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Why do stores and manufacturers use mail in rebates? A scam, or is there a way to use them effectively? | It's an effective way to achieve market segmentation without having to ask your customers how rich they are, and you get the benefit of finding out additional information like their address, email etc. The principle is similar to coupons on cereal boxes, anybody can get the rebate/discount if they go to the effort, but people who are cash rich/time poor are less likely to do so than those that really need the money. Joel Spolsky wrote about this and various other pricing mechanisms a while back, I like to reference the article every few weeks. It's well worth a read. Now, if you're retired and living off of social security, $7 an hour sounds pretty good, so you do it, but if you're a stock analyst at Merrill Lynch getting paid $12,000,000 a year to say nice things about piece-of-junk Internet companies, working for $7 an hour is a joke, and you're not going to clip coupons. Heck, in one hour you could issue "buy" recommendations on ten piece-of-junk Internet companies! So coupons are a way for consumer products companies to charge two different prices and effectively segment their market into two. Mail-in rebates are pretty much the same as coupons, with some other twists like the fact that they reveal your address, so you can be direct marketed to in the future. |
Why are big companies like Apple or Google not included in the Dow Jones Industrial Average (DJIA) index? | In addition to the answers provided above, the weight the Dow uses to determine the index is not the market capitalization of the company involved. That means that companies like Google and Apple with very high share prices and no particular inclination to split could adversely effect the Dow, turning it into essentially the "Apple and Google and then some other companies" Industrial Average. The highest share price Dow company right now, IIRC, is IBM. Both Google and Apple would have three times the influence on the Index as IBM does now. |
What happened to Home Depot's Stock in 1988? | It's got to be a bad chunk of data on Google. Yahoo finance does not show that anomaly for 1988, nor does the chart from Home Depot's investor relations site: |
Will a Barclaycard Visa help me in building up credit score? | Payment history is probably the most significant contributor to your credit score. Having a solid history of making, at least the minimum, payments on time will have a positive impact on your credit score. Whether or not this specific transaction means anything to that equation is up for debate. If you have no credit lines now and 0% for 18 months on a computer makes sense to you, then yes, making this purchase this way and paying on time will have a positive impact on your credit score. Paying interest doesn't help your credit score. Repay this computer before the 18 month period ends, then be sure to pay your balance in full every month thereafter. |
Why do financial institutions charge so much to convert currency? | Echoing that bank fees are mostly "because they can", although partly this is because simply holding onto the money doesn't really pay enough for the physical infrastructure of branches, ATMs and staff. So like a budget airline they make it up on additional fees. But that document doesn't actually say they charge 3% for currency conversion! It's "0.20% of transaction amount" for currency conversion, which is not bad (although watch out for the "spread" between buying and selling rates). I see "International POS/ATM Transaction Fee 3% of transaction amount", which is very different. That's a card fee. The big issue with these is fraud - your card number suddenly being used in a different country will nearly always trigger extra fraud checks. It also involves a much more complicated settlement process. I'm more unimpressed with the monthly service charges and the huge $85 fee for international wire transfers. |
Can a CEO short his own company? | mhoran_psprep has answered the question well about "shorting" e.g. making a profit if the stock price goes down. However a CEO can take out insurance (called hedging) against the stock price going down in relation to stocks they already own in some cases. But is must be disclosed in public filings etc. This may be done for example if most of the CEO’s money is in the stock of the company and they can’t sell for tax reasons. Normally it would only be done for part of the CEO’s holding. |
How do I deal with a mistaken attempt to collect a debt from me that is owed by someone else? | I can only speak for germany/europe. Inkasso companies/lawyer would write a letter with a bill, those letters have register numbers. If in doubt, one would call the company, ask who is the debtor/what is the origin of the bill. I certainly would not react on a phone call. However, if an official entity or lawyer is contacting you, you have to take action asap, at least calling them. |
Online brokers with a minimum stock purchase lower than $500 | The $500 minimum is a policy of the ASX. As such any broker that offered a different policy would not be offering direct purchase of exchange traded shares. Note however that this policy applies only to the initial purchase. From the CMC FAQs: The ASX requires a minimum parcel of $500 to be traded if you don’t currently hold that particular security. Once you have $500 worth of an individual security, you can purchase any value of shares you like. |
Loan to son - how to get it back | A few ideas. I suggest it would wise to consider what lesson is learned as a result of any resolution of a financial issue. Is it a lesson of responsibility and of the importance of keeping one's word, or of getting away with whatever happens (poorly planned business) with no adverse consequences. "No" consequences (e.g. forgiven loan) is also a consequence, and it sends a message. Sounds like paying the loan from your savings automatically means it's deducted from inheritance, since the savings are part of that inheritance. This may seem like a square deal if we ignore inflation. Assuming Today the $54K is worth much more than, unless it is adjusted for inflation, the same $54K will be worth (i.e. will allow to buy) a few decades from now, when the inheritance materializes. So this option means your son is foregoing a significantly smaller financial loss in the future in exchange for foregoing his debt completely today. This is like borrowing $54K from a bank now, and only having to forego the same amount decades in the future when it is in fact worth much less. What borrower would not be happy with such arrangement, and what lender would do it? Only one's own loving parents :) You are in charge of what life lessons your son will walk away with from this situation. Good luck! |
Debit card for minor (< 8 y.o.) | In the UK, the Osper card would do the trick exactly. The closest thing I can find in the US is the USAA Youth accounts which appear to be what you need but have some restrictions on mobile access until the youth is 13. |
Any advantage to exercising ISO's in company that is not yet public? | Exercising an option early if you can't sell the underlying stock being purchased is generally not advisable. You're basically locking in the worst price you can possibly pay, plus you're losing the time value on your money (which is, admittedly fairly low right now, but still). Let's say you have a strike price of $50. I get that you believe the stock to be worth more than $50. Let's assume that that's probably, but not certainly right. Whether it's worth $51, $151, or $5,100 when your options are going to expire, you still get the profit of $1, $101, or $5,050 if you wait until expiration and exercise then. By exercising now, you're giving up two things: The interest on the money you pay to exercise from now until expiration. The guarantee that you can't lose anything. If you buy it now, you get all the upside above your strike, but have all the downside below it. If you buy it later (at expiration), you still have all the upside above your strike, but no downside - in the (assumed to be unlikely) event that it's worth less than the strike you can simply do nothing, instead of having something you bought at the strike that's worth less now and taking that loss. By exercising early, you take on that loss risk, and give up the interest (or "carry" on the money you spend to exercise) for no additional updside. It's possible that there are tax benefits, as other posters mention, but the odds that "starting the clock" for LTCG is worth as much as the "optionality", or loss protection, plus the "carry", or interest that you're giving up is fairly unlikely. |
Bank of the Sierra: Are they legit? How can the checking interest APY be so high? | I believe MrChrister's answer is correct: Since they're FDIC insured, they are "legit." Second, on the seemingly too-good-to-be-true rate: They're basically making up the difference on other fees (not necessarily paid by you) in order to offer you the higher-than-market rate. I'd like to point out two things not mentioned about the current rate offer, though: The high 4.09% APY advertised is only on balances up to $25,000; anything over that threshold is at a lower 1.01% APY. The offer also states in the footnotes: "Rates may change after the account is opened." You might want to see if they have a good history of paying higher than average interest rates. You wouldn't want to switch only to find out the promotional rate was a teaser that soon gets reduced. |
What to do with your savings in Japan | The reason for these low interests is that the Japanese central bank is giving away money at negative interests to banks. Yes, negative. So, short of opening your own bank, you'll have to either choose less liquid investments or more risky ones. Get Japanese government bonds. Not a great interest, band not that liquid, but for a 5 years bond you'll do better than the bank can. Get Japanese corporate bonds. Still not great, and a bit more risky, it's better than nothing. Get a Japanese mutual fund. I can't recommend any though. Buy Japanese stock. Many Japanese stock have interesting kickbacks. For example if you buy enough stock of Book-Off you'll get some free books every month. it's risky though because I believe the next NIKKEI index crash is imminent. |
