transactions than personal accounts, and it costs more for the banks to run them. In the US, some banks offer free, or very low-cost, business accounts for small businesses that don't need too many transactions. I'm sure if you shop around, you'll find those in Canada as well. |
What is the theory behind Rick Van Ness's risk calculation in the video about diversification? | John Bensin's answer covers the math, but I like the plain-English examples of the theory from William Bernstein's fine book, The Intelligent Asset Allocator. At the author's web site, you can find the complete chapter 1 and chapter 2, though not chapter 3, which is the one with the "multiple coin toss" portfolio example I want to highlight. I'll summarize Bernstein's multiple coin toss example here with some excerpts from the book. (Another top user, @JoeTaxpayer, has also written about the coin flip on his blog, also mentioning Bernstein's book.) Bernstein begins Chapter 1 by describing an offer from a fictitious "Uncle Fred": Imagine that you work for your rich but eccentric Uncle Fred. [...] he decides to let you in on the company pension plan. [...] you must pick ahead of time one of two investment choices for the duration of your employment: Certificates of deposit with a 3% annualized rate of return, or, A most peculiar option: At the end of each year Uncle Fred flips a coin. Heads you receive a 30% investment return for that year, tails a minus 10% (loss) for the year. This will be hereafter referred to as "Uncle Fred’s coin toss," or simply, the "coin toss." In effect, choosing option 2 results in a higher expected return than option 1, but it is certainly riskier, having a high standard deviation and being especially prone to a series of bad tosses. Chapters 1 and 2 continue to expand on the idea of risk, and take a look at various assets/markets over time. Chapter 3 then begins by introducing the multiple coin toss example: Time passes. You have spent several more years in the employ of your Uncle Fred, and have truly grown to dread the annual coin-toss sessions. [...] He makes you another offer. At the end of each year, he will divide your pension account into two equal parts and conduct a separate coin toss for each half [...] there are four possible outcomes [...]: [...] Being handy with numbers, you calculate that your annualized return for this two-coin-toss sequence is 9.08%, which is nearly a full percentage point higher than your previous expected return of 8.17% with only one coin toss. Even more amazingly, you realize that your risk has been reduced — with the addition of two returns at the mean of 10%, your calculated standard deviation is now only 14.14%, as opposed to 20% for the single coin toss. [...] Dividing your portfolio between assets with uncorrelated results increases return while decreasing risk. [...] If the second coin toss were perfectly inversely correlated with the first and always gave the opposite result [hence, outcomes 1 and 4 above never occurring], then our return would always be 10%. In this case, we would have a 10% annualized long-term return with zero risk! I hope that summarizes the example well. Of course, in the real world, one of the tricks to building a good portfolio is finding assets that aren't well-correlated, and if you're interested in more on the subject I suggest you check out his books (including The Four Pillars of Investing) and read more about Modern Portfolio Theory (MPT). |
Why does it seem unnecessary to fully save for irregular periodic expenses? | It totally depends on when your expenses hit and whether you might have a larger stock than necessary. If you run your projections against the monthly save and the intervals of when you'll need the money, you might be able to extract some stock from the account. I recommend making this a bit simpler. I operate this with an "annuals" account which is a complete aggregate of expenses that I know I have several times per year (or once every two years), but are not monthly or part of a weekly non-fixed expense budget cap. Instead of tracking each expense individually and saving for it, create a spreadsheet that lists out all of these expenses, sum them, and then divide by 12. When I first opened this account, I added a one-time deposit to "catchup" to make sure I would never need to pull money from another source for these expenses. As new expenses come into existence that I should plan for annually, I simply add them to this list and adjust the monthly auto-deposit to the account. This also adjusts my single number weekly budget. To make it easy, whenever I see an expense on my annuals list on my amex or debit, I simply initiate a withdrawal from the annuals savings and it will balance out my weekly or monthly budget expenses. The goal of my annuals account is to simply avoid anti-windfalls that are known quantities (insurance, annual eye exam, sprinkler flush, amazon prime, etc) that would throw a wrench in weekly/monthly budget and expense planning. The more variables you can remove from your weekly/monthly, the more regular it becomes and the more likely you will be able to stick to a budget. |
Is it true that the price of diamonds is based on a monopoly? | Yes, the De Beers Group of Companies is a diamond cartel that had complete control of the diamond market for most of the 20th century. They still control a sizable portion of the market and their effort at marketing (particularly with the slogan "A Diamond is Forever") has done much to inflate the market for diamonds in our society. The intrinsic value of diamonds is much lower than the market prices currently reflect, but with the caveat that there is a rarity factor which does drive up the price of larger diamonds. The larger the diamond, the more likely it is to have flaws, so when it comes to diamonds that are 5 carats or greater, you are not as likely to see a new supply of diamonds disrupt the prices of those larger stones. Some other ways that high end jewelers and suppliers are differentiating themselves is by patenting a specific cut that they design. This is another barrier to entry that works to create some artificial price inflation. One common example is the Lucida cut sometimes referred to as the Tiffany cut. Diamonds can also be manufactured. The same carbon structure can be grown in a lab. These stones have the same carbon structure as natural diamonds but without the flaws and visible impurities. Most manufactured diamonds are used industrially, but processes have improved sufficiently to allow for gemstone quality synthetic diamonds. They sell at a decent discount, so that might be an option to consider if you want a substitute. In the years to come, you can expect prices for synthetic diamonds to continue to decrease which will probably put some further downward pressure on jewelers' prices. |
Are Index Funds really as good as “experts” claim? | Two main points to answer this in my opinion. First, most people don't start with say half a million dollar to buy all the stocks they need in one shot but rather they accumulate this money gradually. So they must make many Buys in their lifetime. Similarly, most people don't need to withdraw all their investment in one day (and shouldn't do this anyway as it cuts the time of investment). So there will be many Sells. Performing a single buy or sell per year is not efficient since it means you have lots of cash sitting doing nothing. So in this sense, low cost indexing lets you quickly invest your money (and withdraw it when needed after say you retire) without worrying about commission costs each time. The second and most important point to me to answer this is that we should make a very clear distinction between strategy and outcome. Today's stock prices and all the ups and downs of the market are just one possible outcome that materialized from a virtually uncountable number of possible outcomes. It's not too hard to imagine that tomorrow we hear all iPhones explode and Apple stock comes crashing down. Or that in a parallel universe Amazon never takes off and somehow Sears is the king of online commerce. Another item in the "outcome" category is your decisions as a human being of when to buy and sell. If that exploding iPhone event does occur, would you hold on to your stocks? Would you sell and cut your losses? Does the average person make the same decision if they had $1000 invested in Apple alone vs $1M? Index investing offers a low cost strategy that mitigates these uncertainties for the average person. Again here the key is the word "average". Picking a handful of the heavyweight stocks as you mention might give you better returns in 30 years, but it could just as easily give you worse. And the current data suggest the latter is more likely. "Heavyweights" come and go (who were they 30 years ago?) and just like how the other 450 companies may seem right now as dragging down the portfolio, just as easily a handful of them can emerge as the new heavyweights. Guaranteed? No. Possible? Yes. Jack Bogle is simply saying low cost indexing is one of the better strategies for the average person, given the data. But nowhere is it guaranteed that in this lifetime (e.g. next 30 years) will provide the best outcome. Berkshire on the other hand are in the business of chasing maximum outcomes (mid or short term returns). It's two different concepts that shouldn't be mixed together in my opinion. |
What is the rationale behind stock markets retreating due to S&P having a negative outlook on the USA? | When people (even people in the media) say: "The stock market is up because of X" or "The stock market is down because of Y", they are often engaging in what Nicolas Taleb calls the narrative falacy. They see the market has moved in one direction or another, they open their newspaper, pick a headline that provides a plausible reason for the market to move, and say: "Oh, that is why the stock market is down". Very rarely do statements like this actually come from research, asking people why they bought or sold that day. Sometimes they may be right, but it is usually just story telling. In terms of old fashioned logic this is called the "post hoc, ergo proper hoc" fallacy. Now all the points people have raised about the US deficit may be valid, and there are plenty of reasons for worrying about the future of the world economy, but they were all known before the S&P report, which didn't really provide the markets with much new information. Note also that the actual bond market didn't move much after hearing the same report, in fact the price of 10 year US Treasury bonds actually rose a tiny bit. Take these simple statements about what makes the market go up or down on any given day with several fistfuls of salt. |
What can I expect to pay when meeting my first financial planner? | My suggestion would be to ask the planner as an initial question as there could be a couple possible explanations for a free meeting: Initial consultation - Within some industries there will be that first meeting which is free to see how well do two people work together. In Canada there are some lawyers that will give a half-hour of their time and I'd imagine some financial planners may have a similar practice. This would be where that first meeting is a half-hour or hour to see what is your situation and what expertise do you want that the planner would have. Straight commission - There is also the possibility that the planner is compensated by the products you purchase through him. In this case, the mutual fund companies, insurance companies and other institutions that he recommends will be handling his compensation. While this does present a conflict of interest, you have to decide whether you want a fee-only planner which wouldn't have this issue though you'd have to pay out of pocket. Something to consider is what are you bringing to this meeting and how long is it intended to be. If you are bringing a lot of paperwork then it is definitely worth asking upfront while if it is an informal chat for a half hour then things may be different. |
