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How can online trading platforms be trustworthly? | In most countries trading platforms are legally required to be overseen by a regulator, in the US this is the SEC (Securities and Exchanges Commission). This regulatory oversight is required in order to operate (i.e. have clients) in that country and the company will lose the right to operate in that country if they do not comply with the regulations. If you believe that you have genuine cause to complain that a trading platform that you are using within your jurisdiction is behaving unfairly towards you you can report this to the regulator and they will investigate so long as you can provide them with some concrete evidence. Note that in many jurisdictions gambling websites are also regulated (they are in the UK for example) and so arguments about their fairness are specious. A big problem with a lot of these complaints is that people who lose money are very vocal about blaming everyone else, people who make money are very vocal about their own amazing skills... think about that! |
Why would you elect to apply a refund to next year's tax bill? | There actually are legitimate reasons, but they don't apply to most people. Here are a few that I know of: You're self-employed and have to pay quarterly estimated taxes. Rather than wait for the refund when you already have to pay 1/4 of next year's taxes at the same time, you just have the IRS apply to refund forward. (so you're not out the money you owe while waiting for your refund). You're filing an amended or late return, and so you're already into the next year, and have a similar situation as #1, where your next year's taxes have already come due. You're planning on declaring bankruptcy, and you're under the Tenth Circuit, those credits might be safe from creditors For almost any other situation, you're better off taking the money, and using it to pay down debt, or put it somewhere to make interest (although, at the current rates, that might not be very much). |
Renting or Buying an House | When you sell a house around between 7-10% of the sales price will go to various fees. Mostly to the agents, but also to county fees, city fees, deed tax, and possibly covering closing costs for the buyers. So if you sell a $400k house for the same price you buy, just in fees, you're out $40k. Mortgages are structured so that the frontend is very interest heavy, while at the end you're mostly paying towards principal. So for the first two years you will pay down very little of the principal. Figure around $2500 for the mortgage, and without running the numbers I bet you would pay an average for the first two years of around $1800/month in interest. $43,200. Mortgage interest is tax deductible, so you'll get some of that back. That's also $16,800 in equity you'll have on the house, so you'll get that back out when you sell. Rough numbers, I would be you lose around $50k buying the house and selling for the same price two years later. That doesn't take into account having to do any maintenance. And it assumes you can sell quickly when you want to. Renting is not throwing away money. You don't lose any money. You get a place to live in exchange. You don't build equity, sure, but you don't need to worry about maintenance and other related issues. When you're looking to be somewhere short term renting is generally the best idea. |
Reason for “qualified” buyer requirements to exercise stock options/rights spun off from parent company? | The fact that your shares are of a Canadian-listed corporation (as indicated in your comment reply) and that you are located in the United States (as indicated in your bio) is highly relevant to answering the question. The restriction for needing to be a "qualified institutional buyer" (QIB) arises from the parent company not having registered the spin-off company rights [options] or shares (yet?) for sale in the United States. Shares sold in the U.S. must either be registered with the SEC or qualify for some exemption. See SEC Fast Answers - Securities Act Rule 144. Quoting: Selling restricted or control securities in the marketplace can be a complicated process. This is because the sales are so close to the interests of the issuing company that the law might require them to be registered. Under Section 5 of the Securities Act of 1933, all offers and sales of securities must be registered with the SEC or qualify for some exemption from the registration requirements. [...] There are regulations to follow and costs involved in such registration. Perhaps the rights [options] themselves won't ever be registered (as they have a very limited lifetime), while the listed shares might be? You could contact investor relations at the parent company for more detail. (If I guessed the company correctly, there's detail in this press release. Search the text for "United States".) |
I forgot to write the name on the check | If you forgot to put the name on the "pay to the order of" line then anybody who gets their hands on the check can add their name to the check and deposit it at their bank into their account. If it goes to the correct person they will have an easy time making sure that the check is made out correctly. They don't have to worry about that picky teller who doesn't know what to do with a check made out to Billy Smith and a drivers license for Xavier William Smith. On the other hand... a criminal will also be able to make sure it is processed exactly the way they want it. If I made it out to a small business or a person I would let them know. You might not have a choice but to wait and see what happens if it was sent to a large business, the payment processing center could be a long way from where you will be calling. |
Can my federal adjusted gross income differ by $1 between my federal and state returns? | No, you don't. Rounding errors happen, and if there's no change in the actual tax there's no reason to amend. If all the income was properly reported and the tax was properly calculated - no-one cares if it was rounded up or down on one of the lines. Note for the next time though: Not sure about New York, but Federal taxes are generally rounded to the nearest dollar on each line of the form. So don't calculate cents, just round to the nearest dollar, and be consistent on all of your tax forms. Technically, it is perfectly legal to report cents as well (and people used to when the forms were still filled by hand with pen), but all the automatic tax filing software rounds, so just do that. |
When is the right time to buy a new/emerging technology? | If you're looking for a purely financial answer (ignoring the social/environmental aspects) there are a few different ways you can look at it. For these types of improvements the simplest is a payback calculation. How long would it take you to recoup the initial costs? For example, if the entire installation cost $5,000 (including any tax credits), and you save $100 per month (I'm making both numbers up), you'll pay back your investment in 50 months, or about 4 years. (Note that if you borrow money to do the improvement, then your payback period is longer because you're reducing the amount that you're saving each month by paying interest.) If you're deciding between different uses for the money (like investing, or paying down other debt) then you can look at the return that you're getting. Using the same example, you are spending $5,000 and getting $100 per month back, for a 24% annual return ($1,200 / $5,000), which is better than you can get on almost anything but a 401(k) match (meaning don't stop your 401(k) contributions to do this either). The decision on whether or wait or not then becomes - will the price drop faster than the amount of savings you will realize. So if you will save $100 per month in your electric bill, is the price of the complete installation going down by more than $100 each month? If not, you'd be better off buying now and start paying back the investment sooner. |
Nanny taxes and payroll service | Whether to employ a payroll service to handle the taxes (and possibly the payroll itself) is a matter that depends on how savvy you are with respect to your own taxes and with using computers in general. If you are comfortable using programs such as Excel, or Quicken, or TurboTax, or TaxAct etc, then taking care of payroll taxes on a nanny's wages all by yourself is not too hard. If you take a shoebox full of receipts and paystubs to your accountant each April to prepare your personal income tax returns and sign whatever the accountant puts in front of you as your tax return, then you do need to hire a payroll service. It will also cost you a bundle since there are no economies of scale to help you; there is only one employee to be paid. |
Can a entrepreneur hire a self-employed business owner? | Yes. I can by all means start my own company and name myself CEO. If Bill Gates wanted to hire me, I'll take the offer and still be CEO of my own company. Now, whether or not my company makes money and survives is another question. This is the basis of self-employed individuals who contract out their services. |
Why is economic growth so important? | One of the best answers to this question that I've ever read is in a paper published by Robert Lucas in the Journal of Economic Perspectives. That journal is meant to a be a place for experts to write about their area of expertise (in economics) for a general but still technically-minded audience. They recently opened up the journal as free to the public, which is a fantastic resource -- you no longer need a subscription to JSTOR (or whatever) to read it. You can read the abstract to the paper, and find a link to it, here. One of the things that I like a lot about this paper is that it strips out absolutely everything even slightly unnecessary to thinking about a macroeconomy, and just discusses what one can arrive at with a very very simple model. Of course, with great simplicity come sacrifice about details. However, it does a great job of answering your question, "why do people care about growth?" A quick note: the key to understanding the answer to your question is to think about things in terms of "the long term" -- not even looking forward to the future, because we'll be dead by then, but looking back to the past. The key to the importance of growth is that, for the last ~200 years, the US has, on average, had maybe 2-3% "real growth" per year (I'm pulling these numbers out of my head; I think much better numbers are in that paper somewhere). On average, over that period of time, this growth has meant that the quality of life that one has, if one lives in a country experiencing this growth, is enormous compared to countries that do not experience this average growth over that period. Statistically speaking, growth is also somewhat auto-correlated. Roughly speaking, if it was low the last few periods, you can expect it to be low the next period. Same thing if it's high. Then, the reason we care about growth right now: if you have too many periods of low growth, pretty soon the average "over the long term" growth will be pulled down -- and then quality of life can't be higher in the future (which quickly becomes someone's "present"). The paper above makes this point with a very simple model. Of course, none of this touches on distributional issues, which are another issue entirely. With respect to, "The economy needs to grow to just keep up with its debt repayments," I think the answer is along the lines of, "sometimes countries get into debt expecting that growth will increase their resources in the future, and thus they can pay back their debt." That strategy is, of course, the strategy that anyone borrowing ("taking out a loan") should be employing -- you should expect that your future income will be enough to pay back your interest+principle on a loan you took. Otherwise you're irresponsible. At the aggregate level, production is the nation's "income" -- it is what you have, all that you have (as a nation) to pay back any debt you've incurred at the national level. |