Does my net paycheck decrease as the year goes on due to tax brackets filling up? | H.R. basically consults Publication 15 (this is the link to 2015) to determine how much to hold, based on filing status, exemptions, and pay amount. What's described here is a form of estimation, or, in other words, H.R. withholds what would be your actual taxes, dividing across the number of paychecks you receive. Assuming your gross pay and exemptions do not change, this usually results in a zero-sum for taxes owed (you will receive nothing, and owe nothing). As you can see from the charts, the year is basically broken down into equal tax units that reflect how much you would owe if you worked at that bracket all year. This estimation works best when you have steady hours from check to check. In other words, your taxes are based on the estimate of what you'd make if you earned that much all year, scaled down to the time frame (e.g. 1/52 if you are paid weekly, or 1/26 if you paid biweekly). They do not go "up" near the end of the year, because they're estimated in advance. You don't move up a tax bracket, but are instead taxed at a particular bracket every paycheck. There's also other forms of estimation mentioned there, but basically follow the same scheme. Note that all estimation forms are just that-- estimates. It's best to use a calculator and compare your current taxes whenever a significant change occurs-- a raise, a new child, getting married or divorced, etc. You'll want to be able to alter your exemptions so that enough taxes are coming out. That's also the reason for the "withhold extra" box, so that you can avoid owing. For example, if you're making $44 a week for the first 26 weeks, and then you make $764 a week for the second 26 weeks of the year, you'll end up with an actual tax liability of $2,576.6, but end up paying only $2,345.20. You would owe $231.40. Of course, the actual math is a lot more complicated if you're an employee paid by the minute, for example, or you have a child, go to college, etc. Paychecks that vary wildly, like $10,000 one week and $2,000 the next tend to have the hardest-to-predict estimates (e.g. jobs with big commission payouts). You should avoid living check-to-check with jobs that pay this way, because you'll probably end up owing taxes. Conversely, if you've done your estimates right and you're paid salary or exactly the same number of hours every week, you'll find that the taxes are much easier to predict and you can usually easily create a refund situation simply by having the correct exemptions on your check. So, in summation, if your check falls in the 25% category (which is, of course, 25% above the tax bracket break point), you're already paying the correct amount, and no further drop in your check would be expected. |
What is a good investment vehicle for introducing kids to investing? | Buy them a physical stock certificate... you can request them from a broker, or buy through a company like http://www.oneshare.com. Other options: |
What to do when a job offer is made but with a salary less than what was asked for? | What's relevant to whether you accept the offer should be the compensation package (including salary and benefits) they're offering, the work you'll be doing, and the conditions in which you'll be doing it. The communication history between you and the recruiter isn't really that relevant, since you probably won't deal with the recruiter once you're hired. So, if this is a job you want to do at the level of compensation offered, accept the offer. If not, don't. If you suspect that they actually could be willing to negotiate for a higher salary despite already saying that they aren't, you could test this by declining the offer and saying that that last $5K is the only sticking point, but only if your intent really is to walk away from the offer as it stands. |
How can a 529 plan help me save for my child's college education? | If you're ready to start a 529 account, it makes a big difference which state you choose (some states have excessive fees). It doesn't have to be your own state, but some states give you tax incentives to stay in-state. What you need to do is check out Clark Howard's 529 Guide and check to see if your state is in the "good" list. If not, then pick out a good state. |
Using stock markets in Europe, how can I buy commodities / resources, to diversify my portfolio? | I recommend avoiding trading directly in commodities futures and options. If you're not prepared to learn a lot about how futures markets and trading works, it will be an experience fraught with pitfalls and lost money – and I am speaking from experience. Looking at stock-exchange listed products is a reasonable approach for an individual investor desiring added diversification for their portfolio. Still, exercise caution and know what you're buying. It's easy to access many commodity-based exchange-traded funds (ETFs) on North American stock exchanges. If you already have low-cost access to U.S. markets, consider this option – but be mindful of currency conversion costs, etc. Yet, there is also a European-based company, ETF Securities, headquartered in Jersey, Channel Islands, which offers many exchange-traded funds on European exchanges such as London and Frankfurt. ETF Securities started in 2003 by first offering a gold commodity exchange-traded fund. I also found the following: London Stock Exchange: Frequently Asked Questions about ETCs. The LSE ETC FAQ specifically mentions "ETF Securities" by name, and addresses questions such as how/where they are regulated, what happens to investments if "ETF Securities" were to go bankrupt, etc. I hope this helps, but please, do your own due diligence. |
Set different trigger and sell price for Trailing Stop Limit | It will depend largely on your broker what type of stop and trailing stop orders they provide. Saying that, I have not come across any brokers yet that offer limit orders with trailing stop orders. Unlike a standard stop order where you can either make it a market stop order or a limit stop order, usually most brokers have trailing stop orders as market orders only, where you can either set the trailing stop to be a dollar value or percentage from the most recent high. Remember also, that trailing stop orders will be based on the intra-day highs and not the highest closing price. That means that if the share price spikes up during the day your trailing stop will move up, and if the price then spikes down you may be stopped out prematurely, after which the price might rally again. For this reason I try to base my trailing stops on the highest closing price by using standard stop loss orders and moving it up manually after the close of trade if the share price has closed at a new high. This takes a few minutes each evening (depending on how many stocks you have to check and adjust the stops for) but gives you more control. Using this method will also enable you to set limit orders attached to your stop loss triggers, and you won't have to keep your trailing too close to the last high price thus potentially causing you to get stopped out prematurely. Slightly off track but may be handy if you set profit targets, my broker has recently introduced Trailing Take Profit Orders. The way it works is, say you have a profit target of 50%, so you buy at $2 and want to take profits if the price reaches $3, you could set your Trailing Take Profit Trigger at say $3.10 or above and set a Trail by Amount of say $0.10. So if the price after hitting $3.10 falls to $3.00 you will be stopped out and collect your profits. If the price moves up to $3.30 and then falls to $3.20, you will be stopped out at $3.20 and make some extra profits. If the price continues going up the Trailing Take Profit will continue to move up always $0.10 below the highest price reached. I think this would be a very useful order if you were range trading where you could set the Trailing Take Profit trigger near recent resistance so you can get out if prices start reversing at or around the resistance, but continue profiting if the price breaks through the resistance. |
Is there such a thing as “stock insurance”? | Not that I am aware. If you are trying to mitigate losses from stock purchases, you may want to consider stock mutual funds. This is why single stocks can be extremely risky. |
Buy Php in Malaysia and sell to Philippines | basically the selling (for banks) means you will exchange PHP to MYR buying simply MYR to PHP the bank will buy your MYR in exchange to PHP. and you will sell your MYR to PHP. I think it has something to do with processing fee.. |
Get interest on $100K by spending only $2K using FOREX rollovers? | No free lunch You cannot receive risk-free interest on more money than you actually put down. The construct you are proposing is called 'Carry Trade', and will yield you the interest-difference in exchange for assuming currency risk. Negative expectation In the long run one would expect the higher-yielding currency to devalue faster, at a rate that exactly negates the difference in interest. Net profit is therefore zero in the long run. Now factor in the premium that a (forex) broker charges, and now you may expect losses the size of which depends on the leverage chosen. If there was any way that this could reliably produce a profit even without friction (i.e. roll-over, transaction costs, spread), quants would have already arbitraged it away. Intransparancy Additionaly, in my experience true long-term roll-over costs in relation to interest are a lot harder to compute than, for example, the cost of a stock transaction. This makes the whole deal very intransparant. As to the idea of artificially constructing a USD/USD pair: I regret to tell you that such a construct is not possible. For further info, see this question on Carry Trade: Why does Currency Carry Trade work? |