What is the meaning of “short selling” or “going short” a stock? | Rich's answer captures the basic essence of short selling with example. I'd like to add these additional points: You typically need a specially-privileged brokerage account to perform short selling. If you didn't request short selling when you opened your account, odds are good you don't have it, and that's good because it's not something most people should ever consider doing. Short selling is an advanced trading strategy. Be sure you truly grok selling short before doing it. Consider that when buying stock (a.k.a. going long or taking a long position, in contrast to short) then your potential loss as a buyer is limited (i.e. stock goes to zero) and your potential gain unlimited (stock keeps going up, if you're lucky!) Whereas, with short selling, it's reversed: Your loss can be unlimited (stock keeps going up, if you're unlucky!) and your potential gain is limited (i.e. stock goes to zero.) The proceeds you receive from a short sale – and then some – need to stay in your account to offset the short position. Brokers require this. Typically, margin equivalent to 150% the market value of the shares sold short must be maintained in the account while the short position is open. The owner of the borrowed shares is still expecting his dividends, if any. You are responsible for covering the cost of those dividends out of your own pocket. To close or cover your short position, you initiate a buy to cover. This is simply a buy order with the intention that it will close out your matching short position. You may be forced to cover your short position before you want to and when it is to your disadvantage! Even if you have sufficient margin available to cover your short, there are cases when lenders need their shares back. If too many short sellers are forced to close out positions at the same time, they push up demand for the stock, increasing price and deepening their losses. When this happens, it's called a short squeeze. In the eyes of the public who mostly go long buying stock, short sellers are often reviled. However, some people and many short sellers believe they are providing balance to the market and preventing it sometimes from getting ahead of itself. [Disambiguation: A short sale in the stock market is not related to the real estate concept of a short sale, which is when a property owner sells his property for less than he owes the bank.] Additional references: |
Investment strategy for retired couple | The safest investment in the United States is Treasures. The Federal Reserve just increased the short term rate for the first time in about seven years. But the banks are under no obligation to increase the rate they pay. So you (or rather they) can loan money directly to the United States Government by buying Bills, Notes, or Bonds. To do this you set up an account with Treasury Direct. You print off a form (available at the website) and take the filled out form to the bank. At the bank their identity and citizenship will be verified and the bank will complete the form. The form is then mailed into Treasury Direct. There are at least two investments you can make at Treasury Direct that guarantee a rate of return better than the inflation rate. They are I-series bonds and Treasury Inflation Protected Securities (TIPS). Personally, I prefer the I-series bonds to TIPS. Here is a link to the Treasury Direct website for information on I-series bonds. this link takes you to information on TIPS. Edit: To the best of my understanding, the Federal Reserve has no ability to set the rate for notes and bonds. It is my understanding that they can only directly control the overnight rate. Which is the rate the banks get for parking their money with the Fed overnight. I believe that the rates for longer term instruments are set by the market and are not mandated by the Fed (or anyone else in government). It is only by indirect influence that the Fed tries to change long term rates. |
How to exercise options when you they're worth more money than you have? [duplicate] | The fact that the option is deep in the money will be reflected in the market price of the option so you can just sell it at a profit. If there's a (n almost) guaranteed profit to be had, however, you can always find someone who will lend you the money to cover the exercise... they'll charge you interest, however! |
Paying off mortgage or invest in annuity | You can't pay your bills with equity in your house. Assuming you paid off the mortgage, where would the money come from that you plan to live off of? If that is your whole retirement savings I'd say do neither. Maybe an annuity (not variable) for SOME of the money, keep the rest invested in conservative investments some of it in cash for emergencies. |
Why are stocks having less institutional investors a “good thing”? | It's not necessarily bad but it can cause the stock price to become a lot more volatile. Depends on which side of the bet you're on ;) Suppose a hedge fund manager thinks a company is poorly run. He may buy a ton of shares so that he can get rid of the current CEO and replace it with his/her own. For the hedge fund and others long on the stock, this is good. Those who are trading options or using some short-term strategies could get screwed because of the sudden volatility. My next point is related to the above. What is the intrinsic value of a stock? The current price of a stock is the equilibrium of all investor's perception of the stock's value. Professionals make up a value for a stock using models such as DCF. Once they do so they trade based on what they believe the value of the stock is. You might calculate a stock is worth 70 and I believe it's 80 so the stock price is going to fluctuate a bit but it should keep within that range (assuming we're the only investors). Then comes a hedge fund manager, say Carl Icahn, and discloses a stake in our stock. "Wow, the stock must be really valuable!" Everyone starts buying this stock so up it goes to 90, simply because the guy who seems to know what he's doing bought it. The point here is that now it's not trading based on intrinsic value, now it's purely psychological. Ie. it's now a momentum stock, which you have no idea when it'll crash. Look at Tesla, Netflix, or just google momentum stocks. All the big crashes in stock prices happen when these big funds unload their stocks. A surge in supply will cut the price. The problem is you can't predict when some fund manager will decide to sell some stake of his. Tying everything together is liquidity. The more liquid a stock is, the easier it is to obtain and the less volatile it is. The more people playing the game, with not too big shares of stock, the faster the price will converge to some equilibrium and with less volatility. Institutional investors take away liquidity. |
Why index funds have different prices? | Funds which track the same index may have different nominal prices. From an investors point of view, this is not important. What is important is that when the underlying index moves by a given percentage, the price of the tracking funds also move by an equal percentage. In other words, if the S&P500 rises by 5%, then the price of those funds tracking the S&P500 will also rise by 5%. Therefore, investing a given amount in any of the tracking funds will produce the same profit or loss, regardless of the nominal prices at which the individual funds are trading. To see this, use the "compare" function available on the popular online charting services. For example, in Google finance call up a chart of the S&P500 index, then use the compare textbox to enter the codes for the various ETFs tracking the S&P500. You will see that they all track the S&P500 equally so that your relative returns will be equal from each of the tracking funds. Any small difference in total returns will be attributable to management fees and expenses, which is why low fees are so important in passive investing. |
How should I file my taxes as a contractor? | For tax purposes you will need to file as an employee (T4 slips and tax withheld automatically), but also as an entrepreneur. I had the same situation myself last year. Employee and self-employed is a publication from Revenue Canada that will help you. You need to fill out the statement of business activity form and keep detailed records of all your deductible expenses. Make photocopies and keep them 7 years. May I suggest you take an accountant to file your income tax form. More expensive but makes you less susceptible to receive Revenue Canada inspectors for a check-in. If you can read french, you can use this simple spreadsheet for your expenses. Your accountant will be happy. |
What determines price fluctuation of groceries | Yes and no. First off, commodity prices reflect the cost of a good about 3 steps back in the retail supply chain; the agreed-upon price for the raw foodstuff between farmers/ranchers and manufacturers. Your grocer may carry bags of whole grain wheat, but that's certainly not all he carries that contains it. Same for corn, rice and other staple grains, as well as for fruits and vegetables, herbs (yes, you can buy basil by the ton on the CME), meats, various sugars, etc. So, a long-term sustained change in prices of a commodity foodstuff will eventually affect the real cost to you to buy things they're made from. However, in the short term, the retail supply chain will generally act as a buffer between these prices and the ones you see on the store shelf. Consumers don't like price increases, especially of necessities like food. When food costs go up, consumers can and will very quickly change their spending habits, buying cheaper options to get their needed calories. That makes manufacturers nervous; consumers not buying their product is a worse scenario than consumers buying their product at a reduced gain or even at a loss. So, manufacturers, and suppliers and retailers, will all absorb as much as they can of the cost of a commodities increase before beginning to pass it on to consumers. On the flip side, while consumers like price drops, they don't notice them as much as price increases. So, the supply chain will also absorb a fall in commodity prices by resisting price reductions in the consumer goods, as long as they can get away with it (which is usually longer than the price reduction actually lasts). The net effect is that processed food prices typically follow the gentle upward climb of long-term inflation, and only rarely do you see drastic price increases or decreases. Where this model breaks down a little bit is in highly perishable foodstuffs, especially seasonal or "wild-managed" foods; fruits and vegetables, seafood, etc. The limited time in which the stuff can be sold makes the process of getting a fish out of the ocean and a fruit off the tree and into your grocery store much more market-driven; the producers, suppliers and grocers are all in constant contact over what's available and how much they can get for what price. The prices therefore are typically a lower markup (unlike highly processed grain-based foods, there's not much added value to be marked up between the apple farmer picking the fruit and the grocer putting it on display), but also much more volatile; if there's a bumper crop of fruit, the farmer has to unload it all or it goes to waste, while similarly if an early freeze decimated the apple crop, the suppliers can't just get some of last year's bumper crop out of storage; they fight with everyone else for what little made it to market. Farmers will sometimes intentionally let excess crop spoil in order to maintain a minimum price for what they sell (the rest can at least be composted and used for fertilizer, saving them some money on maintenance), but there's no silver bullet for a shortage. This is why a lot of these foods, especially seafood, are considered luxury items; they're not stable enough for everyone to get as much as they want whenever they want, unlike staple grains. |
Announcement of rights offering (above market price) causing stock price increase [duplicate] | This seemed very unrealistic, I mean who would do that? But to my immense surprise the market price increased to 5.50$ in the following week! Why is that? This is strange. It seems that people mistakenly [?] believe that the company should be at 5.5 and currently available cheap. This looks like irrational behaviour. Most of the past 6 months the said stock in range bound to 4.5 to 5. The last time it hit around 5.5 was Feb. So this is definitely strange. If the company had set a price of 6.00$ in the rights offering, would the price have increased to 6$? Obviously the company thinks that their shares are worth that much but why did the market suddenly agree? Possibly yes, possible no. It can be answered. More often the rights issue are priced at slight discount to market price. Why did this happen? Obviously management thinks that the company is worth that much, but why did the market simply believe this statement without any additional information? I don't see any other information; if the new shares had some special privileges [in terms of voting rights, dividends, etc] then yes. However the announcements says the rights issues is for common shares. |
Correct way to amend tax return as a result of not correctly reporting gains on sale of private stock based on Installment method? | After much research, the answer is "a": recompute the tax return using the installment sales method because (1) the escrow payment was subject to "substantial restrictions" by virtue of the escrow being structured to pay buyer's indemnification claims and (2) the taxpayer did not correctly elect out of the installment method by reporting the entire gain including the escrow payments on the return in the year of the transaction. |