A debt collector will not allow me to pay a debt, what steps should I take? | This is somewhat unbelievable. I mean if you had a business of collecting debts, wouldn't you want to collect said debts? Rather than attempting to browbeat people with these delinquent debts into paying, you have someone volunteering to pay. Would you want to service that client? This would not happen in just about any other industry, but such is the lunacy of debt collecting. The big question is why do you need this cleared off your credit? If it is just for a credit score, it probably is not as important as your more recent entries. I would just wait it out, until 7 years has passed, and you can then write the reporting agencies to remove it from your credit. If you are attempting to buy a home or similarly large purpose and the mortgage company is insisting that you deal with this, then I would do the following: Write the company to address the issue. This has to be certified/return receipt requested. If they respond, pay it and insist that it be marked as paid in full on your credit. I would do this with a money order or cashiers check. Done. Dispute the charge with the credit reporting agencies, providing the documentation of no response. This should remove the item from your credit. Provide this documentation to the mortgage broker. This should remove any hangup they might have. Optional: Sue the company in small claims court. This will take a bit of time and money, but it should yield a profit. There was a post on here a few days ago about how to do this. Make part of any settlement to have your name cleared of the debt. It is counterproductive to fall into the trap of the pursuit of a perfect credit score. A person with a 750 often receives the same rate options as a person with 850. Also your relationship with a particular lender could trump your credit score. Currently I am "enjoying" the highest credit score of my life, over 820. Do you know how I did it? I got out of debt (including paying off the mortgage) and I have no intentions of ever going into debt for anything. So why does it matter? It is a bit ridiculous. |
Is there a correlation between self-employment and wealth? | The key to becoming wealthy as a self-employed person is the drive to be successful. A driven person, who starts their own company (or companies, should they fail), will find success. Assuming that you define success as the accumulation of wealth, then yes, self-employment is correlated with wealth. But as matt mentions in the comments, there is no casual (in the statistical sense) relationship between self-employment and wealth. While I can't say for sure, I would argue that drive is more important that the employment situation. |
Why does capital gains tax apply to long term stock holdings? | In Australia we have a 50% capital gain discount if you hold the asset for more than 12 months, whether it is in shares, property or other assets. The main reason is to encourage people to invest long-term instead of speculating or trading. The government sees speculation or short term trading as more risky than long term investing for the everyday mum and dad investor, so rewards people it sees taking the lower risk long term view. In my opinion, long term investing, short term trading and speculation can all be risky for someone who is unedutated in the financial markets, and the first rule of investing should be to consider the asset itself and not the tax implications. |
How to calculate interest payments without EBIT | The actual financial statements should always be referenced first before opening or closing a position. For US companies, they are freely available on EDGAR. Annual reports are called 10-Ks, and quarterly reports are called 10-Qs. YHOO and GOOG do a great job of posting financials that are quickly available, but money.msn has the best. These should be starting point, quick references. As you can see, they may all have the same strange accounting. Sometimes, it's difficult to find the information one seeks in the consolidated financial statements as in this case, so searching through the filing is necessary. The notes can be helpful, but Ctrl-F seems to do everything I need when I want something in a report. In AAPL's case, the Interest expense can be found in Note 3. |
Retirement Funds: Betterment vs Vanguard Life strategy vs Target Retirement | First, congratulations on choosing to invest in low cost passively managed plans. If you choose any one of these options and stick with it, you will already be well ahead of most individual investors. Almost all plans will allow you to re-balance between asset classes. With some companies, sales agents will encourage you to sell your overweighted assets and buy underweighted assets as this generates brokerage commissions for them, but when you only need to make minor adjustments, you can simply change the allocation of the new money going into your account until you are back to your target weights. Most plans will let you do this for free, and in general, you will only need to do this every few years at most. I don't see much reason for you to be in the Target funds. The main feature of these plans is that they gradually shift you to a more conservative asset allocation over time, and are designed to prevent people who are close to retirement from being too aggressive and risking a major loss just before retirement. It's very likely that at your age, most plans will have very similar recommendations for your allocation, with equities at 80% or more, and this is unlikely to change for the next few decades. The main benefits of betterment seems to be simplicity and ease of use, but there is one concern I would have for you with betterment. Precisely because it is so easy to tweak your allocation, I'm concerned that you might hurt your long-term results by reacting to short-term market conditions: I know I said I wanted a hands off account, but what if the stock market crashes and I want to allocate more to bonds??? One of the biggest reasons that stock returns are better than bond returns on average is that you are being paid to accept additional risk, and living with significant ups and downs is part of what it means to be in the stock market. If you are tempted to take money out of an asset class when it has been "losing/feels dangerous" and put more in when it is "winning/feels safe", my concerns is that you will end up buying high and selling low. I'd recommend taking a look at this article on the emotional cycle of investing. My point is simply that it's very likely that if you are moving money in and out of stocks based on volatility, you're much less likely to get the full market return over the long term, and might be better off putting more weight in asset classes with lower volatility. Either way, I'd recommend taking one or more risk tolerance assessments online and making sure you're committed to sticking with a long-term plan that doesn't involve more risk than you can really live with. I tend to lean toward Vanguard Life Strategy simply because Vanguard as a company has been around longer, but betterment does seem very accessible to a new investor. Best of luck with your decision! |
Get financial reports on Canadian companies | www.sedar.com is the official site that provides access to most public securities documents and information filed by public companies and investment funds with the Canadian Securities Administrators (CSA) in the SEDAR filing system. Now, I'm guessing - I think the doc is MDA - Management’s Discussion and Analysis of Financial Condition and Results of Operations. At least this is what appears listed for many companies. |
Do performers pay taxes on comped meals and hotels? | My number one piece of advice is to see a tax professional who can guide you through the process, especially if you're new to the process. Second, keep detailed records. That being said, I found two articles, [1] and [2] that give some relevant details that you might find helpful. The articles state that: Many artists end up with a combination of income types: income from regular wages and income from self-employment. Income from wages involves a regular paycheck with all appropriate taxes, social security, and Medicare withheld. Income from self-employment may be in the form of cash, check, or goods, with no withholding of any kind. They provide a breakdown for expenses and deductions based on the type of income you receive. If you get a regular paycheck: If you've got a gig lasting more than a few weeks, chances are you will get paid regular wages with all taxes withheld. At the end of the year, your employer will issue you a form W-2. If this regular paycheck is for entertainment-related work (and not just for waiting tables to keep the rent paid), you will deduct related expenses on a Schedule A, under "Unreimbursed Employee business expenses," or on Form 2106, which will give you a total to carry to the schedule A. The type of expenses that go here are: If you are considered an independent contractor (I presume this includes the value of goods, based on the first quoted paragraph above): Independent contractors get paid by cash or check with no withholding of any kind. This means that you are responsible for all of the Social Security and Medicare normally paid or withheld by your employer; this is called Self-Employment Tax. In order to take your deductions, you will need to complete a Schedule C, which breaks down expenses into even more detail. In addition to the items listed above, you will probably have items in the following categories: Ideally, you should receive a 1099 MISC from whatever employer(s) paid you as an independent contractor. Keep in mind that some states have a non-resident entertainers' tax, which is A state tax levied against performers whose legal residence is outside of the state where the performance is given. The tax requires that a certain percentage of any gross earnings from the performance be withheld for the state. Seriously, keep all of your receipts, pay stubs, W2's, 1099 forms, contracts written on the backs of napkins, etc. and go see a tax professional. |
How could strike price for new shares be higher than the market price | This can arise with very thinly traded stocks for large blocks of shares. If the market only has a few thousand dollars available at between 8.37 and 12.5 the price is largely meaningless for people who want to invest in hundreds of thousands/millions of dollars worth, as the quoted price can't get them anywhere near the number of shares they want. How liquid is the stock in question? |
What is the equivalent of the QQQ in the UK for the FTSE 100? | I searched for FTSE 100 fund on Yahoo Finance and found POW FTSE RAF UK 100 (PSRU.L), among many others. Google Finance is another possible source that immediately comes to mind. |
Dollar-cost averaging: How often should one use it? What criteria to use when choosing stocks to apply it to? | Dollar cost averaging is a great strategy to use for investment vehicles where you can't invest it in a lump sum. A 401K is perfect for this. You take a specific amount out of each paycheck and invest it either in a single fund, or multiple funds, or some programs let you invest it in a brokerage account so you can invest in virtually any mutual fund or stock. With annual or semi-annual re-balancing of your investments dollar cost averaging is the way to invest in these programs. If you have a lump sum to invest, then dollar cost averaging is not the best way to invest. Imagine you want to invest 10K and you want to be 50% bonds and 50% stocks. Under dollar cost averaging you would take months to move the money from 100% cash to 50/50 bonds/stocks. While you are slowly moving towards the allocation you want, you will spend months not in the allocation you want. You will spend way too long in the heavy cash position you were trying to change. The problem works the other way also. Somebody trying to switch from stocks to gold a few years ago, would not have wanted to stay in limbo for months. Obviously day traders don't use dollar cost averaging. If you will will be a frequent trader, DCA is not the way to go. No particular stock type is better for DCA. It is dependent on how long you plan on keeping the investment, and if you will be working with a lump sum or not. EDIT: There have be comments regarding DCA and 401Ks. When experts discuss why people should invest via a 401K, they mention DCA as a plus along with the company match. Many participants walk away with the belief that DCA is the BEST strategy. Many articles have been written about how to invest an inheritance or tax refund, many people want to use DCA because they believe that it is good. In fact in the last few years the experts have begun to discourage ever using DCA unless there is no other way. |