Using simple moving average in Equity | One of the most obvious uses of SMAs is the detection of a trend reversal. A trend reversal happens when a short term SMA crosses over a longer term SMA. For example, if a 20 day moving average was, previously, above a 200 day moving average, but has crossed over the 200 day and is currently below the 200 day then the security has performed a 'death cross' and the trend is for lower and lower prices. Stockcharts.com has excellent 'chart school' for the beginning chart user. They also provide excellent charts. Here is a link: http://stockcharts.com/school/doku.php?id=chart_school I like to use a 20 day SMA, a 200 day SMA, and a 21 day EMA. |
How long do you have to live somewhere to be a resident for tax purposes? | If you are going to be trying clever stuff with taxes in different place, you probably need a professional. Different countries definitely have different laws on the subject. For example (several years ago) the UK considered you absent from the UK for tax purposes from the day you left, provided you were gone for a year, whereas Canada didn't charge you tax as long as you were not in the country for six months in the year. A carefully timed move enabled me to not pay tax at all for six months because I wasn't resident anywhere. Also it was irrelevant whether I intended to stay or not. |
Apartment lease renewal - is this rate increase normal? | If it is true that for the same price, you could get a better place (or that for a lower price you could get an equivalent place), you should do some soul-searching to decide what monetary value you would place on the hassle of moving to such an alternative. You should then negotiate aggressively for a rent that is no more than the rent of the alternative place plus your hassle costs, and if the landlord does not meet your price, you should refuse to renew your lease, and instead move out to an alternative. (Of course, you might also want to double-check your research to ensure you really can get such a good alternative, and that your new landlords won't try a similar bait-and-switch and force you to move again in a year.) Barring local ordinances such as rent control laws, I don't think it's worth it to worry about whether the increase is "normal". If you can get a better deal somewhere else, then what your landlords are asking is too much. If you have a good relationship with them on a personal level you may be able to tell them this in a nice way and thus get them to make a more reasonable offer. Otherwise, the landlords will learn that their expectations are unreasonable when all their tenants move out to cheaper places. |
Do brokers execute every trade on the exchange? | There are two terms that are related, but separate here: Broker and Market Maker. The former is who goes and finds a buyer/seller to buy/sell shares from/to you. The latter (Market Maker) is a company which will agree to partner with you to complete the sale at a set price (typically the market price, often by definition as the market maker often is the one who determines the market price in a relatively low volumne listing). A market maker will have as you say a 'pool' of relatively common stock (and even relatively uncommon, up to a point) for this purpose. A broker can be a market maker (or work for one), also, in which case he would sell you directly the shares from the market maker reservoir. This may be a bad idea for you - the broker (while obligated to act in your interest, in theory) may push you towards stocks that the brokerage acts as a market maker for. |
How long does a bank's “Know Your Customer” (KYC) process typically take? | The idea is to positively identify you with properly issued government ID. If you show up with your passport, visa, and another form of government-issued identification which the banker can recognize and use (for example - international driver's license, a US-State driver's license, EU internal ID, etc) - it will be quick and painless. Usually, at least two distinct forms of identification are required from foreigners: passport and something else, and not the visa stamped in a passport, that just shoes to show your status upon your W9/W8 requirements may be based. You'll probably be asked for a TIN before any payments are made to you by the bank. If you don't have anything credible to show as your identification it will be equally quick and painless, except that you'd be leaving without a bank account. If your identity cannot be established properly there and then - they will not serve you. |
UK: Personal finance book for a twenty-something | Public sector and private industry retirement plans, taxation and estate planning would be the most substantial differences between the two countries. The concepts for accumulating wealth are the same, and if you are doing anything particularly lucrative with an above average amount of risk, the aforementioned differences are not very relevant, for a twenty something. |
Stock options value | What you will probably get is an option to buy, for £10,000, £10,000 worth of stock. If the stock price on the day your option is granted is £2.50, then that's 4,000 shares. Companies rarely grant discounted options, as there are tax disincentives. The benefit of the stock option is that when you exercise it, you still only pay £10,000, no matter what the 4,000 shares are now worth. This is supposed to be an incentive for you to work harder to increase the value of the company. You should also check the vesting schedule. You will typically not be able to exercise all your options for some years, although some portion of it may vest each year. |
Stocks that only have 1 really high peak | Investing is not the same as illegal drugs. One does not start with pot and progress to things like heroin in order to get a better high. Penny stocks are a fools game and not an entry into the world of investing. The charts you mentioned are fake and likely the result of pump and dump schemes as my colleagues have pointed out in the comments. They have no bearing on investing. Good investment grade companies have many peaks and valleys over time. Look at any company you are familiar with Apple, Google, Tesla, GE, Microsoft, etc... One has a few choices in getting "into investing" to name a few: All of those are valid and worthy pursuits. Read books by Jack Bogle. |
How smart is it to really be 100% debt free? | Having no debt should be the ultimate goal for every household, IMHO, but at what cost? As an example, I had some clients (before they started working with me) that had outstanding debt when they retired and were gung-ho to pay it off. They opted to take it out of their retirement accounts. They didn't set aside enough for taxes which was their first mistake. After a few years, they now have realized they should not have paid off everything as now they have other medical issues that have arisen and not enough in their retirement accounts to satisfy their monthly requirement. |
How to select a bank based on availability in two areas? | Asking a bank for which ATM/branch network it belongs to and where those networks are would be your best bet. |
England: Alternative to Student Finance | Since you're also looking for alternative means of funding, have you considered doing part-time work -- during the holidays or on some of the weekends? With this kind of financing you have to watch out that the work does not interfere with your study. On the other hand it can be valuable work experience that can come in handy later in your life, such as when applying for your first "real" job. The kind of work you can do will depend a lot on the subject you are studying and what qualifications you have. For example, if you are studying computer science, there are a lot of freelance opportunities in programming. One of these could lead right to your first job after university. The two broad types of work you can do are: For freelance: Try searching for "[subject] student freelance" and look at sites like oDesk. Read up on tax concerns, research how to price your time, and start doing! For employment: Browse the job boards at your university. Contact businesses to ask for part-time opportunities. Hope this helps to open one of the alternative paths here. If you go down this road, remember to keep your priorities in mind. Especially the freelance work can easily interfere with your study and delay you unnecessarily. Good luck! |
Do I make money in the stock market from other people losing money? | The answer is partly and sometimes, but you cannot know when or how. Most clearly, you do not take somebody else's money if you buy shares in a start-up company. You are putting your money at risk in exchange for a share in the rewards. Later, if the company thrives, you can sell your shares for whatever somebody else will pay for your current share in the thriving company's earnings. Or, you lose your money, when the company fails. (Much of it has then ended up in the company's employees' pockets, much of the rest with the government as taxes that the company paid). If the stockmarket did not exist, people would be far less willing to put their money into a new company, because selling shares would be far harder. This in turn would mean that fewer new things were tried out, and less progress would be made. Communists insist that central state planning would make better decisions than random people linked by a market. I suggest that the historical record proves otherwise. Historically, limited liability companies came first, then dividing them up into larger numbers of "bearer" shares, and finally creating markets where such shares were traded. On the other hand if you trade in the short or medium term, you are betting that your opinion that XYZ shares are undervalued against other investors who think otherwise. But there again, you may be buying from a person who has some other reason for selling. Maybe he just needs some cash for a new car or his child's marriage, and will buy back into XYZ once he has earned some more money. You can't tell who you are buying from, and the seller can only tell if his decision to sell was good with the benefit of a good few years of hindsight. I bought shares hand over fist immediately after the Brexit vote. I was putting my money where my vote went, and I've now made a decent profit. I don't feel that I harmed the people who sold out in expectation of the UK economy cratering. They got the peace of mind of cash (which they might then reinvest in Euro stocks or gold or whatever). Time will tell whether my selling out of these purchases more recently was a good decision (short term, not my best, but a profit is a profit ...) I never trade using borrowed money and I'm not sure whether city institutions should be allowed to do so (or more reasonably, to what extent this should be allowed). In a certain size and shortness of holding time, they cease to contribute to an orderly market and become a destabilizing force. This showed up in the financial crisis when certain banks were "too big to fail" and had to be bailed out at the taxpayer's expense. "Heads we win, tails you lose", rather than trading with us small guys as equals! Likewise it's hard to see any justification for high-frequency trading, where stocks are held for mere milliseconds, and the speed of light between the trader's and the market's computers is significant. |