When will the U.K. convert to the Euro as an official currency? | In many countries in Europe the prices shot through the roof, so it is not all positive. Also the switching country gives out lot of monetary control that is not welcomed by many. I think that UK is not going to change to euro for a long long time. |
Ongoing Automatic Investment Fee | Reading the plan documentation, yes, that is what it means. Each purchase by bank debit, whether one-time or automatic, costs $2 plus $0.06 per share; so if you invested $50, you would get slightly less than $48 in stock as a result (depending on the per-share price). Schedule of Fees Purchases – A one-time $15.00 enrollment fee to establish a new account for a non-shareholder will be deducted from the purchase amount. – Dividend reinvestment: The Hershey Company pays the transaction fee and per share* fee on your behalf. – Each optional cash purchase by one-time online bank debit will entail a transaction fee of $2.00 plus $0.06 per share* purchased. – Each optional cash purchase by check will entail a transaction fee of $5.00 plus $0.06 per share* purchased. – If funds are automatically deducted from your checking or savings account, the transaction fee is $2.00 plus $0.06 per share* purchased. Funds will be withdrawn on the 10th of each month, or the preceding business day if the 10th is not a business day. – Fees will be deducted from the purchase amount. – Returned check and rejected ACH debit fee is $35.00. |
CEO entitlement from share ownership? | If I own shares of a company, am I entitled to apply as position of CEO? Sure, but anybody else can apply too. Who decides? The corporate board of directors, who are nominally chosen by a vote of the stockholders. I say nominally, because in practice they are nominated by the current CEO and it's very rare for stockholders to veto the CEO's choice. Once in a while a group of stockholders will nominate their own candidate for the board, but they rarely win. I'd like to think there's some socio-corporate or investor-relationship advantage to working or having the option to work in certain positions in said company -- especially by privilege or total outstanding share ownership numbers. Why? Simply holding a large number of shares doesn't necessarily mean you know anything about running the business. |
Best way to start investing, for a young person just starting their career? | This is a tough question, because it is something very specific to your situation and finances. I personally started at a young age (17), with US$1,000 in Scottrade. I tried the "stock market games" at first, but in retrospect they did nothing for me and turned out to be a waste of time. I really started when I actually opened my brokerage account, so step one would be to choose your discount broker. For example, Scottrade, Ameritrade (my current broker), E-Trade, Charles Schwab, etc. Don't worry about researching them too much as they all offer what you need to start out. You can always switch later (but this can be a little of a hassle). For me, once I opened my brokerage account I became that much more motivated to find a stock to invest in. So the next step and the most important is research! There are many good resources on the Internet (there can also be some pretty bad ones). Here's a few I found useful: Investopedia - They offer many useful, easy-to-understand explanations and definitions. I found myself visiting this site a lot. CNBC - That was my choice for business news. I found them to be the most watchable while being very informative. Fox Business, seems to be more political and just annoying to watch. Bloomberg News was just ZzzzZzzzzz (boring). On CNBC, Jim Cramer was a pretty useful resource. His show Mad Money is entertaining and really does teach you to think like an investor. I want to note though, I don't recommend buying the stocks he recommends, specially the next day after he talks about them. Instead, really pay attention to the reasons he gives for his recommendation. It will teach you to think more like an investor and give you examples of what you should be looking for when you do research. You can also use many online news organizations like MarketWatch, The Motley Fool, Yahoo Finance (has some pretty good resources), and TheStreet. Read editorial (opinions) articles with a grain of salt, but again in each editorial they explain why they think the way they think. |
What prevents investors from buying high yield stocks and selling them as soon as their dividend is paid out? | Although the market discussion by other answers is correct, the tax structure of many developed nations (I am familiar with Canada in particular) offers a preferred tax rate for dividend income compared to taxable gains. Consequently, if your portfolio is large enough to make transaction fees a very small percentage rate, this is a viable investment strategy. However, as the preferred tax rate for dividends typically will catch up to that for capital gains at some cut-off point, there is a natural limit on how much income can be favourably obtained in this way. If you believe your portfolio might be large enough to benefit from this investment strategy, talk to a qualified investment advisor, broker, or tax consultant for the specifics for your tax jurisdiction. |
Does the IRS reprieve those who have to commute for work? | When I have a question about my income taxes, the first place I look is generally the Giant Book of Income Tax Information, Publication 17 (officially called "Your Federal Income Tax"). This looks to be covered in Chapter 26 on "Car Expenses and Other Employee Business Expenses". It's possible that there's something in there that applies to you if you need to temporarily commute to a place that isn't your normal workplace for a legitimate business reason or other business-related travel. But for your normal commute from your home to your normal workplace it has this to say: Commuting expenses. You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. These costs are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your regular place of work. You cannot deduct commuting expenses even if you work during the commuting trip. |
Super-generic mutual fund type | Congrats on having such a nice emergency fund. That's pretty substantial. I don't want to be the one to suggest the One Investment To Rule Them All because I might be wrong. :) I'd investigate other avenues for investment. Here are a few (in no particular order): My two cents but I think you're wise to be wary of investing in US equities now. Hedging (both with your passive investments and with another source of income) is something you can afford to do. (But to answer your question, there are indexes that are broader than the S&P 500. The Wilshire 5000 index has all of them, for example.) |
What is a good open source Windows finance software | You really shouldn't be using class tracking to keep business and personal operations separate. I'm pretty sure the IRS and courts frown upon this, and you're probably risking losing any limited liability you may have. And for keeping separate parts of the business separate, like say stores in a franchise, one approach would be subaccounts. Messy, I'm sure. |
If USA defaults on its debt, will the T bond holder get back his money | There is no situation one can imagine in which the US defaults (beyond a day or three) on its obligations. The treasury can print money, and while it would be disastrous, 'monetizing' the debt would simply eliminate all outstanding debt at the risk of devaluing the dollar to hyperinflation levels. |
Do I need to pay taxes in the US as an Alien Resident for my Canadian stock capital gains | I will answer my own question. After calling my broker, they explained me this: |
How long should I keep my tax documents, and why? | Unfortunately, my taxes tend to be complicated This. In and of itself, is a greater reason to keep the documents. The other answer offered a good summary, but keep in mind, if the IRS decides you fraudulently withheld claiming income, they can go back 7 years. I bought a rental property in 1987, and sold it in 2016. In that case, keeping the returns seemed the right thing to do to have the paper trail for basis, else I could claim anything, and hope for the best. I have all my tax returns since my first tax return, 1980. It's one drawer of a file cabinet. Not too great a burden. |
selling apple stock limit order | Your order may or may not be executed. The price of stock can open anywhere. Often yesterday's close is a good indication of today's open, but with a big event overnight, the open may be somewhere quite different. You'll have to wait and see like the rest of us. Also, even if it doesn't execute at the open, the price could vary during the day and it might execute later. |
Mortgage sold to yet another servicer. What are my options? | Are my mortgage terms locked in? Who oversees this? Yes your terms like rate, balance, penalties, due dates, are all covered in the mortgage documents. Those will not change. If the mortgage is an adjustable or has a balloon payment those terms will be followed by the new company. That being said, mistakes can be made. Double check everything. I had a transfer get messed up once, and all the terms were wrong. It took a few months but everything was worked out. In fact because they first tried to stonewall me I was able to negotiate some additional concessions out of them. Running your own escrow account is one thing you always want to do. That makes sure that the taxes and insurance are always paid by you, even if the servicing company has a glitch. Generally you have to have enough equity to not have PMI in order to get them to agree to the self-escrow option. If you have a problem with the servicing company then contact the Consumer Finance Protection Bureau a part of the US Government. They have only been a round a few years, thus I have no experience with them. Have an issue with a financial product or service? We'll forward your complaint to the company and work to get a response from them. The last few times I applied for a mortgage or refinanced a mortgage the lender had to reveal as part of the application stage the percentage of recent mortgages they still own/service. Check those numbers the next time you apply. |
Why is being “upside down” on a mortgage so bad? | The largest problem and source of anxiety / ruin for homeowners during the housing market collapse was caused by the inability to refinance. Many people had bought homes which they were stretched to afford, by using variable-rate mortgages. These would typically offer a very attractive initial rate, with an annual cap on the potential increase of rate. Many of these people intended to refinance their variable-rate to a fixed rate once terms were more favorable. If their house won't appraise for the value needed to obtain a new loan, they are stuck in their current contract with potentially unfavorable rates in the later years (9.9% above prime was not unheard of.) Also, many people, especially those in areas of high inflation in the housing market, used a financial device known as a Balloon Mortgage, which essentially forced you to get a new loan after some number of years (2, 5, 10) when the entire note became due. Some of those loans offered payments less than Principal + Interest! So, say you move near Los Angeles and can't afford the $1.2M for the 3-bedroom ranch in which you wish to live. You might work out a deal with your mortgage broker/banker in which you agree contractually to only pay $500/month, with a balloon payment of $1.4M due in 5 years, which seemed like a good deal since you (and everyone else,) actually expect the house to be 'worth' $1.5M in 5 years. This type of thing was done all the time back in the day. Now, imagine the housing bubble bursts and your $1.2M home is suddenly only valued at, perhaps, $750k. You still owe $1.4M sometime in the next several years (maybe very soon, depending on timing,) and can only get approved financing for the current $750k value -- so you're basically anticipating becoming homeless and bankrupt within the same year. That is a source of much anxiety about being upside-down on a loan. See this question for an unfortunate example. |
devastated with our retirement money that we have left | When you say: I am 48 and my husband is 54. We have approx. 60,000.00 left in our retirement accounts. We want to move our money into something so our money will grow. We've been looking at annunities. We've talked to 4 different advisors about what is best for us. Bad mistake, I am so overwhelmed with the differences they all have til I can't even think straight anymore. @Havoc P is correct: ...It's very likely that 60k is not nearly enough, and that making the right investment choices will make only a small difference. You could invest poorly and maybe end up with 50K when you retire, or invest well and maybe end up with 80-90k. But your goal is probably more like a million dollars, or more, and most of that will come from future savings. This is what a planner can help you figure out in detail. TL; DR Here is my advice: |