Use of free and clear houses as Collateral | Any sensible lender will require a lean lien against your formerly-free-and-clear property, and will likely require an appraisal of the property. The lender is free to reject the deal if the house is in any way not fitting their underwriting requirements; examples of such situations would be if the house is in a flood/emergency zone, in a declining area, an unusual property (and therefore hard to compare to other properties), not in salable condition (so even if they foreclose on it they'd have a questionable ability to get their money back), and so forth. Some lenders won't accept mobile homes (manufactured housing) as collateral, for instance, and also if the lender agrees they may also require insurance on the property to be maintained so they can ensure that a terrible fate doesn't befall both properties at one time (as happens occasionally). On the downside, in my experience (in the US) lenders will often require a lower loan percentage than a comparable cash down deal. An example I encountered was that the lender would happily provide 90% loan-to-value if a cash down payment was provided, but would not go above 75% LTV if real estate was provided instead. These sort of deals are especially common in cases of new construction, where people often own the land outright and want to use it as collateral for the building of a home on that same land, but it's not uncommon in any case (just less common than cash down deals). Depending on where you live and where you want to buy vs where the property you already own is located, I'd suggest just directly talking to where you want to first consider getting a quote for financing. This is not an especially exotic transaction, so the loan officer should be able to direct you if they accept such deals and what their conditions are for such arrangements. On the upside, many lenders still treat the LTV% to calculate their rate quote the same no matter where the "down payment" is coming from, with the lower the LTV the lower the interest rate they'll be willing to quote. Some lenders might not, and some might require extra closing fees - you may need to shop around. You might also want to get a comparative quote on getting a direct mortgage on the old property and putting the cash as down payment on the new property, thus keeping the two properties legally separate and giving you some "walk away" options that aren't possible otherwise. I'd advise you to talk with your lenders directly and shop around a few places and see how the two alternatives compare. They might be similar, or one might be a hugely better deal! Underwriting requirements can change quickly and can vary even within individual regions, so it's not really possible to say once-and-for-all which is the better way to go. |
What is a decent rate of return for investing in the markets? | If someone is guaranteeing X%, then clearly you can borrow money for less than X% (otherwise his claim wouldn't be remotely impressive). So why not do that if his 4% is guaranteed? :) Anyway, my answer would be that beating the market as a whole is a "decent" rate of return. I've always used the S&P 500 as a benchmark but you can use other indices or funds. |
What do I need to do to form an LLC? | You can file an LLC yourself in most states, although it might be helpful to use a service if you're not sure what to do to ensure it is correct. I filed my LLC here in Colorado online with the Secretary of State's office, which provided the fill-in-the-blank forms and made it easy. In the U.S., taxation of an LLC is "pass-through", meaning the LLC itself does not have any tax liability. Taxes are based on what you take out of the LLC as distributions to yourself, so you pay personal income tax on that. There are many good books on how to form and then operate an LLC, and I personally like NoLo (link to their web site) because they cater to novices. As for hiring people in India, I can't speak to that, so hopefully someone else can answer that specific topic. As for what you need to know about how to run it, I'll refer back to the NoLo books and web site. |
Is This A Scam? Woman added me on LinkedIn first, then e-mailed offering me millions of dollars [duplicate] | Yes. If you reply back, they'll confirm that Uncle Alex did indeed leave you $7 million, and you just need to send them a few thousand dollars for taxes and estate fees and then they'll wire you the money. And then there'll be customs fees. And then more taxes. And of course, there will be separate import fees. And so on until you run out of money. |
Is there any reason not to put a 35% down payment on a car? | I am going to give advice that is slightly differently based on my own experiences. First, regarding the financing, I have found that the dealers do in fact have access to the best interest rates, but only after negotiating with a better financing offer from a bank. When I bought my current car, the dealer was offering somewhere around 3.3%, which I knew was way above the current industry standard and I knew I had good credit. So, like I did with my previous car and my wife's car, I went to local and national banks, came back with deals around 2.5 or 2.6%. When I told the dealer, they were able to offer 2.19%. So it's ok to go with the dealer's financing, just never take them at face value. Whatever they offer you and no matter how much they insist it's the best deal, never believe it! They can do better! With my first car, I had little credit history, similar to your situation, and interest rates were much higher then, like 6 - 8%. The dealer offered me 10%. I almost walked out the door laughing. I went to my own bank and they offered me 8%, which was still high, but better than 10%. Suddenly, the dealer could do 7.5% with a 0.25% discount if I auto-pay through my checking account. Down-payment wise, there is nothing wrong with a 35% down payment. When I purchased my current car, I put 50% down. All else being equal, the more cash down, the better off you'll be. The only issue is to weigh that down payment and interest rate against the cost of other debts you may have. If you have a 7% student loan and the car loan is only 3%, you're better off paying the minimum on the car and using your cash to pay down your student loan. Unless your student loan balance is significantly more than the 8k you need to finance (like a 20k or 30k loan). Also remember that a car is a depreciating asset. I pay off cars as fast as I can. They are terrible debt to have. A home can rise in value, offsetting a mortgage. Your education keeps you employed and employable and will certainly not make you dumber, so that is a win. But a car? You pay $15k for a car that will be worth $14k the next day and $10k a year from now. It's easy to get underwater with a car loan if the down payment is small, interest rate high, and the car loses value quickly. To make sure I answer your questions: Do you guys think it's a good idea to put that much down on the car? If you can afford it and it will not interfere with repayment of much higher interest debts, then yes. A car loan is a major liability, so if you can minimize the debt, you'll be better off. What interest rate is reasonable based on my credit score? I am not a banker, loan officer, or dealer, so I cannot answer this with much credibility. But given today's market, 2.5 - 4% seems reasonable. Do you think I'll get approved? Probably, but only one way to find out! |
How can I buy government bonds from foreign countries? | Significantly less effort to buy into any of several international bond index funds. Off the top of my head, VTIBX. |
How to value employee benefits? | To fairly compare a comp-only job to a job that offers insurance, get a quote for health insurance. Call your local insurance broker and find out what it would cost. Because if you aren't getting insurance from your employer, you'll have to get it elsewhere. If you get a quote on an HSA, don't forget to add in the annual deductible as part of the cost. On the ESPP, I'd count it as zero. The rationale being that so much of your financial status is tied to your employer that you don't really want to tie up too much more in company stock. (I.e. Company hits hard times, stock tanks, and then they lay you off. Double whammy -- both your assets and income.) But given that I've only been employed by companies that no longer exist in their original form, my perspective may be warped. |
I spend too much money. How can I get on the path to a frugal lifestyle? | Keep track of everything you buy. Write it down and be accountable. Try not to buy anything on credit cards, if the money is not in your account now then you can't afford it. Ask yourself whether what you're buying is a "need" or a "want". If you find that you are buying things because you are bored and you like shopping then try taking up a (cheap) hobby that fills that void and is something you enjoy doing. |
Is this investment opportunity problematic? | Adding to what others have said, if the mortgage for the new house is backed by the federal government (e.g., through FHA or is to be sold to Fannie Mae/Freddie Mac) you would be violating 18 USC § 1001, which makes making intentionally false statements to any agent or branch of the federal government a crime punishable by up to 5 years' imprisonment. The gift letter you are required to sign will warn you of as much. Don't do it, it's not worth the risk of prison time. |
Why do financial institutions charge so much to convert currency? | Mainly because they can. Yes, there is a cost for banks to execute such transactions, and yes, there is a cost to cover the implied risks, but it is far from 3 or 4%. There are banks that charge a flat rate of less than 30$ (and no percentage), so for larger amounts, it is worth shopping around. Note that for smaller amounts, which are the majority of personal transactions, that is probably about as, if not more expensive, than paying 3% - below 1000$, 3% is less than 30$. So charging a percentage is actually better for people that want to transfer smaller amounts. |
Best way to start investing, for a young person just starting their career? | Warren Buffett answered this question very well at the 2009 Berkshire Hathaway annual meeting. He said that it was important to read everything you can about investing. What you will find is that you will have a number of competing ideas in your head. You will need to think these through and find the best way to solve them that fits you. You will mostly learn how to invest through good examples. There are fewer good examples out there than you might think, given how many books there are and how many people get paid to give advice in this area. If you want to see how professional investors actually think about specific investments, over a thousand investment examples can be found at www.valueinvestorsclub.com, just login as a guest. The site is run by Joel Greenblatt (you would benefit from reading his books also), and it will give you a sense of the work that investors put into their research. Good luck. |
What happens when a (Internation) Central securities depository goes bankrupt? | There is no generic answer and it would depend on case to case basis. CSD are built on strong foundation in the sense they would have very low cost base and generally would not go bankrupt. However if such a situation as CSD provide an essential role, the regulator, central bank and Government would all step in to prevent a total collapse. They would be forced merged with other entity or more capital raised or put under watch by Govt appointed trustee to settle issues so that there is least or No impact. |
Why do companies have a fiscal year different from the calendar year? | In addition to the company-specific annual business cycle reasons and company-specific historical reasons mentioned in the other answers, there is another reason. Accounting firms tend to be very busy during January (and February and March) when most companies are closing and auditing their calendar-year books. If a company chooses its fiscal year to end at a different time of year, the accounting firms are more available, and the auditing costs might be lower. |
What factors make someone buy or sell a stock? | First, note that a share represents a % of ownership of a company. In addition to the right to vote in the management of the company [by voting on the board of directors, who hires the CEO, who hires the VPs, etc...], this gives you the right to all future value of the company after paying off expenses and debts. You will receive this money in two forms: dividends approved by the board of directors, and the final liquidation value if the company closes shop. There are many ways to attempt to determine the value of a company, but the basic theory is that the company is worth a cashflow stream equal to all future dividends + the liquidation value. So, the market's "goal" is to attempt to determine what that future cash flow stream is, and what the risk related to it is. Depending on who you talk to, a typical stock market has some degree of 'market efficiency'. Market efficiency is basically a comment about how quickly the market reacts to news. In a regulated marketplace with a high degree of information available, market efficiency should be quite high. This basically means that stock markets in developed countries have enough traders and enough news reporting that as soon as something public is known about a company, there are many, many people who take that information and attempt to predict the impact on future earnings of the company. For example, if Starbucks announces earnings that were 10% less than estimated previously, the market will quickly respond with people buying Starbucks shares lowering their price on the assumption that the total value of the Starbucks company has decreased. Most of this trading analysis is done by institutional investors. It isn't simply office workers selling shares on their break in the coffee room, it's mostly people in the finance industry who specialize in various areas for their firms, and work to quickly react to news like this. Is the market perfectly efficient? No. The psychology of trading [ie: people panicking, or reacting based on emotion instead of logic], as well as any inadequacy of information, means