Should I use put extra money toward paying off my student loans or investing in an index fund? | From a purely financial standpoint (psychology aside) the choice between paying off debt and investing on risky investments boils down to a comparison of risk and reward. Yes, on average the stock market has risen an average of 10% (give or take) per year, but the yearly returns on the S&P 500 have ranged from a high of 37.6% in 1995 to a low of -37% in 2008. So there's a good chance that your investment in index funds will get a better return than the guaranteed return of paying off the loan, but it's not certain, and you might end up much worse. You could even calculate a rough probability of coming out better with some reasonable assumptions (e.g. if you assume that returns are normally distributed, which historically they're not), but your chances are probably around 30% that you'll end up worse off in one year (your odds are better the longer your investment horizon is). If you can tolerate (meaning you have both the desire and the ability to take) that risk, then you might come out ahead. The non-financial factors, however - the psychology of debt, the drain on discretionary cash flow, etc. cannot be dismissed as "irrational". Paying off debt feels good. Yes, finance purists disagree with Dave Ramsey and his approaches, but you cannot deny the problems that debt causes millions of households (both consumer debt and student loan debt as well). If that makes them mindless "minions" because they follow a plan that worked for them then so be it. (disclosure - I am a listener and a fan but don't agree 100% with him) |
I cosigned for a friend who is not paying the payment | Without all the details it's hard to tell what options you may have, but none of them are good. When you cosign you are saying that, you believe the primary signer will make good on the loan, but that if he doesn't you will. You are 100% responsible for this debt. As such, there are some actions you can take. First, really try to stress to your friend, that they need to get you outta this loan. Urge them to re-finance with out you if they can. Next look for "better" ways of defaulting on the loan and take them. Depending on what the loan is for you could deed-in-lue or short sale. You may just have to admit default. If you work with the bank, and try not to drag out the process, you will likely end up in a better place down the line. Also of importance is ownership. If you pay the loan, do you get ownership of the thing the loan was secured against? Usually not, but working with an attorney and the bank, maybe. For example, if it's a car, can the "friend" sign over the car to you, then you sell it, and reduce your debt. Basically as a cosigner, you have some rights, but you have all the responsibilities. You need to talk to an attorney and possibly the bank, and see what your options are. At this point, if you think the friend is not that much of a friend anymore, it's time to make sure that any conversation you have with them is recorded in email, or on paper. |
Should I finance rental property or own outright? | In general you do not want to show a taxable gain on rental properties if you can avoid it. One of the more beneficial advantages of owning cash flowing rental properties, is that the income is tax deferred because of the depreciation. I say deferred, because depreciation affects the cost basis of your property. Also since you are considering financing, it sounds like you don't need the cash flow currently. You usually can get better returns by financing and buying more rental properties, especially with investment mortgages at historical lows (Win via inflation over time) |
When's the best time to sell the stock of a company that is being acquired/sold? | I'm not sure what you expect in terms of answers, but it depends on personal factors. It pretty well has to depend on personal factors, since otherwise everyone would want to do the same thing (either everyone thinks the current price is one to sell at, or everyone thinks it's one to buy at), and there would be no trades. You wouldn't be able to do what you want, except on the liquidity provided by market makers. Once that's hit, the price is shifting quickly, so your calculation will change quickly too. Purely in terms of maximising expected value taking into account the time value of money, it's all about the same. The market "should" already know everything you know, which means that one time to sell is as good as any other. The current price is generally below the expected acquisition price because there's a chance the deal will fall through and the stock price will plummet. That's not to say there aren't clever "sure-fire" trading strategies around acquisitions, but they're certain to be based on more than just timing when to sell an existing holding of stock. If you have information that the market doesn't (and assuming it is legal to do so) then you trade based on that information. If you know something the market doesn't that's going to be good for price, hold. If you know something that will reduce the price, sell now. And "know" can be used in a loose sense, if you have a strong opinion against the market then you might like to invest based on that. Nothing beats being paid for being right. Finally, bear in mind that expected return is not the same as utility. You have your own investment goals and your own view of risk. If you're more risk-averse than the market then you might prefer to sell now rather than wait for the acquisition. If you're more risk-prone than the market then you might prefer a 90% chance of $1 to 90c. That's fine, hold the stock. The extreme case of this is that you might have a fixed sum at which you will definitely sell up, put everything into the most secure investments you can find, and retire to the Caribbean. If that's the case then you become totally risk-averse the instant your holding crosses that line. Sell and order cocktails. |
Is there any emprical research done on 'adding to a loser' | This is basically martingale, which there is a lot of research on. Basically in bets that have positive expected value such as inflation hedged assets this works better over the long term, than bets that have negative expected value such as table games at casinos. But remember, whatever your analysis is: The market can stay irrational longer than you can stay solvent. Things that can disrupt your solvency are things such as options expiration, limitations of a company's ability to stay afloat, limitations in a company's ability to stay listed on an exchange, limitations on your borrowings and interest payments, a finite amount of capital you can ever acquire (which means there is a limited amount of times you can double down). Best to get out of the losers and free up capital for the winners. If your "trade" turned into an "investment", ditch it. Don't get married to positions. |
Why is auto insurance ridiculously overpriced for those who drive few miles? | because it cost the insurer more, obviously. while this sounds snarky, it's important to realize that actual insurance companies set their insurance rates based on actual historical costs. for some reason people who report low miles have cost the company more dollars per reported mile than people who report high miles. in that sense, insurance is not overpriced. if it were truly overpriced, then an insurer would specialize in such insurance and make a killing on the free market. the more interesting questions is why do drivers who claim to travel very few miles cost the insurance companies so much per mile? that question has a host of possible answers and it's difficult to say which is the largest cost. here are just a few: |
How will I pay for college? | You sound like you're well educated, well spoken, and resourceful, so I'm going to assume that you are somewhere in the neighborhood of top 5% material. That means you can pretty much do anything you want to if you put enough effort into it. There are two types of people in this world: those who run the world and those who live comfortably in it (and, of course, everyone else, but they are irrelevant to the discussion). Who do you want to be? I've been around a lot of wildly successful people, and they have two consistent traits: connections and freedom. First, everyone always told me that "it's not what you know, it's who you know", but I never appreciated it until after college. The world runs on connections. The more connections you have, and the more successful they are, the more successful you will be. Second, the more freedom you have, the more opportunity you will have to take chances, which is how you become wildly successful. Freedom comes from not being in debt (first) and having money (second). Why do you think Harvard grads are the guys that end up having so much money and power? It's probably because they grew up in a rich family which provided them money (freedom) and a wide social circle of rich people (connections). So you're not rich. What to do? Well, the easiest way to get into that group is to go to college with them. And that means you need to get into Harvard or another Ivy League. Stanford if you want to be an engineer. College will be where you will make your most intense and long-lasting friendships. That roommate at Harvard that you went on the crazy four-day road trip with may someday be CEO of a company... and when he needs a CIO, you