FHA Reduction Notices From Third-Party Companies - Scam? Or Something To Consider? | This is obviously a spam mail. Your mortgage is a public record, and mortgage brokers and insurance agents were, are and will be soliciting your business, as long as they feel they have a chance of getting it. Nothing that that particular company offers is unique to them, nothing they can offer you cannot be done by anyone else. It is my personal belief that we should not do business with spammers, and that is why I suggest you to remember the company name and never deal with them. However, it is up to you if you want to follow that advice or not. What they're offering is called refinance. Any bank, credit union or mortgage broker does that. The rates are more or less the same everywhere, but the closing fees and application fees is where the small brokers are making their money. Big banks get their money from also servicing the loans, so they're more flexible on fees. All of them can do "streamline" refinance if your mortgage is eligible. None if it isn't. Note that the ones who service your current mortgage might not be the ones who own it, thus "renegotiating the rate" is most likely not an option (FHA backed loans are sold to Fannie and Freddie, the original lenders continue servicing them - but don't own them). Refinancing - is a more likely option, and in this case the lender will not care about your rate on the old mortgage. |
Resources on Buying Rental Properties | I would also suggest finding the training resource within your state for real estate agent license exam prep... When I was getting started, I took the "101" level course and it was worth the few hundred bucks for the overview I gleaned. |
Is the stock market a zero-sum game? | While this seems overall a macroeconomics question and not really personal finance, let me give it a shot: The question of why corporations form in a free or efficient market is why Ronald Coase received the 1991 Nobel Prize in Economics, for his work developing the theory of the firm Corporations organize when there are transaction costs in the free market; corporations form when it is in fact more efficient for a corporation to exist than a number of small producers contracting with one another. To the extent that corporations add efficiency to a total market, they are not "zero sum" at all; the net production is increased over what would exist in a market of sole proprietors who would have costs (such as researching the trust levels in counterparts, regulatory compliance, etc) that they cannot bear to engage in the same level of transactions. |
Under what circumstance will the IRS charge you a late-payment penalty for taxes? | I just got hit with the late payment penalty due to a bug in the H&R Block tax program. The underpayment was only $2 and the penalty was a whopping 1 cent. The letter that informed me of the error also said that they did not consider the $2.01 worth collecting, the amount owed had been zeroed. |
What are my options to deal with Student Loan debt collectors? | I had about $16k in student loans. I defaulted on the loans, and they got > passed to a collection type agency (OSCEOLA). These guys are as legitimate as a collection agency can be. One thing that I feel is very sketchy is when they were verifying my identity they said "Does your Social Security Number end in ####. Is your Birthday Month/Day/Year." That is not sketchy. It would be sketchy for a caller to ask you to give that information; that's a common scheme for identity theft. OSCEOLA are following the rules on this one. My mom suggested I should consider applying for bankruptcy Won't help. Student loans can't be discharged in bankruptcy. You have the bankruptcy "reform" act passed during the Bush 43 regime for that. The loan itself is from school. What school? Contact them and ask for help. They may have washed their hands of your case when they turned over your file to OSCEOLA. Then again, they may not. It's worth finding out. Also, name and shame the school. Future applicants should be warned that they will do this. What can I do to aid in my negotiations with this company? Don't negotiate on the phone. You've discovered that they won't honor such negotiations. Ask for written communications sent by postal mail. Keep copies of everything, including both sides of the canceled checks you use to make payments (during the six months and in the future). Keep making the payments you agreed to in the conversation six months ago. Do not, EVER, ignore a letter from them. Do not, EVER, skip going to court if they send you a summons to appear. They count on people doing this. They can get a default judgement if you don't show up. Then you're well and truly screwed. What do you want? You want the $4K fee removed. If you want something else, figure out what it is. Here's what to do: Write them a polite letter explaining what you said here. Recount the conversation you had with their telephone agent where they said they would remove the $4K fee if you made payments. Recount the later conversation. If possible give the dates of both conversations and the names of the both agents. Explain the situation completely. Don't assume the recipient of your letter knows anything about your case. Include evidence that you made payments as agreed during the six months. If you were late or something, don't withhold that. Ask them to remove the extra $4K from your account, and ask for whatever else you want. Send the letter to them with a return receipt requested, or even registered mail. That will prevent them from claiming they didn't get it. And it will show them you're serious. Write a cover letter admitting your default, saying you relied on their negotiation to set things straight, and saying you're dismayed they aren't sticking to their word. The cover letter should ask for help sorting this out. Send copies of the letter with the cover letter to: Be sure to mark your letter to OSCEOLA "cc" all these folks, so they know you are asking for help. It can't hurt to call your congressional representative's office and ask to whom you should send the letter, and then address it by name. This is called Constituent Service, and they take pride in it. If you send this letter with copies you're letting them know you intend to fight. The collection agency may decide it's not worth the fight to get the $4K and decide to let it go. Again, if they call to pressure you, say you'd rather communicate in writing, and that they are not to call you by telephone. Then hang up. Should I hire a lawyer? Yes, but only if you get a court summons or if you don't get anywhere with this. You can give the lawyer all this paperwork I've suggested here, and it will help her come up to speed on your case. This is the kind of stuff the lawyer would do for you at well over $100 per hour. Is bankruptcy really an option Certainly not, unfortunately. Never forget that student lenders and their collection agencies are dangerous and clever predators. You are their lawful prey. They look at you, lick their chops, and think, "food." Watch John Oliver's takedown of that industry. https://www.youtube.com/watch?v=hxUAntt1z2c Good luck and stay safe. |
Is it legal if I'm managing my family's entire wealth? | Aside from the fact that there are massive problems with taxes, liability, fiduciary responsibility, and (assuming you're accepting any sort of compensation at all) licensing. The mere fact that you're asking this question indicates that you're probably not suitably qualified to handle this for others. Why not have someone qualified handle this? |
I'm currently unemployed and have been offered a contract position. Do I need to incorporate myself? How do I do it? | I am co-owner of a business, and we incorporated federally. (Mostly to limit liability.) There is some excellent information above, and most of my wisdom I got from a trusted lawyer and accountant (find experts you trust in these two areas, they will prove invaluable in so many areas.) The one point I would add is that if you decide to incorporate, you can do so federally or provincially. We were all set to go provincially, when our lawyer asked "Is there any chance you might move the business? Any chance you might want to do work in other provinces? What about next year? Five years?" If you are going through the expenses to set up a corporation, consider doing so federally, the extra costs were insignificant, but someday you might be glad you don't have to start from scratch. In this day and age, many people end up moving out of province for work, family concerns, etc. |
How to buy stuff (stocks?) in IRA account? What else? | You can buy stocks in the IRA, similarly to your regular investment account. Generally, when you open an account with a retail provider like TDAmeritrade, all the options available for you on that account are allowable. Keep in mind that you cannot just deposit money to IRA. There's a limit on how much you can deposit a year ($5500 as of 2015, $6500 for those 50 or older), and there's also a limit on top of that - the amount you deposit into an IRA cannot be more than your total earned income (i.e. income from work). In addition, there are limits on how much of your contribution you can deduct (depending on your income and whether you/your spouse have an employer-sponsored retirement plan). |
Diagnostic Questions to Determine if Renter intends to pay | Firstly, how far behind on rent are they? Have you sent them notices in writing about late rent, and if so how many have you had to send? How often do they say they are going to do things (like pay overdue rent) and they never do? To tell you the truth IMHO, if they are starting to be regularly late in rent payments and they don't do things they say they are going to do - then it is time to evict them. In NSW Australia, if the tenant is more than 2 weeks late in rent, and prior to them reaching 2 weeks late you have called them asking for late rent and sent notices, you can evict the tenants. If the tenants do not leave you can apply to the Tribunal to get them out and ask for outstanding money to be paid to you. However, if it does get to this stage, the tenants may be pissed off so may do some damage to the property in retaliation. Then you have to go back to the Tribunal to get the Tenant's Bond (Security Deposit) and any other funds to repair any damages done to your place. The longer you leave it the worse it will get. We had some tenants similar to this which we finally got out earlier this year. They would say they would pay rent due by the end of the week and no money would come by the end of the week. We took them to Tribunal and got them out, and we got the Bond plus unpaid rent and other money for damages and leaving the place dirty (over and above the Bond) awarded to us - just under $4K. The tenants said they couldn't pay and so went on a payment plan to pay about $135 every 2 weeks. They didn't pay any of the payments, so then we went to the local court to get a sheriff to go to their new place and take their property. The must have gotten scared from this because they approached the local court and agreed to pay $60 per week. We have currently received about 10 payments so it will be a long time before we get all our money back. As I said the longer you leave it the worse it can get. You should also look at improving your criteria for selecting new tenants. I have given an answer to this question How to choose a good tenant as a private landlord? Hopefully it can give you some ideas of what to ask for when searching for your next tenant. Update due update in Question Six weeks behind in rent is quite a bit to be behind. If the landlord had been asking the tenant to pay the late rent during this period and the tenant had been giving excuses why the rent was late and saying they would pay it by a certain time but never did - it is a big sign that they will tell you lies. If this is the first time they have been late in paying rent and now they are back up to date with the rent, you might want to give them one more chance. If this is a pattern that happens regularly it is better to get them out, as it will happen again, you will get in an argument with them and then they might stop paying rent altogether. You can usually gain a better perspective of the tenants from their action rather than their words - that is why ascertaining their past rental history is so important when finding a new tenant. |