that not all news is perfectly acted upon immediately. However, my personal opinion is that for large markets, the market is roughly efficient enough that you can assume that you won't be able to read the newspaper and analyze stock news in a way better than the institutional investors. If a market is generally efficient, then it would be very difficult for a group of people to manipulate it, because someone else would quickly take advantage of that. For example, you suggest that some people might collectively 'short AMZN' [a company worth half a trillion dollars, so your nefarious group would need to have $5 Billion of capital just to trade 1% of the company]. If someone did that, the rest of the market would happily buy up AMZN at reduced prices, and the people who shorted it would be left holding the bag. However, when you deal with smaller items, some more likely market manipulation can occur. For example, when trading penny stocks, there are people who attempt to manipulate the stock price and then make a profitable trade afterwards. This takes advantage of the low amount of information available for tiny companies, as well as the limited number of institutional investors who pay attention to them. Effectively it attempts to manipulate people who are not very sophisticated. So, some manipulation can occur in markets with limited information, but for the most part prices are determined by the 'market consensus' on what the future profits of a company will be. Additional example of what a share really is: Imagine your neighbor has a treasure chest on his driveway: He gathers the neighborhood together, and asks if anyone wants to buy a % of the value he will get from opening the treasure chest. Perhaps it's a glass treasure chest, and you can mostly see inside it. You see that it is mostly gold and silver, and you weigh the chest and can see that it's about 100 lbs all together. So in your head, you take the price of gold and silver, and estimate how much gold is in the chest, and how much silver is there. You estimate that the chest has roughly $1,000,000 of value inside. So, you offer to buy 10% of the chest, for $90k [you don't want to pay exactly 10% of the value of the company, because you aren't completely sure of the value; you are taking on some risk, so you want to be compensated for that risk]. Now assume all your neighbors value the chest themselves, and they come up with the same approximate value as you. So your neighbor hands out little certificates to 10 of you, and they each say "this person has a right to 10% of the value of the treasure chest". He then calls for a vote from all the new 'shareholders', and asks if you want to get the money back as soon as he sells the chest, or if you want him to buy a ship and try and find more chests. It seems you're all impatient, because you all vote to fully pay out the money as soon as he has it. So your neighbor collects his $900k [$90k for each 10% share, * 10], and heads to the goldsmith to sell the chest. But before he gets there, a news report comes out that the price of gold has gone up. Because you own a share of something based on the price of gold, you know that your 10% treasure chest investment has increased in value. You now believe that your 10% is worth $105k. You put a flyer up around the neighborhood, saying you will sell your share for $105k. Because other flyers are going up to sell for about $103-$106k, it seems your valuation was mostly consistent with the market. Eventually someone driving by sees your flyer, and offers you $104k for your shares. You agree, because you want the cash now and don't want to wait for the treasure chest to be sold. Now, when the treasure chest gets sold to the goldsmith, assume it sells for $1,060,000 [turns out you underestimated the value of the company]. The person who bought your 10% share will get $106k [he gained $2k]. Your neighbor who found the chest got $900k [because he sold the shares earlier, when the value of the chest was less clear], and you got $104k, which for you was a gain of $14k above what you paid for it. This is basically what happens with shares. Buy owning a portion of the company, you have a right to get a dividend of future earnings. But, it could take a long time for you to get those earnings, and they might not be exactly what you expect. So some people do buy and sell shares to try and earn money, but the reason they are able to do that is because the shares are inherently worth something - they are worth a small % of the company and its earnings. |
How do I claim HST compensation on my personal Ontario income taxes? | Your income and expenses for the business should be independent of HST. That is, if you charged somebody 100 + 13 HST, you have revenue of 100. You're going to send the 13 to the government later, it's not part of your revenue. If you go out and buy something for 10 + 1.30 HST, you record 10 as an expense. You're going to take the 1.3 off the 13 you would have sent the government, it's not part of your expenses. And so on. I am not sure what you mean by "HST compensation" but if it came from the government, and it needs to be declared as income, there will be information to that end in the letter that comes with the cheque. (For example, if they pay you interest on your refund, the letter reminds you to include that money in next year's income.) |
If a stock doesn't pay dividends, then why is the stock worth anything? | There are two ways that an asset can generate value. One is that the asset generates some revenue (e.g. you buy a house for $100,000 and rent it out for $1,000 per month) and the second way is that the asset appreciates (e.g you buy a house for $100,000, you don't rent it out and 5 years later you sell it for $200,000). Stocks are the same. |
Is engaging in stocks without researching unwise? | Stock recommendations and price history are an unwise way to invest. People that recommend stocks are usually compensation for recommending it. They are paid directly by third parties, that can be paid in shares, they can simply own the stock themselves and if the stock goes up they can sell it to new investors at a higher price (or even a lower price, they may not actually care) Price history does not tell you a complete picture, what kind of price history are you even looking at: "this stock went up, let me buy now at the very top and hope it goes higher, am I too late" "this stock went down let me avoid it" if you don't know why, what, who, when, assets, debt, etc, you shouldn't be buying the stock. |
Consumer Loans vs Mortgages | I went here: Consumer Loan Law. It seems that a consumer loan is anything other than a business loan or mortgage. However, in California it seems to include a mortgage. It's a bit weird to see that a HEL can be considered a consumer loan even if it is the primary or the only loan on a property. Getting a HEL can be a great low cost way to (re)finance a property as they tend to have low or no closing costs and lower interest rates. |
What is the rate of return for a security when there is no risk-free rate (CAPM)? | For starters, the risk-free rate has nothing to do with stocks. It would be independent of anything. It pays out the same return in all states of nature. The definition of a risk-free asset is that regardless of how the universe turns out, including a meteor striking the Earth killing everyone but the recipient, then the payout would happen exactly as planned. One could imagine a computer still being on, connected to a power supply and printing a check. Most people use the 90-day t-bill as the risk-free rate. A beta greater than one implies it is more volatile than the market, not that it moves more perfectly. The CAPM should not be used for this. Cryptocurrencies should not be used with this model because they have valuation dynamics related to the new issue of coins. In other words, they have non-market price movements as well as market price movements. In general, you should not use the CAPM because it doesn't work empirically. It is famous, but it is also wrong. A scientific hypothesis that is not supported by the data is a bad idea. My strong recommendation is that you read "The Intelligent Investor," by Benjamin Graham. It was last published in 1972, and it is still being printed. I believe Warren Buffett wrote the current forward for it. Always go where the data supports you and never anywhere else, no matter how elegant. Finally, unless you are doing this like a trip to Vegas, for fun and willing to take the losses, I would avoid cryptocurrencies because you don't know what you are doing yet. It is obvious from the posting. I have multiple decades working in every type of financial institution and at every level, bottom to top. I also have a doctorate, and I am an incredible researcher. I am professionally qualified in three different disciplines. If you want to learn how to do this, start with the "Intelligent Investor." Get a basic book on accounting and learn basic accounting. Pick up economics textbooks at least through "Intermediate" for both microeconomics and macroeconomics. Get William Bolstad's book "Introduction to Bayesian Statistics." You will need them for reasons that go very far beyond this post. Trust me; you want to master that book. Find a statistician and ask them to teach it to you as a special topics course. It will help you as both either a Marine officer or a Naval officer. Then after that pick up a copy of "Security Analysis." Either the 1943 copy (yes it is in print) by Benjamin Graham if you feel good about accounting, or the 1987 copy by Cottle under the Graham/Dodd imprimatur. Then, if you are still interested in cryptocurrencies and they will be blasé by then, then pick up an economics textbook on money. If I were you, I would learn about Yap money, commodity money, and prison money first, then you might understand why a cryptocurrency may not be an investment for you. |
What intrinsic, non-monetary value does gold have as a commodity? | Extrinsic value is not a factor with respect to gold. Intrinsic value by definition is the natural value of a commodity set by the market -- extrinsic value is externally set. The "extrinsic" value of gold in the United States is $50/oz. If the market value of gold fell below $50/oz, a US American Eagle coin would be worth $50 in the US. If you take away the attributes that make a commodity valuable, the value drops. Substitutes of equal or better quality for most industrial or other uses of gold exist, so if if the popularity of gold declines, or if the hoarders of gold have to liquidate, it's value will diminish. I have no idea what that value would be, but it would set by the market demand for gold jewelry and other valuable industrial uses. |
How to calculate the closing price percentage change for a stock? | The previous day's close on Thursday 10th October was 5,000.00 The close on Friday 11th October is 5,025.92 So the gain on Friday was 25.92 (5025.92 - 5000) or 0.52% (25.92/5000 x 100%). No mystery! |
Pay off car or use money for down payment | To focus on your question.. pay it off then trade in. The reason is because say you just have 14k laying around and buy a car for 14k, you must pay 14k plus tax. If you are in one of the states that allows the tax break, then trading the 14k valued vehicle in for a 14k vehicle will nullify your sales tax. As per your question, if you traded the car in at 7k, you would then owe 7k plus tax. You only have 7k..so how would you pay for the tax and why would you want to? Pay off the car and you'll have 14k of tax free off any car. |
Do I pay a zero % loan before another to clear both loans faster? | This is more of an interesting question then it looks on first sight. In the USA there are some tax reliefs for mortgage payments, which we don’t have in the UK unless you are renting out the property with the mortgage. So firstly work out the interest rate on each loan taking into account any tax reliefs, etc. Then you need to consider the charges for paying off a loan, for example often there is a charge if you pay off a mortgage. These days in the UK, most mortgagees allow you to pay off at least 10% a year without hitting such a charge – but check your mortgage offer document. How interest is calculated when you make an early payment may be different between your loans – so check. Then you need to consider what will happen if you need another loan. Some mortgages allow you to take back any overpayments, most don’t. Re-mortgaging to increase the size of your mortgage often has high charges. Then there is the effect on your credit rating: paying more of a loan each month then you need to, often improves your credit rating. You also need to consider how interest rates may change, for example if you mortgage is a fixed rate but your car loan is not and you expect interest rates to rise, do the calculations based on what you expect interest rates to be over the length of the loans. However, normally it is best to pay off the loan with the highest interest rate first. Reasons for penalties for paying of some loans in the UK. In the UK some short term loans (normally under 3 years) add on all the interest at the start of the loan, so you don’t save any interest if you pay of the loan quicker. This is due to the banks having to cover their admin costs, and there being no admin charge to take out the loan. Fixed rate loans/mortgagees have penalties for overpayment, as otherwise when interest rates go down, people will change to other lenders, so making it a “one way bet” that the banks will always loose. (I believe in the USA, the central bank will under right such loans, so the banks don’t take the risk.) |