can be damn sure you'll be at the top of the list if you're qualified. But Harvard costs a lot of money...which means you'll be in debt, a lot, when you get out of college. You'll have lots of rich, important friends(connections), but you'll be deeply in debt (no freedom). Most of these type of people end up becoming consultants at big firms because they pay well. You'll live a comfortable life and pay off your student loans in five or 10 years. Then you'll continue to live comfortably, but at that point you'll be too old to take huge chances and too comfortable to change things (or perhaps you'll have a big mortgage = no freedom). With a heavy debt load, it's almost impossible to, say, join an early stage startup and really be able to take huge chances. You can do it, maybe. Or, as an alternate option, you can do what I did. Go to a cheap state school and graduate with no debt. That puts you on the other side of the fence: freedom, but no connections. Then, in order to be successful, you have to figure out how to get connections. Goldman Sachs won't hire you, and everyone you meet is going to automatically assume you're mediocre because of where you went to college. At this point, your only option is to take big chances. Move to New York or San Francisco, offer to work for free as an intern somewhere or something. It can be done, and it's really not too hard, you just have to have lots of spending restraint because the little money you have has to go a long way. So what are the other options? Well, some people are recommending that you think about not going to college at all. That will certainly save you money and give you a four year head start on whatever you decide to do (freedom), but you'll forever be branded as that guy without a college degree. Think my second option above but just two or three times worse. You won't even get that free internship, and you'll be that weird guy at dinner parties who can"t answer the first question "So, where did you go to college?". It doesn't matter if you're self-taught; life isn't a meritocracy. If you're very good, you'll end up getting a nice cushy job pushing ones and zeros. A nice cushy golden handcuff job. Well, you could go to community college. They're certainly cheap. You can spend very little money so you'll end up with fairly good freedom. I might add, though, that community colleges teach trades, and not high-level things like management and complex architecture. You'll be behind technically, but not as bad as if you didn't go at all. How about connections? Your fellow students will probably lack ambition, money, and connections. They'll be candidates for entry-level wage slave jobs at Fortune 500 companies after they graduate. If they get lucky, they'll work up to middle management. There's no alumni association, and there's certainly no "DeVry Club" in downtown Boston. At New York and Silicon Valley dinner parties, having a community college degree is almost as bad as having nothing at all. Indeed, the entire value of the community college degree will be what you learn, and you'll be learning at the speed and level of your classmates. My advice? If you get into an Ivy League school, go and hope you get some grants to help you out. The debt will suck, but you'll be well positioned for the future. Otherwise, go to a cheap second-tier school where you can get a large scholarship. There are also lots of third-party scholarships that are out there on the Internet you can get. I got a couple from local organizations. Don't work during college. Focus on expanding your network instead; the future value of a minimum wage job while you're trying to go through school is practically zero. |
How might trading volume affect future share price? | There is no direct relationship between volume and stock price. High volume indicates how much stock is changing hands. That can be because people are enthusiastically buying OR enthusiastically selling... and their reasons for doing so may not agree with your own sense of the future value of the stock. Higher volume may mean that the price is more likely to change during the day, but it can be in either direction -- or in no direction at all if there isn't a general agreement on how to react to some piece of news. It's a possibly interesting datum, but it means nothing in isolation. |
Filing a corporation tax return online? | This may not exactly answer your question but, as a small business owner, I would highly recommend having a professional handle your taxes. It is worth the money to have it done correctly rather than doing something wrong and getting audited or worse having penalties assessed and owing more than you thought would be possible. I would recommend this especially if this is how you make your primary income, you can always write it off as a business expense. |
I'm in Australia. What should I look for in an online stock broker, for trading mostly on the ASX? | If you want the cheapest online broker in Australia, you can't go past CMC Markets, they charge $9.90 upto a $10,000 trade and 0.1% above that. There is no ongoing fees unless you choose to have dynamic data (stock prices get updated automatically as they change). However, the dynamic data fee does get waived if you have about 10 or more trades per month. You don't really need the dynamic data unless you are a regular trader anyway. They also provide some good research tools and some basic charting. Your funds with them are kept segragated in a Bankwest Account, so are resonably safe. They don't provide the best interest on funds kept in the account, so it is best to just deposit the funds when you are looking to buy, and move your funds elswhere (earning higher interest) when selling. Hopes this helps, regards Victor. Update They have now increased their basic brokerage to a minimum of $11 per trade unless you are a frequent trader. |
Does being on the board of a bankruptcy-declaring company affect my credit rating? | The answer to your question is governed by the structure of the company and your ownership or lack thereof in the business. Australian business can be structured the same way U.S. ones are, as a sole proprietorship, partnership, LLC, or company. If you are only on the board and have no equity, you cannot be affected. You must have some amount of equity in the business to have any chance of being affected. If the business is a sole proprietorship, then the single individual running the business is personally responsible for all debt and the inability to pay obligations would result in personal bankruptcy which would in all likelihood affect your credit score (it would in the U.S.). If it is a partnership, then anyone holding stock in the company is likewise personally responsible for a portion of the debt, and can be subject to bankruptcy and credit score implications. If the business is structured as a limited liability company or a corporation, a stakeholder's personal finances are separate from the business's and their credit score cannot be affected. |
How to compute for losses in an upside down trade-in of a financed car? | I'm going to ignore your numbers to avoid spending the time to understand them. I'm just going to go over the basic moving parts of trading an upside down car against another financed car because I think you're conflating price and value. I'm also going to ignore taxes, and fees, and depreciation. The car has an acquisition cost (price) then it has a value. You pay the price to obtain this thing, then in the future it is worth what someone else will pay you. When you finance a car you agree to your $10,000 price, then you call up Mr. Bank and agree to pay 10% per year for 5 years on that $10,000. Mr. Banker wires over $10,000 and you drive home in your car. Say in a year you want a different car. This new car has a price of $20,000, and wouldn't you know it they'll even buy your current car from you. They'll give you $7,000 to trade in your current car. Your current car has a value of $7,000. You've made 12 payments of $188.71. Of those payments about $460 was interest, you now owe about $8,195 to Mr. Banker. The new dealership needs to send payment to Mr. Banker to get the title for your current car. They'll send the $7,000 they agreed to pay for your car. Then they'll loan you the additional $1,195 ($8,195 owed on the car minus $7,000 trade in value). Your loan on the new car will be for $21,195, $20,000 for the new car and $1,195 for the amount you still owed on the old car after the dealership paid you $7,000 for your old car. It doesn't matter what your down-payment was on the old car, it doesn't matter what your payment was before, it doesn't matter what you bought your old car for. All that matters is how much you owe on it today and how much the buyer (the dealership) is willing to pay you for it. How much of this is "loss" is an extremely vague number to derive primarily because your utility of the car has a value. But it could be argued that the $1,195 added on to your new car loan to pay for the old car is lost. |
Plan/education for someone desiring to achieve financial independence primarily through investing? | Stay in school, learn everything you can, and spend as little money as possible. And realize that the chances of you dropping out and becoming a millionaire are much lower than the chances of you staying in school and becoming a millionaire. You're unlikely to be a good investor if you make bets with negative expected payoffs. |
Trading when you work for a market participant | There is normally a policy at the organisation that would restrict trades or allow trades under certain conditions. This would be in accordance with the current regulations as well as Institutions own ethical standards. Typical I have seen is that Technology roles are to extent not considered sensitive, ie the employees in this job function normally do not access sensitive data [unless your role is analyst or production support]. An employee in exempt roles are allowed to trade in securities directly with other broker or invest in broad based Mutual Funds or engage a portfolio management services from a reputed organisation. It is irrelevant that your company only deals with amounts > 1 Million, infact if you were to know what stock the one million is going into, you may buy it slightly earlier and when the company places the large order, the stock typically moves upwards slightly, enough for you to make some good money. That is Not allowed. But its best you get hold of a document that would layout the do' and don't in your organisation. All such organisation are mandated to have a written policy in this regard. |