Will I be turned down for a car loan? | Considering I'm putting 30% down and having my father cosign is there any chance I would be turned down for a loan on a $100k car? According to BankRate, the average credit score needed to buy a new car is 714, but they also show average interest rates at 6.39% for new-car loans to people with credit scores in the 601-660 range. High income certainly helps offset credit score to some extent. Not every bank/dealership does things the same way. Being self-employed you'd most likely be required to show 2 years of tax returns, and they'd use those as a basis for your income rather than whatever you have made recently. If using a co-signer, their income matters. Another key factor is debt to income ratio, if too much of someone's income is already spoken for by other debts a lender will shy away. So, yes, there's a chance, given all the information we don't know and the variability with lender policies, that you could be turned down for a car loan. How should I go about this? If you're set on pursuing the car loan, just go talk to some lenders. You'll want to shop around for a good rate anyway, so no need to speculate just go find out. Include the dealership as a potential financing option, they can have great rates. Personally, I'd get a much cheaper car. Your insurance premium on a 100k car will be quite high due to your age. You might be rightly confident in your earning potential, but nothing is guaranteed, situations can change wildly in short order. A new car is not a good investment or a value-retaining asset, so why bother going into debt for one if you don't have to? If you buy something in cash now, you could upgrade in a few years without financing if your earning prediction holds and would save quite a bit in car insurance and interest over the years between. |
How long can I convert 401(k) to Roth 401(k)? | the deadline for roth conversions is december 31st. more precisely, roth conversions are considered to have happened in the tax year the distribution was taken. this creates a kind of loop hole for people who do an ira rollover (not a trustee-to-trustee transfer). technically, you can take money out of your traditional ira on december 31st and hold it for 60 days before deciding to roll it over into either another traditional ira or a roth ira. if you decide to put it in another traditional account, it is not a taxable event. but if you decide to put it in a roth account, the "conversion" is considered to have happened in december. unfortunately non-trustee rollovers are tricky. for one, the source trustee will probably take withholding that you will have to make up with non-ira funds. and rollovers are limitted to a certain number per year. also, if you miss the 60-day deadline, you will have to pay an early-withdrawal penalty (with some exceptions). if you really want to push the envelope, you could try to do this with a 60-day-rule extension, but i wouldn't try it. source: https://www.irs.gov/publications/p590a/ch01.html oddly, recharacterizations (basically reverse roth conversions) have a deadline of october 15th of the year after the original roth conversion it is reversing. so, you could do the conversion in december, then you have up to 10 months to change your mind and "undo" the conversion with a "recharacterization". again, this is tricky business. at the very least, you should be aware that the tax calculations for recharacterization are different if you convert the funds into a new empty roth account vs an existing roth account with a previous balance. honestly, if you want to get into the recharacterization business, you can probably save more on taxes by converting in january before 20-month stock market climb rather than simply converting in the year your tax brackets are low. that is the typical recharacterization strategy. source: https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs-Recharacterization-of-Roth-Rollovers-and-Conversions |
Strategic countermeasures to overcome crisis in Russia | You could of course request payment in EUR or USD, maybe keep a PayPal account and just leave the funds in PayPal unless you need to withdraw the money in local currency? Either currency would be fine because the problem you are trying to overcome is the instability in the ruble. EUR and USD both accomplish that. If you can get local clients to pay in EUR or USD (again, PayPal seems like an easy way to accomplish that) you avoid the ruble, but at the risk that your services become more expensive to local clients because they have to convert a weaker currency to a stronger one. You should also solicit some international clients! You are obviously perfectly fluent in English and that's a significant advantage. And they'll be happy to pay in dollars and euros. |
Buying Fixed Deposit in India from Europe | You could go further and do a carry trade by borrowing EUR at 2% and depositing INR at 10%. All the notes above apply, and see the link there. |
Periodicity in stock charts | If the period is consistent for company X, but occurs in a different month as Company Y, it might be linked to the release of their annual report, or the payment of their annual dividend. Companies don't have to end their fiscal year near the end of the Calendar year, therefore these end of year events could occur in any month. The annual report could cause investors to react to the hard numbers of the report compared to what wall street experts have been predicting. The payment of an annual dividend will also cause a direct drop in the price of the stock when the payment is made. There will also be some movement in prices as the payment date approaches. |
Is there a way to claim a car purchase in the tax return? | You've got two options. Deduct the business portion of the depreciation and actual expenses for operating the car. Use the IRS standard mileage rate of $.575/mile in 2015. Multiply your business miles by the rate to calculate your deduction. Assuming you're a sole proprietor you'll include a Schedule C to your return and claim the deduction on that form. |
How much does a landlord pay in taxes? | I'd recommend you use an online tax calculator to see the effect it will have. To your comment with @littleadv, there's FMV, agreed, but there's also a rate below that. One that's a bit lower than FMV, but it's a discount for a tenant who will handle certain things on their own. I had an arm's length tenant, who was below FMV, I literally never met him. But, our agreement through a realtor, was that for any repairs, I was not required to arrange or meet repairmen. FMV is not a fixed number, but a bit of a range. If this is your first rental, you need to be aware of the requirement to take depreciation. Simply put, you separate your cost into land and house. The house value gets depreciated by 1/27.5 (i.e. you divide the value by 27.5 and that's taken as depreciation each year. You may break even on cash flow, the rent paying the mortgage, property tax, etc, but the depreciation might still produce a loss. This isn't optional. It flows to your tax return, and is limited to $25K/yr. Further, if your adjusted gross income is over $100K, the allowed loss is phased out over the next $50K of income. i.e. each $1000 of AGI reduces the allowed loss by $500. The losses you can't take are carried forward, until you use them to offset profit each year, or sell the property. If you offer numbers, you'll get a more detailed answer, but this is the general overview. In general, if you are paying tax, you are doing well, running a profit even after depreciation. |
Would it make sense to take a loan from a relative to pay off student loans? | Personally, I avoid making business deals with friends and relatives. There's just too much of a possibility that things can go wrong. Let's assume that you're honest people and you have no intention of cheating your mother-in-law. Still, all sorts of things could happen that could make it difficult for you to repay the loan. You could lose your job. You could get some big medical expense. Etc. Then what happens? Then your financial problems become family problems. There's a strong temptation when people borrow from relatives to make paying the loan the lowest priority in their budget. "I know I promised to pay \$X per month, but things are really tight right now and Mom should understand." Maybe she does understand and can manage without it. But maybe not. And then it becomes a family fight. "You promised you'd pay it back." "And we will, we're having a hard time right now. Can't you just give us a break?" Etc. Or she might have some extra expense, and say, "Hey, can't you pay a little more this month? I really need some extra cash." "I'm sorry, we're struggling just to make the regular payments, we can't." "Well I was willing to loan you all this money. The least you could do is pay me back when I need it." Etc. You can end up ruining family relationships over money. Your wife can find herself in the position of having to choose whether to side with her mother or her husband. Etc. I'm sure plenty of people do things like this and it works out just great. But there are big risks. And by the way, apparently this was your idea, not your mother-in-laws. I wonder what her reaction is. Is she eager to help out her daughter and son-in-law and had nothing in particular to do with the money anyway? Or is she feeling very imposed on? It's one thing to ask relatives to let you borrow their car for the weekend. Asking someone to loan you $50,000 is a very big request. If one of my kids asked me to loan them $50,000 from my retirement fund, I'd consider that a very presumptuous request. (Unless they needed the money for life-saving surgery for my grandchild or some such.) |
How to pick a state to form an LLC in? | There are very few circumstances where forming an out of state entity is beneficial, but a website is within these circumstances in certain instances. Businesses with no physical operations do not need to care what jurisdiction they are registered in: your home state, a better united state or non-united state. The "limited liability" does it's job. If you are storing inventory or purchasing offices to compliment your online business, you need to register in the state those are located in. An online business is an example of a business with no physical presence. All states want you to register your LLC in the state that you live in, but this is where you need to read that state's laws. What are the consequences of not registering? There might be none, there might be many. In New York, for example, there are no consequences for not registering (and registering in new york - especially the city - is likely the most expensive in the USA). If your LLC needs to represent itself in court, New York provides retroactive foreign registrations and business licenses. So basically, despite saying that you need to pay over $1000 to form your LLC "or else", the reality is that you get the local limited liability protection in courts whenever you actually need it. Check your local state laws, but more times than not it is analogous to asking a barber if you need a haircut, the representative is always going to say "yes, you do" while the law, and associated case law, reveals that you don't. The federal government doesn't care what state your form an LLC or partnership in. Banks don't care what state you form an LLC or partnership in. The United States post office doesn't care. Making an app? The Apple iTunes store doesn't care. So that covers all the applicable authorities you need to consider. Now just go with the cheapest. In the US alone there are 50 states and several territories, all with their own fee structures, so you just have to do your research. Despite conflicting with another answer, Wyoming is still relevant, because it is cheap and has a mature system and laws around business entity formation. http://www.incorp.com has agents in every state, but there are registered agents everywhere, you can even call the Secretary of State in each state for a list of registered agents. Get an employer ID number yourself after the business entity is formed, it takes less than 5 minutes. All of this is also contingent on how your LLC or partnership distributes funds. If your LLC is not acting like a pass through entity to you and your partner,but instead holding its own profits like a corporation, then again none of this matters. You need to form it within the state you live and do foreign registrations in states where it has any physical presence, as it has becomes its own tax person in those states. This is relevant because you said you were trying to do something with a friend. |
Is there a generally accepted term for fractions of Currency Units? | I recently bought a stock - which was priced exactly as your question ponders, to the 1/100 cent. I happened to buy 2000 shares, but just a round lot of 100 would be enough to create no need for rounding. It's common for industry to price this way as well, where an electronic component purchased by the thousands, is priced to the tenth or hundredth of a cent. There's nothing magic about this, and you'll have more to ponder when your own lowest unit of currency is no longer minted. (I see you are in UK. Here, in the US, there's talk of dropping our cent. A 5 cent piece to be the smallest value coin. Yet, any non-cash transactions, such as checks, credit card purchases, etc, will still price to the penny.) To specifically answer the question - it's called decimal currency. 1/10, 1/100 of a cent. |