What investments are positively related to the housing market decline? | A possibility could be real estate brokerage firms such as Realogy or Prudential. Although a brokerage commission is linked to the sale prices it is more directly impacted by sales volume. If volume is maintained or goes up a real estate brokerage firm can actually profit rather handsomely in an up market or a down market. If sales volume does go up another option would be other service markets for real estate such as real estate information and marketing websites and sources i.e. http://www.trulia.com. Furthermore one can go and make a broad generalization such as since real estate no longer requires the same quantity of construction material other industries sensitive to the price of those commodities should technically have a lower cost of doing business. But be careful in the US much of the wealth an average american has is in their home. In this case this means that the economy as a whole takes a dive due to consumer uncertainty. In which case safe havens could benefit, may be things like Proctor & Gamble, gold, or treasuries. Side Note: You can always short builders or someone who loses if the housing market declines, this will make your investment higher as a result of the security going lower. |
Buying a car and learning to drive versus paying up study loans | Welcome to Money.SE. It appears there's public transportation to get you to work? And the area by your house is walkable? i.e. you and your wife can get groceries and other needs by walking. If it will take 5 years to pay the loans even without a car, how long if you get one? Will you even be able to afford the payments? There's not enough detail here except to say that all purchases aside from true needs have a cost/reward to consider. Whatever the car's total cost is, will it add that much pleasure to your life? People in cities with great transportation save quite a bit on the expenses a car brings. Personal anecdote - Mom lives in a city. She never drives out of the city. Ever. Between insurance, maintenance, and gas, even with low miles, she spends $3000/yr. Once per week, she drives 1500 ft (.3mi) each way to the grocery store. Once every month or 2 to a mall 6 miles away. She can walk and groceries delivered for free. In the end, she spends $250/mo for the feeling of freedom. I get that. When I am 70+, as she is, I will gladly pay car service the $20 to drive me around. You are young, and need to sit with your partner (your wife is your partner in the business of running the family finances, or so I hope) and decide if the benefit is worth the cost. How does she take the kids to a doctor? How do you go out to dinner? |
Is leveraging notoriety to raise stock prices illegal in the US? | pump and dump is a common Illegal practice of boiler room operations. It refers to the talking a stock up, both through word of mouth as well as selling shares to unwitting buyers. I fail to see much difference between that practice and this. |
How accurate is Implied Volatility in predicting future moves? | Historical volatility of a stock is going to be based on past performance, basically its current trend. That can be useful, but really is no indication of how it will perform in the future. Especially with a big swing in the market. Now if you're talking about implied volatility (IV) of an options contract, that's a little different. IV is derived from an option’s price and shows what the market “implies” about the stock’s volatility in the future. Thus it is based on the actions of active traders and market makers. So, it gives you a bit more insight into what's going on, but at times has less to do with fundamentals. I guess a good way to think of IV based on options contracts is as an educated opinion, of the market as a whole, with regards to how much that stock could likely move over a period of time (options expiration). Also note that IV represents the potential for a stock to move, but it does not forecast direction. I don't know of any studies off the top of my head, but I'm sure there have been plenty. |
Can one get a house mortgage without buying a house? | First, many banks do not keep the loan. Even if they send you a payment notice and process the monthly payment, there's still a good chance the loan itself was packed up and sold to investors. Collateralizing mortgages, in and of itself, is not inherently dangerous. But the loan definitely needs a house behind it. If you found a bank that keeps its loans, it would be a tough sell. You'd be asking them to trust that you've chosen the right number to match up with the house you intend to buy. And then they'd need to have another round of processing to turn this into a loan with normal collateral (i.e. put a lien on the house and tie them together.) |
Video recommendation for stock market education | In general I would recommend to stay away from any video from a successful trader, at least those that claim to share their secrets. If they were that successful, why would they want company? What they have most likely discovered is that they can make more money through videos and seminars than they can through trading. While not a video, GetSmarterAboutMoney has a good basic section on Stock markets without being purely Canada centric (as I see from your profile you are in NY). I know that also in our city, there are continuing education courses that often go over the basics like this, if you have a college nearby they might have something. Cheapest of all would be to hit your local library. The fundamentals don't change that quickly that you need the latest and greatest - those are much more likely to be get-poor-quick schemes. Good Luck |
Optimal Asset Allocation | Generally a diversified portfolio will give you a better overall return --a couple of factors that may address what you are looking at - 1) Correlation - The correlation between your two funds is still very high -- it's partially a function of how global economies are related and many companies are now multi-national. It may help if you diversified into other types of products. 2) Diversification - Following up from before, you may want to also look into diversifying into some bonds, commodities, reits, etc. They will have a much smaller correlation with a total domestic stock fund. 3) Returns - I'm not sure if by dominate you mean that it has better overall returns, but the point of diversification is to to get you the highest returns. It's really the ability to limit the risk for the returns - this really translates to limiting the volatility. This may mean that overall your max returns could be lower-- ie: maybe VTSAX gives potential average returns between 3%-11%. A diversified portfolio may give you potential average returns of 5%-9%. A similar article debating the merits of 'smart beta ETFs' if you are curious. Hope that helps. |
Hearing much about Dave Ramsey. Which of his works is best in describing his “philosophy” about money? | His books: The Total Money Makeover - This is a very step by step approach to what he teaches about how to handle money. Financial Peace - This is a more philosophical approach to the same topics. More idea and less application based. You can catch his radio show online for free - or an hour podcast each day in the itunes store - this is free. You can watch his TV show on Hulu. |
When trading put options, is your total risk decreased if you are in a position to exercise the option? | In absolute terms the risk is about the same. If you own the stock and your put option goes in the money, then you have the option to get rid of your stock at yesterday's higher price. If you don't, you can sell the option for a higher price than you paid for it. But, as you calculated yourself, the net gain or loss (in absolute terms, not percentage terms) is the same either way. |
Growth rate plus dividend yieid total? | The sum of the dividend yield plus capital growth is called total return. In your examples, you get to a total return of 7% through several different (and theoretically equivalent) paths. That is the right way of thinking. |
Multi-state K-1 earnings to S-Corp | I'm not sure why you think that it matters that the distribution goes to an S-Corp vs an individual tax payer. You seem to think it has any relevance to your question, but it doesn't. It only confuses your readers. The situation is like this: LLC X is deriving income in State #2. It has two members (I and S) residents of State #1. Members I and S pay all their taxes to State #1, and don't pay taxes to State #2. State #2 audited member I and that member now needs to pay back taxes and penalties to State #2 on income derived from that State. Your question: Does that mean that member S should be worried, since that member was essentially doing the exact same thing as member I? My answer: Yes. |
Getting Cash from Credit Card without Fees | Nope. Or at least, if it were possible the company offering such a credit card would quickly go out of business. Credit card companies make money off of fees from the merchants the user is buying from and from the users themselves. If they charged no fees to the user on cash advances and, in fact, gave a 3% back on cash advances, then it would be possible for a user to: The company would lose money until they stopped the loophole or went out of business. |
Can my broker lock my cash account if I try to use the money from a stock sale during the three-day settlement period? | Here's how this works in the United States. There's no law regarding your behavior in this matter and you haven't broken any laws. But your broker-dealer has a law that they must follow. It's documented here: The issue is if you buy stock before your sell has settled (before you've received cash) then you're creating money where before none existed (even though it is just for a day or two). The government fears that this excess will cause undue speculation in the security markets. The SEC calls this practice freeriding, because you're spending money you have not yet received. In summary: your broker is not allowed to loan money to an account than is not set-up for loans; it must be a margin account. People with margin account are able to day-trade because they have the ability to use margin (borrow money). Margin Accounts are subject to Pattern Daytrading Rules. The Rules are set forth by FINRA (The Financial Industry Reporting Authority) and are here: |
Why is property investment good if properties de-valuate over time? | Properties do in fact devaluate every year for several reasons. One of the reasons is that an old property is not the state of the art and cannot therefore compete with the newest properties, e.g. energy efficiency may be outdated. Second reason is that the property becomes older and thus it is more likely that it requires expensive repairs. I have read somewhere that the real value depreciation of properties if left practically unmaintained (i.e. only the repairs that have to absolutely be performed are made) is about 2% per year, but do not remember the source right now. However, Properties (or more accurately, the tenants) do pay you rent, and it is possible in some cases that rent more than pays for the possible depreciation in value. For example, you could ask whether car leasing is a poor business because cars depreciate in value. Obviously it is not, as the leasing payments more than make for the value depreciation. However, I would not recommend properties as an investment if you have only small sums of money. The reasons are manyfold: So, as a summary: for large investors property investments may be a good idea because large investors have the ability to diversify. However, large investors often use debt leverage so it is a very good question why they don't simply invest in stocks with no debt leverage. For small investors, property investments do not often make sense. If you nevertheless do property investments, remember the diversification, also in time. So, purchase different kinds of properties and purchase them in different times. Putting a million USD to properties at one point of time is very risky, because property prices can rise or fall as time goes on. |
Most common types of financial scams an individual investor should beware of? | Investing in a business can be daunting and risky, so it is not for everyone. The most common pitfalls are mentioned here: Beyond that: It all sounds a bit like "Don't trust anyone" and sadly, this is true when there's a lot of money involved. So be prepared and do your homework, this sometimes will save you more money than you gain with your investments :) Good luck! |