Online service that computes implied volatility | remember that IV is literally the volatility that would be present to equate to the latest price of a particular option contract, assuming the Black-Scholes-Merton model. Yahoo's free finance service lists the IV for all the options that it tracks. |
Is there a rule that a merchant must identify themself when making a charge | In some case the customer wants the name to be cryptic or misleading. They don't want to advertise the true nature of the business they visited. In other cases the transaction may be reported through another business. A few years ago the local PTA was having a silent auction as a fundraiser. A local business allowed the PTA to use their credit card reader to process transactions over a certain amount. Of course when the credit card statement arrived it looked like you spent $500 at the florist. I have seen PayPal listed when donating to some small charities. I have noted another case where confusion can occur. I used a debit card to buy a soda from a vending machine: the name and location were the name of the vending machine company and the location of their main office. It didn't say soda machine city A. It said Joe's vending company city B. In most cases the business and the credit card company want to make it easy to identify the transactions to keep the cost of research and charge backs to a minimum. |
When to sell a stock? | I am a believer in stocks for the long term, I sat on the S&P right though the last crash, and am 15% below the high before the crash. For individual stocks, you need to look more closely, and often ask yourself about its valuation. The trick is to buy right and not be afraid to sell when the stock appears to be too high for the underlying fundamentals. Before the dotcom bubble I bought Motorola at $40. Sold some at $80, $100, and out at $120. Coworkers who bought in were laughing as it went to $160. But soon after, the high tech bubble burst, and my sales at $100 looked good in hindsight. The stock you are looking at - would you buy more at today's price? If not, it may be time to sell at least some of that position. |
Do stock prices drop due to dividends? | Share prices fall when dividends are paid out because the paid dividend (cash out) actually reduces the value of the company. Usually the share price falls by the amount of the dividend payment. |
Why are real-term bond yields systematically declining, and what does it mean for investors? | Keep in mind there are a couple of points to ponder here: Rates are really low. With rates being so low, unless there is deflation, it is pretty easy to see even moderate inflation of 1-2% being enough to eat the yield completely which would be why the returns are negative. Inflation is still relatively contained. With inflation low, there is no reason for the central banks to raise rates which would give new bonds a better rate. Thus, this changes in CPI are still in the range where central banks want to be stimulative with their policy which means rates are low which if lower than inflation rates would give a negative real return which would be seen as a way to trigger more spending since putting the money into treasury debt will lose money to inflation in terms of purchasing power. A good question to ponder is has this happened before in the history of the world and what could we learn from that point in time. The idea for investors would be to find alternative holdings for their cash and bonds if they want to beat inflation though there are some inflation-indexed bonds that aren't likely appearing in the chart that could also be something to add to the picture here. |
How can I improve my credit score if I am not paying bills or rent? | If credit scoring works in the UK like it does in the US, then I think the fact that you own+use a credit card and pay off your everyday expenses will give you perfectly good credit. Just keep doing what you're doing. I have seen people in the United States with very high credit scores based solely upon owning & occasionally using a credit card, paid in full and on time every month. |
Can I transfer my Employee Stock Purchase Plan assets to a different broker? | I have an ESPP with E*Trade; you can transfer stock like that via a physical (paper) asset-transfer form. Look for one of those, and if you can't find it, call your brokerage (or email / whatever). You own the shares, so you can generally do what you want with them. Just be very careful about recording all the purchase and transfer information so that you can deal properly with the taxes. |
What do I need to consider when refinancing one home to pay the down-payment of another? | What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation. While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of. Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it. You're going to pay more in interest that you're going to get in savings. From there things get trickier. While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent. PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance. |
Everyone got a raise to them same amount, lost my higher pay than the newer employees | The same thing happened to me when I worked retail during my college years. I agree that it is unfair however, it is what it is. With that being said, there may be several factors that you should consider: the new employees might have more experience or qualifications then you, your work performance based on your manager's perspective, and like in my situation when I worked retail, I started out as a cashier which get paid less than sales associates but when I moved to a sales associate position I still got paid less and when I got my raise I got the same pay a new sales associate would get. I suggest you suck it up and ride it through until you get a real job because in retail, in my opinion, you are expendable, if you don't like their pay they will find someone else. |
What is the smartest thing to do in case of a stock market crash | I suggest to just invest in index funds, these are low risk with high reward stocks that can survive even the worst of stock crashes but are still extremely profitable when the stock market is booming |
Will I, as a CS student, be allowed to take loans for paying the fees of Ivy Leagues? | I would be surprised if a bank cared about an undergraduate major. Usually, such things are only important if it is a professional degree, like a law degree or medical degree. The big issue is that if you are not a US citizen, a US bank would be unlikely to make an unsecured loan because you could just return to your country and renege on the loan and they would have no way to collect. Therefore, a bank in your own country might be more logical. If you get accepted by a top Ivy school, they all have financial policies that will allow you to attend regardless of how rich or poor you are, so if you are applying to a top school (Harvard, Princeton, MIT, Stanford, Yale) and get accepted, they will fully finance your attendance. The only exception is if (A) they find out you lied about something, or (B) your parents/family are wealthy and they refuse to pay anything. As long as neither of these two things is true, all of the schools listed GUARANTEE they will provide sufficient financial aid. Princeton even has a no-loan policy, which means not only will they fund your attendance, they will do so without you having to take on any loans. |
What is the incentive for a bank to refinance a mortgage at a lower rate? | The big one is to keep you from refinancing it with someone else to get a better rate. There may also be some funny-money reasons having to do with being able to count this as a new sale. |
How to treat miles driven to the mechanic, gas station, etc when calculating business use of car? | Alright, IRS Publication 463: Travel, Entertainment, Gift, and Car Expenses Business and personal use. If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose. Example. You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense Obviously nothing helpful in the code. So I would use option 1, weight the maintenance-related mileage by the proportion of business use. Although if you use your car for business a lot (and perhaps have a spouse with a car), an argument could be made for 3. So I would consider my odds of being audited (even lower this year due to IRS budget cuts) and choose 1 or 3. And of course never throw anything away until you're room temperature. |
How to make money from a downward European market? | Not a day goes by that someone isn't forecasting a collapse or meteoric rise. Have you read Ravi Batra's The Great Depression of 1990? The '90s went on to return an amazing 18.3%/yr compound growth rate for the decade. (The book sells for just over $3 with free Amazon shipping.) In 1987, Elaine Garzarelli predicted the crash. But went years after to produce unremarkable results. Me? I saw that 1987 was up 5% or so year on year (in hindsight , of course), and by just staying invested, I added deposits throughout the year, and saw that 5% return. What crash? Looking back now, it was a tiny blip. You need to be diversified in a way that one segment of the market falling won't ruin you. If you think the world is ending, you should make peace with your loved ones and your God, no investment advice will be of any value. (Nor will gold for that matter.) |
How does the yield on my investments stack up against other investors? | Generally S&P 500 will be used as the benchmark for US investors because it represents how's the US market performs as a whole. If you've outperformed the S&P 500 during the last couple years, great. However, at the end of day, you would want to look at the total growth percent that your portfolio has achieved, as compared with that of S&P 500. Anyway, your portfolio might actually ride along with the bull market during the 2009-2010 period (more-so for the small caps). |