Is it unreasonable to double your investment year over year? | It is not unheard of. Celebrity investors such as Warren Buffet and Carl Icahn gained notoriety by more than doubling investments some years, with a few very stellar trades and bets. Doubling, as in a 100% gain, is actually conservative if you want to play that game, as 500%, 1200% and greater gains are possible and were achieved by the two otherwise unrelated people I mentioned. This reality is opposite of the comparably pitiful returns that Warren Buffet teaches baby boomers about, but compounding on 2-5% gains annually is a more likely way to build wealth. It is unreasonable to say and expect that you will get the outcome of doubling an investment year over year. |
Figuring out an ideal balance to carry on credit cards [duplicate] | I think this advice to carry a balance each month is nonsense. You're just wasting money that way. Personally, I have always paid off my credit cards every month for as long as I can remember, and my credit score is only 8 points below the max. The bigger factors by far are: It might be good advice to charge a small amount each month on your credit cards each month in order to keep seldom-used accounts active (remember, longer payment history is better), but there's no reason not to pay off the balance to avoid the interest charges. In short, the "ideal balance" to carry month-to-month on a credit card is zero. |
Pay off credit card debt or earn employer 401(k) match? | I'd take the match, but I wouldn't contribute beyond your match, for two reasons: |
Over the long term, why invest in bonds? | If I don't need this money for decades, meaning I can ride out periodical market crashes, why would I invest in bonds instead of funds that track broad stock market indexes? You wouldn't. But you can never be 100% sure that you really won't need the money for decades. Also, even if you don't need it for decades, you can never be 100% certain that the market will not be way down at the time, decades in the future, when you do need the money. The amount of your portfolio you allocate to bonds (relative to stocks) can be seen as a measure of your desire to guard against that uncertainty. I don't think it's accurate to say that "the general consensus is that your portfolio should at least be 25% in bonds". For a young investor with high risk tolerance, many would recommend less than that. For instance, this page from T. Rowe Price suggests no more than 10% bonds for those in their 20s or 30s. Basically you would put money into bonds rather than stocks to reduce the volatility of your portfolio. If you care only about maximizing return and don't care about volatility, then you don't have to invest in bonds. But you probably actually do care about volatility, even if you don't think you do. You might not care enough to put 25% in bonds, but you might care enough to put 10% in bonds. |
Is real (physical) money traded during online trading? | This is somewhat of a non-answer but I'm not sure you'll ever find a satisfying answer to this question, because the premises on which the question is based on are flawed. Money itself does not "exist physically," at least not in the same sense that a product you buy does. It simply does not make sense to say that you "physically own money." You can build a product out of atoms, but you cannot build a money out of atoms. If you could, then you could print your own money. Actually, you can try to print your own money, but nobody would knowingly accept it and thus is it functionally nonequivalent to real money. The paper has no intrinsic value. Its value is derived from the fact that other people perceive it as valuable and nowhere else. Ergo paper money is no different than electronic money. It is for this reason that, if I were you, I would be okay with online Forex trading. |
Is an analyst's “price target” assumed to be for 12 months out? | Analysts normally (oxymoron here) gauge their targets on where the stock is currently and more importantly where it has been. Except for in the case of say a Dryships where it was a hundred dollar stock and is now in the single digits, it is safe to assume that Apple for instance was well over $ 700 and is now at $500, and that a price guidance of $ 580 is not that remarkable and a not so difficult level to strike. Kind of like a meteorologist; fifty percent chance of rain. Analysts and weathermen.Hard to lose your job when your never really wrong. Mr Zip, Over and outta here |
Does a SIM only cell phone contract help credit rating? | I have never seen any of my mobile phone providers report any data to any credit agency. They tend to only do that if you don't pay on time. Maybe sometimes it helps, but from my experience over the last decade - it must be some very rare times. |
Can I force him to pay? | Its best to seek a lawyer, but it is unlikely you can force him to pay. You probably know couples, that are in some part of the divorce process, that have trouble obtaining court ordered payments. In your case you have less of a legal standing (exception: if you have children together). As far as the house goes, the two of you entered into some sort of business arrangement and it will be difficult to "force" him to pay. One thing that works for you is that he has excellent credit. If he is interested in keeping a high credit rating he will ensure that no payments are late on the home. Your question suggests that the two of you are not getting along very well right now, and that needs to stop. The best financial decision you can make right now is to get along with him. It seems that the two of you have not officially broken up. If you do decide to depart ways, do so as amicably as possible. You will have to work to get the home in your name only, and him off the deed. This benefits both of you as you will have sole control of the house and this ill advised business decision can end. He will have the home off his credit and will not be responsible if you miss a payment and can also buy a home or whatever of his own. Good luck and do your best to work this out. Seeking peace will cost you a lot less money in the long run. Fighting in court cost a lot of money. Giving in to semi-reasonable demands are far cheaper then fighting. Here is an example. Lets say he normally contributes $500 to the mortgage, and he decides to move out. I would ask him to contribute $200 until you can get his name off the loan, say 6 months at the most. After that you will put the house up for sale if you cannot obtain a mortgage in your own name and will split any profits. |
What does Dividend 165% mean in stock market? | Do not confuse the DIV (%) value and the dividend yield. As you can see from this page, the DIV (%) is, as you say, 165%. However, the dividend yield is 3.73% at the time of writing. As the Investopedia page referenced above says: The payout ratio is calculated as follows: Annual Dividends per Share / Earnings per Share. which means that the dividends being paid out are more than the earnings of the company: In extreme cases, dividend payout ratios exceed 100%, meaning more dividends were paid out than there were profits that year. Significantly high ratios are unsustainable. |
How does one interpret financial data for stocks listed on multiple exchanges? | First and foremost you need to be aware of what you are comparing. In this case, HSBC as traded on the NYSE exchange is not common shares, but an ADR (American Depository Receipt) with a 5:1 ratio from the actual shares. So for most intents and purposes owning one ADR is like owning five common shares. But for special events like dividends, there may be other considerations, such as the depository bank (the institution that created the ADR) may take a percentage. Further, given that some people, accounts or institutions may be required to invest in a given country or not, there may be some permanent price dislocation between the shares and the ADR, which can further lead to discrepancies which are then highlighted by the seeming difference in dividends. |
What should I do with my $25k to invest as a 20 years old? | I recommend a Roth IRA. At your age you could turn 25K into a million and never pay taxes on these earnings. Of course there are yearly limits (5.5k) on the amount your can contribute to a Roth IRA account. If you haven't filed your taxes this year yet ... you can contribute 5.5K for last year and 5.5K for this year. Open two accounts at a discount brokerage firm. Trades should be about $10 or less per. Account one ... Roth IRA. Account two a brokerage account for the excess funds that can't be placed in the Roth IRA. Each year it will be easy transfer money into the Roth from this account. Be aware that you can't transfer stocks from brokerage acct to Roth IRA ... only cash. You can sell some stocks in brokerage and turn that into cash to transfer. This means settling up with the IRS on any gains/losses on that sale. Given your situation you'd likely have new cash to bring to table for the Roth IRA anyway. Invest in stocks and hold them for the long term. Do a google search for "motley fool stock advisor" and join. This is a premium service that picks two stocks to invest in each month. Invest small amounts (say $750) in each stock that they say you should buy. They will also tell you when to sell. They also give insights into why they selected the stock and why they are selling (aka learning experience). They pick quality companies. So if the economy is down you will still own a quality company that will make it through the storm. Avoid the temptation to load up on one stock. Follow the small amount rule mentioned above per stock. Good luck, and get in the market. |
What is the relationship between the earnings of a company and its stock price? | I have heard that people say the greater earning means greater intrinsic value of the company. Then, the stock price is largely based on the intrinsic value. So increasing intrinsic value due to increasing earning will lead to increasing stock price. Does this make sense ? Yes though it may be worth dissecting portions here. As a company generates earnings, it has various choices for what it can do with that money. It can distribute some to shareholders in the form of dividends or re-invest to generate more earnings. What you're discussing in the first part is those earnings that could be used to increase the perceived value of the company. However, there can be more than a few interpretations of how to compute a company's intrinsic value and this is how one can have opinions ranging from companies being overvalued to undervalued overall. Of Mines, Forests, and Impatience would be an article giving examples that make things a bit more complex. Consider how would you evaluate a mine, a forest or a farm where each gives a different structure to the cash flow? This could be useful in running the numbers here. |
Why are American-style options worth more than European-style options? | An option gives you an option. That is, you aren't buying any security - you are simply buying an option to buy a security. The sole value of what you buy is the option to buy something. An American option offers more flexibility - i.e. it offers you more options on buying the stock. Since you have more options, the cost of the option is higher. Of course, a good example makes sense why this is the case. Consider the VIX. Options on the VIX are European style. Sometimes the VIX spikes like crazy - tripling in value in days. It usually comes back down pretty quick though - within a couple of weeks. So far out options on the VIX aren't worth just a whole lot more, because the VIX will probably be back to normal. However, if the person could have excercised them right when it got to the top, they would have made a fortune many times what their option was worth. Since they are Euroopean style, though, they would have to wait till their option was redeemable, right when the VIX would be about back to normal. In this case, an American style option would be far more valuable - especially for something that is difficult to predict, like the VIX. |
Strategic countermeasures to overcome crisis in Russia | Bitcoins are very liquid. They can be sold or spent very easily. And you don't depend on the banks being solvent to keep your Bitcoin funds, since you can keep them yourself in an offline wallet. I'm not sure what's the legality of Bitcoin in Russia, though. |