How should I prepare for the next financial crisis? | How would gold have protected you during the 2007/8 crisis? In no way, shape or form. The ways to protect yourself at any time are: Boring, huh? |
What is the difference between “good debt” vs. “bad debt”? | First of all debt is a technology that allows borrower to bring forward their spending; it's a financial time machine. From borrowers point of view debt is good when it increases overall economic utility. A young person wants to bring up a family but cannot afford the house. Had they waited for 30 years they would have reached the level of income and savings to buy the house for cash. By the time it might be too late to raise a family, sure they'd enjoy the house for the last 20 years of their life. But they would loose 30 years of utility - they could have enjoyed the house for 50 years! So, for a reasonable fee, they can bring the spending forward. Another young person might want to enjoy a life of luxury, using the magical debt time machine and bringing forward their future earnings. They might spend 10 years worth of future earnings on entertainment within a year and have a blast. Due to the law of diminishing marginal utility - all that utility is pretty much wasted, but they'll still will need to make sacrifices in the future. The trick is to roughly match the period of debt repayment to the economic life of the purchase. Buying a house means paying over 30 years for an asset that has an economic life of 80 years+, given that the interest fee is reasonable and the house won't loose it's value overnight that's a good debt. Buying a used car with a remaining life of 5 years and financing its with a seven years loan - is not a good idea. Buying a luxurious holiday that lasts a fortnight with 2 years of repayments, i.e. financing non-essential short term need with medium term debt is insane. The other question is could the required utility be achieved through a substitute at a lower cost without having to bring the spending forward or paying the associated fee. |
Stock Trade Transaction Fee - at what point is it worth it | The main question is, how much money you want to make? With every transaction, you should calculate the real price as the price plus costs. For example, if you but 10 GreatCorp stock of £100 each, and the transaction cost is £20 , then the real cost of buying a single share is in fact buying price of stock + broker costs / amount bought, or £104 in this case. Now you want to make a profit so calculate your desired profit margin. You want to receive a sales price of buying price + profit margin + broker costs / amount bought. Suppose that you'd like 5%, then you'll need the price per stock of my example to increase to 100 + 5% + £40 / 10 = £109. So you it only becomes worth while if you feel confident that GreatCorp's stock will rise to that level. Read the yearly balance of that company to see if they don't have any debt, and are profitable. Look at their dividend earning history. Study the stock's candle graphs of the last ten years or so, to find out if there's no seasonal effects, and if the stock performs well overall. Get to know the company well. You should only buy GreatCorp shares after doing your homework. But what about switching to another stock of LovelyInc? Actually it doesn't matter, since it's best to separate transactions. Sell your GreatCorp's stock when it has reached the desired profit margin or if it seems it is underperforming. Cut your losses! Make the calculations for LovelyCorp's shares without reference to GreatCorp's, and decide like that if it's worth while to buy. |
How much power does a CEO have over a public company? | If Steve Jobs [Tim Cook] were to decide to try to kill Apple, does he have the power to do so? Yes. But he would be held accountable. In addition to the other answers, the CEO is a fiduciary of the corporation. That means his/her actions must be in good faith and look out for the well-being of the company. Otherwise, he could be sued and held liable for civil damages and even criminally prosecuted for malfeasance. |
Once stock prices are down, where to look for good stock market deals? | Keep in mind, that bargain hunting will fail you from time to time. I know a lot of guys who bought Nortel at $10, planning to hold it until the inevitable recovery. |
Is inflation a good or bad thing? Why do governments want some inflation? | Inflation is theft! It is caused when banks lend money that someone deposited, but still has claim to - called fractional reserve banking. On top of that, the Federal Reserve Bank (in the US) or the Central Bank of the currency (i.e. Bank of Japan, European Central Bank, etc.) can increase the monetary base by writing checks out of thin air to purchase debt, such as US Treasury Bonds. Inflation is not a natural phenomenon, it is completely man-made, and is caused solely by the two methods above. Inflation causes the business cycle. Lower interest rates caused by inflation cause long-term investment, even while savings is actually low and consumption is high. This causes prices to rise rapidly (the boom), and eventually, when the realization is made that the savings is not there to consume the products of the investment, you get the bust. I would encourage you to read or listen to The Case Against the Fed by Murray N. Rothbard - Great book, free online or via iTunes. |
Good yield vs. safer route (Checking vs. Savings) | In personal finance, most of your success is determined by personal habit rather than financial savvy. Getting in the habit of making regular deposits to your savings account will have a much larger effect on your situation than worrying about which account pays the highest interest rate (particularly as neither one of them matches the current inflation rate, which is over 3%). So go ahead and put your money in a savings account, but not because of the interest or safety, but because it's a "savings" account. |
FATCA compliance for small Foreign Company. What do I need to do? | Unless you started a bank or other kind of a financial institution (brokerage, merchant processor, etc etc), the page you linked to is irrelevant. That said, there's enough in the US tax code for you to reconsider your decision of not living in the US, or at least of being a shareholder of a foreign company. Your compliance costs are going to go through the roof. If you haven't broken any US tax laws yet (which is very unlikely), you may renounce your citizenship and save yourself a lot of money and trouble. But in the more likely case of you already being a criminal with regards the US tax law, you should probably get a proper tax advice from a US-licensed CPA/EA who's also proficient in the Japanese-American tax treaty and expats' compliance issues resolution. |
How to measure how the Australian dollar is faring independent of the US dollar | The best answer to your question would to be what the interest rates are like in Australia itself. The Reserve Bank sets the target ‘cash rate’, which is the market interest rate on overnight funds. It uses this as the instrument for monetary policy, and influences the cash rate through its financial market operations. Decisions regarding the cash rate target are made by the Reserve Bank Board and explained in a media release announcing the decision at 2.30 pm after each Board meeting. (Prior to December 2007, media releases were issued only when the cash rate target was changed.) From Investopedia: How Rates Are Calculated Each central bank's board of directors controls the monetary policy of its country and the short-term prime interest rate that banks use to borrow from each other. When the economy is doing well, interest rates are hiked in order to curb inflation and when times are tough, cut rates to encourage lending and inject money into the economy. Have a look at this from graph from http://www.rba.gov.au/monetary-policy/int-rate-decisions/ I would then go to a website that allows you to compare, graphically, whichever interest rate you want.(Or you could get the raw data and run some analysis, to each his own) FYI, this topic (FX) is incredibly complex and I hope my answer satisfies your needs.Otherwise, talk to a quant. You will need a ton of data inputs to model the entire economy of Australia to try and predict what the central bank will do, which is what people try and do everyday. Best of luck! |
Should I charge my children interest when they borrow money? | Would you expect your parents to charge you interest if you borrowed from them? Yes, if they said so when the money was borrowed. No, if there were no terms communicated when the money was borrowed. Expectations need to be clearly laid out up-front. What is your advice? I think you are asking the wrong question of whether or not you should charge interest. The real issue is that you are concerned about the 'borrowing', which are really turning out to be 'gifts'. The money amounts are not the issue as much as the lack of responsibility. Going back to your children and asking for interest will not fix this issue. This is my advice: This is a difficult process, and may not go over well with your children. Remember that this is not hurting them. You are actually hurting them more by allowing them to put off developing good habits, independence, and maturity. It is hard to see someone make choices that hurt themselves and others, but you cannot prevent them from making that choice. If they never feel the results of that choice, they will lack the motivation to change. |
Treasury Bonds, and why has the NYSE 20+ Year Treasury Bond index (AXTWEN) gone up so much in the last year (2011)? | The NYSE 20 Year Plus Treasury Bond Index (AXTWEN) is a multiple-security fixed income index that aims to track the total returns of the long-term 20 year and greater maturity range of the U.S. Treasury bond market. The index constituent bonds are weighted by their relative amounts outstanding.One cannot directly invest in an Index. Index Bond Maturities 24 to 27 Years 20.36% /27 to 29 Years 79.64% Index Duration 17.47 Years An oversimplification of how bonds value changes as rates change is they are inversely related based on the duration of the bond. Think of duration as the time-weighted average of all the coupons and the final payment. In this case, a drop in rates of about 1% will cause a rise in value of about 17.4%. Long term rates took a drop in the last year. |
Margin account: how to calculate the stock price that might trigger a liquidation of positions? | Thanks to this youtube video I think I understood the required calculation. Based on following notation: then the formula to find x is: I found afterwards an example on IB site (click on the link 'How to Determine the Last Stock Price Before We Begin to Liquidate the Position') that corroborate the formula above. |
Is unrealized gain part of asset? | Stocks, as an asset, represent the sum of the current market value of all of your holdings. If your portfolio is showing unrealized gains and losses, then that net amount is inherently reflected in the current market value of your holdings. That's not to say cost basis is not important. Any closed trades, realized gains or losses, will of course have an impact on your taxable income. So, it couldn't hurt to keep track of your cost basis from a tax standpoint, but understand that the term "asset" refers to the current market values and does not consider base amounts. Taxes do. Perhaps consider making separate cells for cost basis, but also bear in mind that most if not all of the major online discount brokers will provide transferring of cost basis information electronically to the major online tax service providers. |
Why should we expect stocks to go up in the long term? | Stocks "go up 5-7% every year. This has been true for the last 100 years for the S&P500 index...." This was true in the 20th century in America. It was not true (over the whole century) for other major countries like Germany, Russia, Japan, or China. (It was more or less true for Britain and certain Commonwealth countries like Australia and Canada.) A lot of this had to do with which countries were occupied (or not) during the two world wars. In one of his company's annual reports, Warren Buffett pointed out that the U.S. standard of living went up 6-7 times in the 20th century, that this was unprecedented (and might not be repeatable in the 21st century). The performance of the U.S. stock market in the past century is representative of those (and other) past facts. If a different set of facts prevails going forward, the U.S. stock market would be reflective of those "different" facts. |