Are credit histories/scores international? | Credit history is local, so when you move to the US you start with the blank slate. Credit history length is a huge factor, so in the first year expect that nobody would trust you and you may be refused credit or asked for deposits. I was asked for deposits at cell phone company and refused for store cards couple of times. My advice - get a secured credit card (that means you put certain sum of money as a deposit in the bank and you get credit equal to that sum of money) and if you have something like a car loan that helps too (of course, you shouldn't buy a car just for that ;) but if you're buying anyway, just know it's not only hurting but also helping when you pay). Once you have a year or two of the history and you've kept with all the payments, you credit score would be OK and everybody would be happy to work with you. In 4-5 years you can have excellent credit record if you pay on time and don't do anything bad. If you are working it the US, a lot of help at first would be to take a letter from your company on an official letterhead saying that you are employed by this and that company and are getting salary of this and that. That can serve as an assurance for some merchants that otherwise would be reluctant to work with you because of the absence of credit history. If you have any assets overseas, especially if they are held in a branch of international bank in US dollars, that could help too. In general, don't count too much on credit for first 1-2 years (though you'd probably could get a car loan, for example, but rates would be exorbitant - easily 10 percentage points higher than with good credit), but it will get better soon. |
Is there any circumstance in which it is necessary to mark extra payments on a loan as going to “principal and not interest”? | I would always presume that given a choice of doing what is in its own self interest verses in the customer's interest, a bank will ALWAYS do the former rather than the latter. Banks are in the business of making money, always presume that their policies, processes and contractual terms will be slanted to maximize their ability to make money. It's not being evil or anything, it's just business, they are under no obligation to be altruistic or do what's best for you at the expense of their profits. So, especially since it's not exactly a hardship, I would always make extra principal payments using a separate check and clearly mark it as an extra principal payment. |
Boyfriend is coowner of a house with his sister, he wants to sell but she doesn't | It seems likely that the mortgage is not in your boyfriend's name because he never would have qualified if he can't even afford utilities after paying the mortgage. It also seems unfair that his sister continues to have a 50% share of the equity if your boyfriend has been making the entire payment on the mortgage every month. What would happen if your boyfriend stopped making the payments? His sister would have no choice if the property went into foreclosure. Your boyfriend has all the leverage he needs by simply refusing to continue making the payments. Why he won't push his sister to make a deal is the real question you need to ask him. In the meantime, if he wants out, all he has to do is decide not to keep paying whether his sister feels attached or not. |
Where are Bogleheadian World ETFs or Index funds? | You weren't really clear about where you are in the world, what currency you are using and what you want your eventual asset allocation to be. If you're in the US, I'd recommend splitting your international investment between a Global ex-US fund like VEU (as Chris suggested in his comment) and an emerging markets ETF like VWO. If you're not in the US, you need to think about how much you would like to invest in US equities and what approach you would like to take to do so. Also, with international funds, particularly emerging markets, low expense ratios aren't necessarily the best value. Active management may help you to avoid some of the risks associated with investing in foreign companies, particularly in emerging markets. If you still want low expenses at all cost, understand the underlying index that the ETF is pegged to. |
Buying a multi-family home to rent part and live in the rest | You are a "strategic" investor, which is to say that you are in the best position to evaluate the deal because you already live there. Others don't have this advantage going in, which is why they might not be inclined to do what you're doing. Your biggest advantage is that you know at least one tenant. In essence, you are your own "tenant" for the top floor You also presumably have a pretty good idea of the neighborhood. These are arguments for owning your own home, although it does get a bit trickier with a second tenant, whom you may not know. Do check credit and references, etc. You might ask the landlord why he wants to sell. Presumably it's because he wants to retire or move, and not a problem with the property. But it does no harm to ask. |
Historical stock prices: Where to find free / low cost data for offline analysis? | You may refer to project http://jstock.sourceforge.net. It is open source and released under GPL. It is fetching data from Yahoo! Finance, include delayed current price and historical price. |
How to calculate P/E ratio for S&P500 sectors | For the S&P and many other indices (but not the DJIA) the index "price" is just a unitless number that is the result of a complicated formula. It's not a dollar value. So when you divide said number by the earnings/share of the sector, you're again getting just a unitless number that is incomparable to standard P-E ratios. In fact, now that I think about, it kinda makes sense that each sector would have a similar value for the number that you're computing, since each sector's index formula is presumably written to make all the index "price"s look similar to consumers. |
How do I find a good mutual fund to invest 5K in with a moderately high amount of risk? | Vanguard has a lot of mutual fund offerings. (I have an account there.) Within the members' section they give indications of the level of risk/reward for each fund. |
Capital gains loss, can IRS waive the loss? | The cap loss can be used to offset future gains or $3000/yr of ordinary income. (I just used up the last of mine from the dot com bubble.) I hope you have future gains that let you use this up quickly. The IRS debt is separate, and I don't imagine they'll let you use any of the loss to offset it. As always, it can't hurt to ask. Their normal payment plans are for 5 years. $40k/yr is a lot. Edit - The IRS does negotiate. I recall, from the dot-com bubble, instances where someone exercised stock grants, but kept the shares. Now, they had a $1M gain, but after year end, the stock crashed. They owed tax on that gain, but the loss was in the next tax year, with nothing to offset. These people were 'regular' guys and gals, no background in finance. I understand the IRS looked at these people and made some exceptions. |
1.4 million cash. What do I do? | At 1.4 Million, you can definately afford a professional advisor who would give you the best advice taking into account all your goals and risk appetite. |
Finding out actual items bought via credit card issuer and not the store receipt? | The store keeps track of what you buy. It is all part of their big data. The knowledge of what you buy helps them project future sales. It allows them to target their marketing. But maybe even more importantly they can sell this knowledge to outside companies. They aren't going to give away that information to another company that would love to have that data, just so they could sell it. Stores use those loyalty cards to be able to link your household to those purchases. Those discounts, or free products, are what they use to entice you to give up your privacy. The fact that in your town young adults love caramel apples, even more than the town next door, makes them confident that your town will love caramel apple scented shampoo. Thus they send you coupons when it become available. They will also sell this knowledge to the shampoo companies. Do some stores make it possible for you to download the data? Yes they do. Apple stores send all receipts via email. Kohls allows me to see detail information about my transactions on line. There must be others. I don't know if any are grocery stores. |
Are stocks only listed with one exchange in one place? | Depends. The short answer is yes; HSBC, for instance, based in New York, is listed on both the LSE and NYSE. Toyota's listed on the TSE and NYSE. There are many ways to do this; both of the above examples are the result of a corporation owning a subsidiary in a foreign country by the same name (a holding company), which sells its own stock on the local market. The home corporation owns the majority holdings of the subsidiary, and issues its own stock on its "home country's" exchange. It is also possible for the same company to list shares of the same "pool" of stock on two different exchanges (the foreign exchange usually lists the stock in the corporation's home currency and the share prices are near-identical), or for a company to sell different portions of itself on different exchanges. However, these are much rarer; for tax liability and other cost purposes it's usually easier to keep American monies in America and Japanese monies in Japan by setting up two "copies" of yourself with one owning the other, and move money around between companies as necessary. Shares of one issue of one company's stock, on one exchange, are the same price regardless of where in the world you place a buy order from. However, that doesn't necessarily mean you'll pay the same actual value of currency for the stock. First off, you buy the stock in the listed currency, which means buying dollars (or Yen or Euros or GBP) with both a fluctuating exchange rate between currencies and a broker's fee (one of those cost savings that make it a good idea to charter subsidiaries; could you imagine millions a day in car sales moving from American dealers to Toyota of Japan, converted from USD to Yen, with a FOREX commission to be paid?). Second, you'll pay the stock broker a commission, and he may charge different rates for different exchanges that are cheaper or more costly for him to do business in (he might need a trader on the floor at each exchange or contract with a foreign broker for a cut of the commission). |