Legal right to ask for someone bank records UK | You might want to head on over to https://law.stackexchange.com/ and ask the same question. However from a personal finance perspective this kind of drama is somewhat common when someone is deceased and financial expectations are not met by the heirs. It sounds like the daughter was expecting a lot more in inheritance than was actually received. There was probably an overestimation of dad's net worth and an underestimation of the cost of his care toward the end of his life. Its best not to participate in this drama, and I feel that you are correct that the daughter does not have a right to see the bank account statements prior to dad's passage. The question is also if she has a right to see it now. Here in the US a joint account can be setup so the ownership transfers to other account holder(s) up death of an owner. So in this case your mother would own the account. If the account is setup as such, then the estate has no right to that money. You may want to check with the bank for some free advice. What is the classification of the account now that dad has passed? When a person grants someone else the power of attorney they have the ability to act as if they were that person. Most of the time POAs are limited in scope so If I give a person the POA to register a car in my name, they cannot apply for a credit card in my name (legally). In this case, however, the POA was probably general so pretty much your mom could do whatever she pleased. So if your mom took good care of the dad and bought herself some nice jewelry that is perfectly allowable with a general POA. I strongly doubt this daughter has any rights to the past records and may not even have the rights to the joint bank account currently. |
Commencing a Pension from an SMSF | No. Disclaimer - As a US educated fellow, I needed to search a bit. I found an article 7 Common SMSF Pension Errors. It implied that there are minimum payments required each year as with our US retirement accounts. These minimums are unrelated to the assets within the account, just based on the total value. The way I read that, there would be a point where you'd have to sell a property or partial interest to be sure you have the cash to distribute each year. I also learned that unlike US rules, which permit a distribution of stock as part of a required minimum distribution, in Australia, the distribution must be in cash (or a deposited check, of course.) |
In-laws moving in (financial/tax implications)? | GET A LAWYER. Doing business with relatives is business first, and some effort spent in setting things up and nailing down exactly what the financial relationships and obligations are beforehand can save a lot of agony and animosity later. Assuming it's a legal rental, you may be able to deduct business costs spent on maintaining the rental unit, but of course you will have to declare the rent as income. If it's just a bedroom suite, rather than a full legal apartment, I don't think you can claim it as rental. (Note that whether you decide to share cooking and such is a separate question; apartment in most areas requires its own kitchen and bathroom.) As Joe pointed out, the actual purchase also sounds like it's going to involve a large gift, which has its own tax implications. Either that, or they retain ownership of their share and you get to deal with that if you or they decide to sell. Again: GET A LAWYER. And a tax accountant or tax lawyer to advise you on those implications. This is not someplace where the average wisdom of the Internet should be relied upon except for generalities; local laws and contract details matter. |
Should I invest in real estate to rent, real estate to live in, or just stocks and bonds to earn 10-15%? | You are in your mid 30's and have 250,000 to put aside for investments- that is a fantastic position to be in. First, let's evaluate all the options you listed. Option 1 I could buy two studio apartments in the center of a European capital city and rent out one apartment on short-term rental and live in the other. Occasionally I could Airbnb the apartment I live in to allow me to travel more (one of my life goals). To say "European capital city" is such a massive generalization, I would disregard this point based on that alone. Athens is a European capital city and so is Berlin but they have very different economies at this point. Let's put that aside for now. You have to beware of the following costs when using property as an investment (this list is non-exhaustive): The positive: you have someone paying the mortgage or allowing you to recoup what you paid for the apartment. But can you guarantee an ROI of 10-15% ? Far from it. If investing in real estate yielded guaranteed results, everyone would do it. This is where we go back to my initial point about "European capital city" being a massive generalization. Option 2 Take a loan at very low interest rate (probably 2-2.5% fixed for 15 years) and buy something a little nicer and bigger. This would be incase I decide to have a family in say, 5 years time. I would need to service the loan at up to EUR 800 / USD 1100 per month. If your life plan is taking you down the path of having a family and needed the larger space for your family, then you need the space to live in and you shouldn't be looking at it as an investment that will give you at least 10% returns. Buying property you intend to live in is as much a life choice as it is an investment. You will treat the property much different from the way something you rent out gets treated. It means you'll be in a better position when you decide to sell but don't go in to this because you think a return is guaranteed. Do it if you think it is what you need to achieve your life goals. Option 3 Buy bonds and shares. But I haven't the faintest idea about how to do that and/or manage a portfolio. If I was to go down that route how do I proceed with some confidence I won't lose all the money? Let's say you are 35 years old. The general rule is that 100 minus your age is what you should put in to equities and the rest in something more conservative. Consider this: This strategy is long term and the finer details are beyond the scope of an answer like this. You have quite some money to invest so you would get preferential treatment at many financial institutions. I want to address your point of having a goal of 10-15% return. Since you mentioned Europe, take a look at this chart for FTSE 100 (one of the more prominent indexes in Europe). You can do the math- the return is no where close to your goals. My objective in mentioning this: your goals might warrant going to much riskier markets (emerging markets). Again, it is beyond the scope of this answer. |
How to start personal finances? | A few practical thoughts: A practical thing that helps me immensely not to loose important paperwork (such as bank statements, bills, payroll statement, all those statements you need for filing tax return, ...) is: In addition to the folder (Aktenordner) where the statements ultimately need to go I use a Hängeregistratur. There are also standing instead of hanging varieties of the same idea (may be less expensive if you buy them new - I got most of mine used): you have easy-to-add-to folders where you can just throw in e.g. the bank statement when it arrives. This way I give the statement a preliminary scan for anything that is obviously grossly wrong and throw it into the respective folder (Hängetasche). Every once in a while I take care of all my book-keeping, punch the statements, file them in the Aktenordner and enter them into the software. I used to hate and never do the filing when I tried to use Aktenordner only. I recently learned that it is well known that Aktenordner and Schnellhefter are very time consuming if you have paperwork arriving one sheet at a time. I've tried different accounting software (being somewhat on the nerdy side, I use gnucash), including some phone apps. Personally, I didn't like the phone apps I tried - IMHO it takes too much time to enter things, so I tend to forget it. I'm much better at asking for a sales receipt (Kassenzettel) everywhere and sticking them into a calendar at home (I also note cash payments for which I don't have a receipt as far as I recall them - the forgotten ones = difference ends up in category "hobby" as they are mostly the beer or coke after sports). I was also to impatient for the cloud/online solutions I tried (I use one for business, as there the archiving is guaranteed to be according to the legal requirements - but it really takes far more time than entering the records in gnucash). |
Strategies to recover from a bad short-term call options purchase where the underlying dropped instead? | For personal investing, and speculative/ highly risky securities ("wasting assets", which is exactly what options are), it is better to think in terms of sunk costs. Don't chase this trade, trying to make your money back. You should minimize your loss. Unwind the position now, while there is still some remaining value in those call options, and take a short-term loss. Or, you could try this. Let's say you own an exchange traded call option on a listed stock (very general case). I don't know how much time remains before the option's expiration date. Be that as it may, I could suggest this to effect a "recovery". You'll be long the call and short the stock. This is called a delta hedge, as you would be delta trading the stock. Delta refers to short-term price volatility. In other words, you'll short a single large block of the stock, then buy shares, in small increments, whenever the market drops slightly, on an intra-day basis. When the market price of the stock rises incrementally, you'll sell a few shares. Back and forth, in response to short-term market price moves, while maintaining a static "hedge ratio". As your original call option gets closer to maturity, roll it over into the next available contract, either one-month, or preferably three-month, time to expiration. If you don't want to, or can't, borrow the underlying stock to short, you could do a synthetic short. A synthetic short is a combination of a long put and a short call, whose pay-off replicates the short stock payoff. I personally would never purchase an unhedged option or warrant. But since that is what you own right now, you have two choices: Get out, or dig in deeper, with the realization that you are doing a lot of work just to trade your way back to a net zero P&L. *While you can make a profit using this sort of strategy, I'm not certain if that is within the scope of the money.stachexchange.com website. |
I earn $75K, have $30K in savings, no debt, rent from my parents who are losing their home. Should I buy a home now or save? | For the vast majority, "buying" a house via a mortgage is not an investment. I use quotes around buying because from a technical perspective you don't own anything until you've paid it off; this is often an important point that people forget. It's highly unlikely you'll make more on it than the amount you put into it (interest, repairs, etc). Even with relatively low interest rates. The people who successfully invest in homes are those that use actual cash (not borrowed) to buy a home at well below market value. They then clean it up and make enough repairs to make it marketable and sell it shortly there after. Sometimes these people get hosed if the housing market tumbles to the point that the home is now worth less than the amount they put into it. This is especially problematic if they used bank loans to get the process going. They were actually the hardest hit when the housing bubble popped several years ago. Well, them and the people who bought on interest only loans or had balloon payments. Whereas the people who use a mortgage are essentially treating it like a bank account with a negative interest rate. For example, $180k loan on a 30 yr fixed at 4% will mean a total payout of around $310k, excluding normal repairs like roofs, carpet, etc. Due to how mortgage's work, most of the interest is collected during the first half of the loan period. So selling it within 2 to 5 years is usually problematic unless the local housing market has really skyrocketed. Housing markets move up and down all the time due to a hundred different things completely out of your control. It might be a regional depression, weather events, failed large businesses, failed city/local governments, etc. It could go up because businesses moved in, a new highway is built, state/local taxes decline, etc. My point is, homes are not long term investments. They can be short term ones, but only in limited circumstances and there is a high degree of risk involved. So don't let that be a driving point of your decision. Instead you need to focus on other factors. Such as: what is really going on with the house you are currently in? Why would they lose it? Can you help out, and, should you help out? If things are precarious, it might make more sense to sell that home now and everyone move into separate locations, possibly different rentals or apartments. If they are foreclosed on then