What assets would be valuable in a post-apocalyptic scenario? | This is going to be a list of some things that will likely be of value immediately after some apocalyptic event. However, note that I am not answering your question of what you should invest in now to take advantage of such an event. That is a pretty ridiculous notion. Preparing oneself for such a possibility is certainly a good idea. That said, there are some realistic limitations to how you could take advantage of such a situation. Namely, the very real requirement of physical security. Unless you have a huge posse -- armed to the teeth -- to defend your cache, someone will come along with a bigger and better armed group to take it. (Not to mention that I am the type of person that would -- at least -- consider organizing such a group to take you down; if only as a matter of principle.) Guns & ammo (Also, knives; ideally ones that can be used as weapons and for food preparation/hunting.) Alcohol. Especially liquor. It's concentrated and easier to store than beer or wine. Beside for getting inebriated, it is useful as a sedative and antiseptic. Non-perishable foods. Canned goods are obvious. Though, grains and cereals can be stored with relative ease under some circumstances. (Obviously, not so easily done in an urban area.) Methods of starting a fire. Preferably rugged ones, such as flint and steel. (Lighters would only be of limited use. Matches are bulky and require water-tight storage.) Salt and/or salt-licks. (Possibly, other forms of non-perishable bait.) As bstpierre puts it, hunting will be about survival not sport. Hand-tools. Textiles, fabrics, thread and needles. Medicines of all sorts, though especially antibiotics, antiseptics and painkillers. Books of a practical nature. Topics such as: wilderness survival, cooking, carpentry, etc. The list is mostly ordered in terms of value & practicality. Ultimately, I doubt there is much that will provide a practical investment idea for such a scenario. The physical security issue is a big limiting factor. In a post-apocalyptic scenario it goes back to who is bigger, stronger and better armed. One thing does come to mind: knowledge. Prepare yourself with the skills and knowledge you need to survive in such a scenario and you will be invaluable. Also, as bstpierre notes in the comments, connections will likely also be important. (Probably local or nearby connections.) No one person can do it all alone. It will come down to cooperation. |
When should I open a “Line of credit” at my bank? | I have a line of credit that I have attached to my checking account in case of an overdraft. Since I haven't over drafted my checking account in 4 years, I typically borrow the minimum $5 from the line of credit and then pay it back the next day. This usually costs me a couple of cents and I have to do it twice a year, but it keeps the account active and they don't close it down. |
Might I need a credit score to rent, or for any other non-borrowing finances? | Typically one wants to see a credit score, just because you may have money in the bank and decent income does not mean your going to pay, there are plenty of people who have the money but simply refuse to cough it up. Credit is simply a relative way of seeing where one fits against another in a larger group, it shows that this person not only can pay, but does pay. While not having a credit history should make no difference, I can and hopefully easily posited above why it can be necessary to have one. Not all landlords will require a credit check, I was not required to give one, I did not have much credit to begin with, given that, I was forced to cough up a higher degree of a security deposit. |
HELOC vs. Parental Student Loans vs. Second Mortgage? | Debt is no fun. Getting out of debt to replace it with more debt is no fun. In both cases, you are making an investment in your child's future. That's laudable, but there might be other ways to economize on the education costs. I prefer HELOC debt because I can deduct the interest (as you pointed out) and it usually allows re-borrowing if other cash-flow problems crop up. The downside of borrowing against your house is that your house could be foreclosed if you become insolvent, and you will lose your buffer if you max out the equity now. The same problem exists with a 2nd mortgage. The fact that you would still have a mortgage either way does make the option more attractive though (or less unattractive anyway). |
How to evaluate stocks? e.g. Whether some stock is cheap or expensive? | nan |
Making an offer on a property - go in at market price? | From then on we've felt he was really pushy and rushing us to make a decision (we need to lock in a good rate, its a sellers market, it'll go fast, snooze loose, etc). This is the first reason for walking away. I understand that all those factors might be true but my question is: How do I know we made a good offer? I'm going to be blunt, here: You don't. You work out ahead of time what you will pay (ignore the agent) and you make the offer on the basis of your own research, research you spent months undertaking. The listed price on the location is $375,000 and according to our agent similar units over the last few years had sold for that amount. So our agent suggested making an offer at market price. According to the agent. I'm going to be blunt here, what do any of the real estate sites out there - that offer a wealth of information for free - indicate? If you don't know, then yet again you don't know if you made the right offer or not. Do some research now by yourself. I would be shocked if your offer was at the right level. Set your emotions aside - there are a gazillion houses out there. |
Should I be worried that I won't be given a receipt if I pay with cash? | If this is because he wants to avoid paying taxes, will I get in trouble if I agree to have him work on my vehicle? You should check your state and local sales tax laws to be certain, but in my state you have no liability if he does not pay his taxes. That's his problem, not yours. The biggest risk for you is if something goes wrong, you have no proof that the work was ever done, so it's possible he could deny that any transaction ever took place and refuse to correct it or refund your money. So at worst you're out what you paid for the service, plus what it would cost you to fix it if you needed to and chose to do so. If you don't want to take that risk, then insist on a receipt or take you business elsewhere, but there's no criminal liability for you if he chooses not to report the income. EDIT Be aware, though that state tax is levied at the state and local level, so the laws of your individual state or city may be different. |
How to explain quick price changes early in the morning | The gap up/down and rapid movement immediately following market open is due to overnight futures activity. In your example, SP500 on June 20, 2016 saw a 20-point gap up at market open. This was because the SP500 futures were trading 20 points higher at 9:30 AM than at its close on Friday. The index will always "catch up" with futures at market open. You can see that below. The top chart is the E-mini SP500 futures from Sunday night to Monday. Beneath it is the SP500 index. |
Why UK bank charges are not taken account when looking on interest for taxation? | When I left the UK four years ago, free banking is still an option and I'm pretty sure it still is. Therefore, you have chosen to have a bank account with a 5.00/month charge. In return for this charge, you will be eligible to receive certain benefits. For example; reduced borrowing costs, discounted mortgage rates, free overdraft on small amounts, "rewards" for paying household bills by direct debit, and things of this sort. Amongst these benefits may be preferential savings rates. However, from HMRC's point of view it will be the extra perks you are paying for with your monthly charge. You have chosen to pay for the account and HMRC is not interested in how you choose to spend your money, only in the money you earn. While I agree with you that it does have an element of unfairness, the problem is how would you divide the cost amongst the various benefits. |
I'm thinking about selling some original artwork: when does the government start caring about sales tax and income tax and such? | First - get a professional tax consultation with a NY-licensed CPA or EA. At what point do I need to worry about collecting sales taxes for the city and state of New York? Generally, from the beginning. See here for more information on NYS sales tax. At what point do I need to worry about record-keeping to report the income on my own taxes? From the beginning. Even before that, since you need the records to calculate the costs of production and expenses. I suggest starting recording everything, as soon as possible. What sort of business structures should I research if I want to formalize this as less of a hobby and more of a business? You don't have to have a business structure, you can do it as a sole proprietor. If you're doing it for-profit - I suggest treating it as a business, and reporting it on your taxes as a business (Schedule C), so that you could deduct the initial losses. But the tax authorities don't like business that keep losing money, so if you're not expecting any profit in the next 3-4 years - keep it reported as a hobby (Misc income). Talk to a licensed tax professional about the differences in tax treatment and reporting. You will still be taxed on your income, and will still be liable for sales tax, whether you treat it as a hobby or as a business. Official business (for-profit activity) will require additional licenses and fees, hobby (not-for-profit activity) might not. Check with the local authorities (city/county/State). |
Good book-keeping software? | I think Peachtree is a double entry system |
What is the meaning of “writing put options”? | Writing options means "selling" options and "put" options are contracts to sell a defined security (the underlying), at a specific date (expiration date) and at a specific price (strike price). So, writing put options simply mean selling to others contracts to sell. Your profit is limited to the premium but your loss may be unlimited in a falling market. |
Which countries allow eChecks? | eChecks (and ACH) are a (desperate?) try of the US banking system to get into the 21st century. All EU countries (and some others) have direct deposits and transfers as the standard way of transferring money since about 20 years, and since about 5 years it is cost-free and one-day across all the EU. The rest of the world runs mostly country specific system, as there is not that large a demand for cross country shifting, and exchange rates are also an issue in any such transaction. Because they have different ways that work fine since decades, other countries will consider the eCheck idea as a step backwards and will probably ignore it, so your answer is 'none'. International companies work with banks in a different relationship than retail customers, so they can do things you and me cannot do - depending on size and volume. Some large companies get a banking license and then handle their own stuff; medium sized companies make favorable contracts with banks (they are golden goose customers - never an issue, no brick and mortar presence needed, banks love them), or they simply suck up the transfer cost (if you move millions, who cares about a 40 $ fee). Small businesses whine and live with what they get... |
How do I explain why debt on debt is bad to my brother? | This is not the case with your brother only. There are many business which run on this premise. It goes till the time all the conditions are in control and get busted when things goes out of way. You have mentioned the loan amount and not the monthly repayment amount. Even if you say, a new loan will not solve his problem, what are the way out ? Telling things nicely sometime does not work especially when facts are otherwise. Hence you need to make a compete case study which should also consider his capacity to pay. As of now it seems he has debts of around 20 months of his earning, which can be considered high, depending upon the terms of major loan such as car loan and personal loan. A case study is way out. You can explain him with such case study that he should not go for further loans. |
When an insider discloses a stock trade are they required to execute? | No. And furthermore, canceling based on insider information is not considered insider trading. SEC Interpretation from October of 2000: (a) Does the act of terminating a plan while aware of material nonpublic information result in liability under Section 10(b) and Rule 10b-5? No. Section 10(b) and Rule 10b-5 apply "in connection with the purchase or sale of any security." Thus, a purchase or sale of a security must be present for liability to attach. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975). [link mine] A 10b5-2 is a rule in the SEC's section in federal law that governs trading on "material nonpublic information." Fried (2002) even concluded that: The SEC's safe harbour permitting insiders to buy or sell shares pursuant to prearranged trading plans while in possession of material nonpublic information and to cancel the plans while aware of material nonpublic information enables insiders to profit from their access to such information. The SEC could easily eliminate insider's advantages over public shareholders by not allowing insiders to cancel their plans after becoming aware of material nonpublic information. |