they will be in a world of financial hurt for a long time. If we ignore your parents situation, then one piece of advice I would give you is this: Rent the cheapest apartment you can find that is still a "safe" place to live in. Put every dollar you can into some type of savings/investment that will actually grow. Stay there for 5+ years, then go pay cash for a nice home. Making $75k a year while single means that you don't need much to live on. In other words, live extremely cheap now so you can enjoy a fantastic living experience later that is free from financial fear. You should be able to put $30k+ per year aside going this route. edit: A bit of support data for those that somehow think buying a home on a mortgage is somehow a good investment: Robert Shiller, who won a Nobel prize in economics and who predicted the bursting of the housing bubble, has shown that a house is not a good investment. Why? First, home prices (adjusted for inflation) have been virtually unchanged for the past 100 years. (link 1, link 2) Second, after you add in the costs of maintenance alone then those costs plus what you've paid for the home will exceed what you get out of it. Adding in the cost of a mortgage could easily double or even triple the price you paid which makes things even worse. Maintenance costs include things like a new roof, carpet/flooring, water heater, appliances, etc. Yes, a home might cost you $100k and you might sell it for $200k after 15 years. However during that time you'll likely replace the roof ($10k to $20k), replace appliances ($2k to $5k), water heater ($1k), carpet/flooring ($5k to $20k), paint ($3k to $6k), and mortgage related costs (~$60k - assuming 30 yr fixed @4%). So your "costs" are between $180k and $200k just on those items. There are many more that could easily escalate the costs further. Like a fence ($5k+), air conditioner ($5k+), windows, etc. The above is assuming the home actually appreciates in value faster than inflation: which they historically haven't over the long term. So you have to consider all of the costs ultimately paid to purchase and maintain the home vs the costs of renting during the same time period. Point is: do your research and be realistic about it. Buying a home is a huge financial risk. |
Closing a futures position | For exchange contracts, yes. A trader can close a position by taking an offsetting position. CME's introduction to Futures explains it quite well (on page 22). Exiting the Market Jack entered the market on the buy side, speculating that the S&P 500 futures price would move higher. He has three choices for exiting the market: |
Strategic countermeasures to overcome crisis in Russia | If you have significant assets, such as a large deposit, then diversification of risks such as currency risk is good practice - there are many good options, but keeping 100% of it in roubles is definitely not a good idea, nor is keeping 100% of it in a single foreign currency. Of course, it would be much more beneficial to have done it yesterday, and moments of extreme volatility generally are a bad time to make large uninformed trades, but if the deposit is sufficiently large (say, equal to annual expenses) then it would make sense to split it among different currencies and also different types of assets as well (deposit/stocks/precious metals/bonds). The rate of rouble may go up and down, but you also have to keep in mind that future events such as fluctuating oil price may risk a much deeper crisis than now, and you can look to experiences of the 1998 crisis as an example of what may happen if the situation continues to deteriorate. |
Do banks give us interest even for the money that we only had briefly in our account? | Ditto @MichaelBorgwardt Just to get concrete: I just checked one bank in India and they say they are paying 4% on savings accounts. I don't know what you're getting or if 4% is typical in India, but it's at least an example. So if the bank pays interest based on average daily balance, and you left the money in the bank for a week, you'd get 4%/52 = .077%. So on Rs 95,000 that would be Rs 73. I live in the US where typical interest on a savings account today is about 1%. So an equivalent amount of money -- I think that would be about $1,500 -- would get 1/52 of 1%, or 29 cents. Don't leave the lights turned on while you do the calculations -- you'll spend more on the electricity than you make on the interest. :-) ** Addendum ** This suddenly reminds me ... I read a news story a few years ago about a man who was expecting a tax refund check from the IRS of a few hundred dollars, and when the check arrived it was for several million. Well obviously it was a mistake. But he came up with the clever idea: Deposit the check in an interest-bearing account. Promptly contact the IRS, inform them of the mistake, and ask how and where to go about returning the money. Hope that it takes at least a few days for them to figure everything out. Then keep the interest accumulated on the several-million dollars for the time that he had the money. And as he contacted them immediately about the error, they can't say he was trying to hide anything. It was a nice try, but it didn't work. They demanded he send them the interest as well as the principle. |
Option settlement for calendar spreads | First off, you should phone your broker and ask them just to be 100% certain. You will be exercised on the short option that was in the money. It is irrelevant that your portfolio does not contain AAPL stock. You will simply be charged the amount it costs to purchase the shares that you owe. I believe your broker would just take this money from your margin/cash account, they would not have let you put the position on if your account could not cover it. I can't see how you having a long dated 2017 call matters. You would still be long this call once assignment of the short call was settled. |
Possible to purchase multiple securities on 1 transaction? | No you can't, as you would have to have a different order for each security. Usually the bigger the order the more the brokerage you would also pay. |
Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other? | As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies. SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index: |
Should I sell a 2nd home, or rent it out? | If it was me, I would sell the house and use the proceeds to work on/pay off the second. You don't speak to your income, but it must be pretty darn healthy to convince someone to lend you ~$809K on two homes. Given this situation, I am not sure what income I would have to have to feel comfortable. I am thinking around 500K/year would start to make me feel okay, but I would probably want it higher than that. think I can rent out the 1st house for $1500, and after property management fees, take home about $435 per month. That is not including any additional taxes on that income, or deductions based on repair work, etc. So this is why. Given that your income is probably pretty high, would something less than $435 really move your net worth needle? No. It is worth the reduction in risk to give up that amount of "passive" income. Keeping the home opens you up to all kinds of risk. Your $435 per month could easily evaporate into something negative given taxes, likely rise in insurance rates and repairs. You have a great shovel to build wealth there is no reason to assume this kind of exposure. You will become wealthy if you invest and work to reduce your debt. |
As a 22-year-old, how risky should I be with my 401(k) investments? | At 22yo, unless you have a terminal illness, you have many years to earn and save a lot more that you will have in your 401k right now (unless you have already been extremely lucky in the market with your 401k investments). This means that even if you lost everything in your 401k right now, it probably wouldn't hurt you that much over the long term. The net present value of all your future savings should far exceed the net present value of your 401k, if you plan to earn and save responsibly. So take as much risk as you want with it right now. There is no real benefit to playing safe with investments at your age. If you were asking me how much risk should you be taking with a $10m inheritance and no income or much prospects of an income, then I'd be giving you a very different answer. |
Stocks and Bankruptcy | As Mhoran said, the risks of buying a bankrupt company are huge, and even successful bankruptcy turnarounds don't involve keeping the same stock. For instance, the GM bankruptcy was resolved by the company more or less selling all its valuable assets (brands, factories, inventory) to a new version of itself, using that money to pay off what liabilities it could, and then dissolving. The new company then issued new stock, and you had to buy the new stock to see it rise; the old stock became worthless. AA could have gone the same way; Delta could have bought it out of bankruptcy and consumed it outright, with any remaining shareholders being paid off at market value. That's probably the best the market was hoping for. Instead, the deal is a much more equal merger; AMR brings a very large airport network and aircraft fleet to the table, and Delta brings its cash, an also-considerable fleet and network, and a management team that's kept that airline solvent. The stockholders, therefore, expect to be paid off at a much higher per-share price, either in a new combined stock, in Delta stock, or in cash. |
how much of foreign exchange (forex/fx) “deep liquidity” is really just unbacked leverage and what is the effect? | First it is worth noting the two sided nature of the contracts (long one currency/short a second) make leverage in currencies over a diverse set of clients generally less of a problem. In equities, since most margin investors are long "equities" making it more likely that large margin calls will all be made at the same time. Also, it's worth noting that high-frequency traders often highly levered make up a large portion of all volume in all liquid markets ~70% in equity markets for instance. Would you call that grossly artificial? What is that volume number really telling us anyway in that case? The major players holding long-term positions in the FX markets are large banks (non-investment arm), central banks and corporations and unlike equity markets which can nearly slow to a trickle currency markets need to keep trading just for many of those corporations/banks to do business. This kind of depth allows these brokers to even consider offering 400-to-1 leverage. I'm not suggesting that it is a good idea for these brokers, but the liquidity in currency markets is much deeper than their costumers. |
How are people able to spend more than what they make, without going into debt? | Rich people use debt for various reasons. The question should not assume that billionaires don't use debt. They also pay lower interest rates on that debt because they have enough collateral that their debt is safer than a typical mortgage. Many rich people will use interest only mortgages on their primary residences so that they can keep their stock earning at higher growth rates than the mortgage interest that they are paying all while writing off a portion of that mortgage interest on their taxes. Taking an artificially low salary and receiving equity for the larger portion of compensation is also a tax strategy to limit the amount of taxes owed on that income. If paid directly in stock grants, that will count as income, but if paid in options, then the purchased stock will only be taxed at the lower capital gains rates if the stock is held for a year after the options are exercised. Every billionaire will have complicated tax avoidance strategies that will require multi-year planning for the best long-term minimization of taxes. Debt is a strategic part of that planning. Also consider that a major part of that upscale lifestyle (corporate jets, fancy meals, etc.) is on the company dime because the CEO is always on the clock. As long as he is meeting with business prospects or doing other company business, those expenses will be justified for the corporation and not attributed as income. |
How do I explain why debt on debt is bad to my brother? | Two suggestions: I don't know if you have them in South Africa, but here we have some TV reality shows where a credit consultant visits a family that is deeply in debt and advises them on how to get out of it. The advice isn't very sophisticated, but it does show the personal impact on a family and what is likely to happen to them in the future. "All Maxed Out" is the name of the one I remember. "Till Debt Us Do Part" is another, which focusses on married couples and the stress debt puts on a marriage. If you can find a similar one, loan him a few episodes. Alternatively, how about getting him to a professional debt counsellor? |
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