Is it a good investment for a foreigner to purchase a flat/apartment in China? | No, it's not. This could be a great question, but with no background, not so much. Do you live there now? For how long, and how much longer? You say investment, are you looking to live in it or rent it out? I have nothing against China, but I'd not buy anywhere unless the price, location, and timing all were right. |
What bonds do I keep and which do I cash, why is the interest so different | Bonds released at the same time have different interest rates because they have different levels of risks and liquidity associated. Risk will depend on the company / country / municipality that offers the bond: their financial position, and their resulting ability to make future payments & avoid default. Riskier organizations must offer higher interest rates to ensure that investors remain willing to loan them money. Liquidity depends on the terms of the loan - principal-only bonds give you minimal liquidity, as there are no ongoing interest payments, and nothing received until the bond's maturity date. All bonds provide lower liquidity if they have longer maturity dates. Bonds with lower liquidity must have higher returns to compensate for the fact that you will have to give up your cash for a longer period of time. Bonds released at different times will have different interest rates because of what the general 'market rate' for interest was in those periods. ie: if a bond is released in 2016 with interest rates approaching 0%, even a high risk bond would have a lower interest rate than a bond released in the 1980s, when market rates were approaching 20%. Some bonds offer variable interest tied to some market indicator - those will typically have higher interest at the time of issuance, because the bondholder bears some risk that the prevailing market rate will drop. Note regarding sale of bonds after market rates have changed: The value of your bonds will fluctuate with the market. If a bond was offered with 1% interest, and next year interest rates go up and a new identical bond is offered for 2% interest, when you sell your old bond you will take a loss, because the market won't want to pay full price for it anymore. Whether you should sell lower-interest rate bonds depends on how you feel about the factors above - do you want junk bonds that have stock-like levels of returns but high risks of default, maturing in 30 years? Or do you want AAA+ Bonds that have essentially 0% returns maturing in 30 days? If you are paying interest on debt, it is quite likely that you could achieve a net income benefit by selling the bonds, and paying off debt [assuming your debt has a higher interest rate than your low-rate bonds]. Paying off debt is sometimes referred to as a 'zero risk return', because essentially there is no real risk that your lender would otherwise go bankrupt. That is, you will owe your bank the car loan until you pay it, and paying it is the only thing you can do to reduce it. However, some schools of thought suggest that maintaining savings + liquid investments makes sense even if you have some debt, because cash + liquid investments can cover you in some emergencies that credit cards can't help you with. ie: if you lose your job, perhaps your credit could be pulled and you would have nothing except for your liquid savings to tide you over. How much you should save in this way is a matter of opinion, but often repeated numbers are either 3 months or 6 months worth [which is sometimes taken as x months of expenses, and sometimes as x months of after-tax income]. You should look into this issue further; there are many questions on this site that discuss it, I'm sure. |
Offsetting capital losses against gains for stocks | The loss for B can be used to write off the gain for A. You will fill out a schedule 3 with cost base and proceeds of disposition. This will give you a $0 capital gain for the year and an amount of $5 (50% of the $10 loss) you can carry forward to offset future capital gains. You can also file a T1-a and carry the losses back up to 3 years if you're so inclined. It can't be used to offset other income (unless you die). Your C and D trades can't be on income account except for very unusual circumstances. It's not generally acceptable to the CRA for you to use 2 separate accounting methods. There are some intricacies but you should probably just use capital gains. There is one caveat that if you do short sales of Canadian listed securities, they will be on income account unless you fill out form T-123 and elect to have them all treated as capital gains. I just remembered one wrinkle in carrying forward capital losses. They don't reduce your capital gains anymore, but they reduce your taxable income. This means your net income won't be reduced and any benefits that are calculated from that (line 236), will not get an increase. |
Priced out of London property market. What are my accommodation investment options? | NB - I live in Surrey and bought my house in January 2014. If you don't have a very social life, it does pay to stay outside London. Places outside London are cheap and you will get a better deal in relation to houses or flats as compared to London. I feel very priced out of the market regarding London mortgages I will strongly question you logic behind this ? Why only London ? Why not live in the commuter belt outside London. Good places to reside, good schools, nice neighbourhood and away from the hustle and bustle of London. Many of my colleagues commute from Cambridge and Oxford daily into Central London and they laugh at people who want to buy a house in London, just for the sake of buying a house. It seems that the housing market is generally in a bubble due to being distorted by the finance market London house market is different from the rest of UK. People from overseas tend to invest in London property market, so it is always inflated. Even the property tax hasn't deterred many. I could look into buying somewhere and renting it out You are trying to join the same people, because of whom you have been put out of the housing market. I strictly question this logic unless your mortgage is less than the rent you pay and what rent you get. Buy a roof over your head first, then think of profiting from property. |
Postbank (Germany) - transferring money to the US - what are the best options? | After doing this many times, my preferred method is: The reason being that the US banks will use every chance possible to take your money in fees. Usually the German bank website will tell you what the current exchange rate. You were correct in selecting Transfer in $ and got the exchange rate. In my experience if you transfer in Euros, the US bank at the other end, will take about 3-5%, because they can. Selecting OUR means that you only have the fee taken out by the Source bank. By doing shared, it looks like both banks took their full fee. If you chose OUR, I'm fairly certain you just would have paid the 1.50 and the 20. Chase would not have taken the 15. |
How and Should I Invest (As a college 18 year old with minimal living expenses)? | You have great intentions, and a great future. As far as investing goes, you're a bit early. Unless your parents or other benefactor is going to pay every dime of your expenses, you'll have costs you need to address. $1000 is the start of a nice emergency fund, but not yet enough to consider investing for the long term. If you continue to work, it's not tough to burn through $200/wk especially when you are in college and have more financial responsibility. |
Are car buying services worth it? | I haven't heard of these before! (And I'm on the board of a Credit Union.) The 0.99% on loans is great. It's especially great on a used car: the steep part of the depreciation curve was paid by the first owner. The network probably have a business relationship with the credit union. Credit unions do indirect lending -- approval of loans that happens at the point of sale, which then the credit union gets as assets. Depending on the cost of that program, it probably won't hurt. Your credit union wants to keep your business, because they know that you have a lot of options for where you bank and where you get loans. |
Interest charges on balance transfer when purchases are involved | The 'common sense' in it is that they want the maximum money from you while still suggesting to a quick read that you get away free. Their target is not to make you happy, but to make money of you. |
Withdrawing cash from investment: take money from underperforming fund? | I think that Bob has good reasons for his planned spending and should follow his plan, not the dubious advice from an account rep. |
Iraqi Dinars. Bad Investment, or Worst Investment? | Currency, like gold and other commodities, isn't really much of an investment at all. It doesn't actually generate any return. Its value might fluctuate at a different rate than that of the US dollar or Euro, but that's about it. It might have a place as a very small slice of a basket of global currencies, but most US / European households don't actually need that sort of basket; it's really more of a risk-management strategy than an investment strategy and it doesn't really reflect the risks faced by an ordinary family in the US (or Europe or similar). Investments shouldn't generally be particularly "exciting". Generally, "exciting" opportunities mean that you're speculating on the market, not really investing in it. If you have a few thousand dollars you don't need and don't mind losing, you can make some good money speculating some of the time, but you can also just lose it all too. (Maybe there's a little room for excitement if you find amazing deals on ordinary investments at the very bottom of a stock market crash when decent, solid companies are on sale much cheaper than they ordinarily are.) |
When to liquidate mutual funds for a home downpayment | This question is calling for a somewhat subjective answer. What I would recommend is liquidate now, since it is a stock fund and stocks have performed very well this year, no need to be greedy and hope that they do as well in 2014. Since it is not an enormous amount of money, put it in an interest yielding savings account which unfortunately are all sub 1%. But the key here is since we cannot predict the markets, no investment is going to be "safer". You want the 18k to be there when you need it for the down payment. If you invest it in a fund now, you may not be able to get at least 18k at the time you are forcing yourself to liquidate. A good rule for investing is never to have to sell to make a purchase because there is a high probability that you will be selling at a sub-optimal price. Some savings accounts that have slightly higher yields. http://money.cnn.com/2013/10/01/pf/savings-account-yields/ |
Dividends Growing Faster than Cost of Capital | I don't think the method falls short, it's the premise that is wrong. If the dividend stream really did grow faster than the cost of capital indefinitely, eventually the company behind the share would become larger than the entire economy. Logically, at some point, the growth must slow down. |
What evidence exists for claiming that you cannot beat the market? | The reason for this is arbitrage. In an free and open market, investments that are certain to generate above-average profits would do so by being sold cheaply, while having a high return on investment after that. But in a free market, prices are set by supply and demand. There is a high demand and little supply for investments that would certainly outperform the market. The demand is in fact so high, that the purchase price rises to the point of eliminating that excess return. And with high-frequency automated trading, that price hike is instant. But who would even want to sell such guaranteed outperformers in the first place? Of course, there are uncertainties associated with stocks, and individual stocks therefore move independently. As "the market" is an average, some stocks will therefore beat the market over certain time periods. That's random statistical variation. The only realistic path to above-average returns is to accept higher risks. As discussed above, nobody wants to sell you safe bets. But risky bets are another matter. Different actors will price risk differently. If you aren't worried much about risk, you can pick up stocks that are cheap by your standards. That is possible only because such stocks aren't cheap by risk-averse standards. Looking a bit deeper, we see that arbitrage works in a free market because there's essentially perfect information. But risk is precisely the absence of such information, and that can lead to price variations. Yet, as the lack of information means a lack of certainty, you can't use this to reliably beat the market. |
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