Is This A Scam? Woman added me on LinkedIn first, then e-mailed offering me millions of dollars [duplicate] | In general, if you think something even MIGHT be a scam, the answer is"yes". |
What is a “Junk Bond”? | A "junk bond" is one that pays a high yield UP FRONT because there is a good chance that it could default. So the higher interest rate is necessary to try to compensate for the default Junk bonds are used in leveraged buyouts (LBOs) because such deals are INHERENTLY risky. "Normal" companies may have 20%-30% debt and the rest equity, so that the company will have to lose 70%-80% of its value before the debtholders start losing money on "normal" bonds. But in an LBO, the company may have only 10%-20% equity and the rest debt. Meaning that if it loses that small equity cushion, the value of the "junk" bonds will be impaired. |
Is it bad etiquette to use a credit or debit card to pay for single figure amounts at the POS | Etiquette or not, it is hurting the seller. The transaction fees have usually minimums, so if the actual transaction is below the minimum - they'll pay larger fee on the transaction (relatively). As an example, assume minimum fee for a debit card swipe is 20 cents, or 2% of the transaction. For a transaction of $10 and above, the fee will be 2% of the transaction. But for $1.67, the fee becomes 12% of the transaction. 6 times more expensive for the seller. Basically, the sale was most likely at a loss for them (they usually have very low margins, especially for a "dollar" store). So take that into account as well. |
How to calculate money needed for bills, by day | I think you might benefit from adopting a zero-sum budget, in which you plan where each dollar will be spent ahead of time, rather than simply track spending or worry about the next expense. Here's a pretty good article on the subject: How and Why to Use a Zero-Sum Budget. This is the philosophy behind a popular budgeting tool You Need a Budget, I am not advocating the tool, but I am a fan of the idea that a budget is less about tracking spending and more about planning spending. That said, to answer your specific question, one method for tracking your min-needed for upcoming expenses would be to record the date, expense, amount due, and amount paid as shown here: Then the formula to calculate the min-needed (entered in E1 and copied down) would be: As you populate amounts paid, the MinNeeded is adjusted for all subsequent rows. You could get fancier and only populate the MinNeeded field on dates where an expense is due using IF(). |
What happens to my position if I hold some stocks of a company that gets acquired? | The stockholders of company A vote to approve or disapprove the buy out. That is the only control you have on the price: Vote to approve or disapprove. If the deal is approved then you get the money, or stock in B, or both, in accordance with the terms of the deal. It will arrive into your account automatically. |
It is worth using a discount stock broker? I heard they might not get the best price on a trade? | Always use limit orders never market orders. Period. Do that and you will always pay what you said you would when the transaction goes through. Whichever broker you use is not going to "negotiate" for the best price on your trade if you choose a market order. Their job is to fill that order so they will always buy it for more than market and sell it for less to ensure the order goes through. It is not even a factor when choosing between TradeKing and Scottrade. I use Trade King and my friend uses ScottTrade. Besides the transaction fee (TK is a few $$ cheaper), the only other things to consider are the tools and research (and customer service if you need it) that each site offers. I went with TK and the lower transaction fee since tools and research can be had from other sources. I basically only use it when I want to make a trade since I don't find the tools particularly useful and I never take an analyst's opinion of a stock at face value anyway since everybody always has their own agenda. |
Where to start with personal finance? | Personal finance is a fairly broad area. Which part might you be starting with? From the very basics, make sure you understand your current cashflow: are you bank balances going up or down? Next, make a budget. There's plenty of information to get started here, and it doesn't require a fancy piece of software. This will make sure you have a deeper understanding of where your money is going, and what is it being saved for. Is it just piling up, or is it allocated for specific purchases (i.e. that new car, house, college tuition, retirement, or even a vacation or a rainy day)? As part of the budgeting/cashflow exercise, make sure you have any outstanding debts covered. Are your credit card balances under control? Do you have other outstanding loans (education, auto, mortgage, other)? Normally, you'd address these in order from highest to lowest interest rate. Your budget should address any immediate mandatory expenses (rent, utilities, food) and long term existing debts. Then comes discretionary spending and savings (especially until you have a decent emergency fund). How much can you afford to spend on discretionary purchases? How much do you want to be able to spend? If the want is greater than the can, what steps can you take to rememdy that? With savings you can have a whole new set of planning to consider. How much do you leave in the bank? Do you keep some amount in a CD ladder? How much goes into retirement savings accounts (401k, Roth vs. Traditional IRA), college savings accounts, or a plain brokerage account? How do you balance your overall portfolio (there is a wealth of information on portfolio management)? What level of risk are you comfortable with? What level of risk should you consider, given your age and goals? How involved do you want to be with your portfolio, or do you want someone else to manage it? Silver Dragon's answer contains some good starting points for portfolio management and investing. Definitely spend some time learning the basics of investing and portfolio management even if you decide to solicit professional expertise; understanding what they're doing can help to determine earlier whether your interests are being treated as a priority. |
Is it a bad idea to buy a motorcycle with a lien on it? | It's extra work for you to purchase a vehicle that has an outstanding lien on it. It's not uncommon, but there are things to take care of and watch out for. Really, all it means is that the vehicle you're trying to purchase hasn't been paid for in full by the current owner. Where things can get dodgy is ensuring that all outstanding debts are paid against the vehicle at the time you take ownership of it, otherwise the owners of those debts could still reclaim the vehicle. Here's a good article about making this kind of purchase. |
Are there any catches with interest from banks? Is this interest “too good to be true”? | Tax won't be an issue. You have a personal tax free allowance of £7475 this coming year, so your first £7475 will be tax free. 1.09% is pretty abysmal (sorry - but we've wrecked the economy for you young fullas), so you'll only earn about £84 a month. Not as awesome as you were expecting I think. Would recommend getting advice on other means of generating an income with your 100k. Because if you bought a cheap flat (cheap enough to own without a mortgage), you could probably earn between £300-£400 a month fairly comfortably. (I'm not suggesting you become a landlord, just that interest rates currently suck) |
Can I get a dumbed down explanation of risk measures used for evaluating stocks? | Standard deviation from Wikipedia : In statistics and probability theory, the standard deviation (represented by the Greek letter sigma, σ) shows how much variation or dispersion from the average exists.1 A low standard deviation indicates that the data points tend to be very close to the mean (also called expected value); a high standard deviation indicates that the data points are spread out over a large range of values. In the case of stock returns, a lower value would indicate less volatility while a higher value would mean more volatility, which could be interpreted as high much change does the stock's price go through over time. Mean would be interpreted as if all the figures had to be the same, what would they be? So if a stock returns 10% each year for 3 years in a row, then 10% would be the mean or average return. Now, it is worth noting that there are more than a few calculations that may be done to derive a mean. First, there is the straight forward sum and division by the number of elements idea. For example, if the returns by year were 0%, 10%, and 20% then one may take the sum of 30% and divide by 3 to get a simple mean of 10%. However, some people would rather look at a Compound Annual Growth Rate which in this case would mean multiplying the returns together so 1*(1+.1)*(1+.2)=1.1*1.2=1.32 or 32% since there is some compounding here. Now, instead of dividing a cubic root is taken to get approximately 9.7% average annual return that is a bit lower yet if you compound it over 3 years it will get up to 32% as 10% compounded over 3 years would be 33.1% as (1.1)^3=1.331. Sharpe Ratio from Investopedia: A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. Thus, this is a way to think about given the volatility how much better did the portfolio do than the 10 year bond. R-squared, Alpha and Beta: These are all around the idea of "linear regression" modelling. The idea is to take some standard like say the "S & P 500" in the case of US stocks and see how well does the portfolio follow this and what if one were to use a linear model are the multipliers and addition components to it. R-squared can be thought of it as a measure as to how good is the fit on a scale of 0 to 1. An S & P 500 index fund may well have an R-squared of 1.00 or 0.99 to the index as it will track it extremely closely while other investments may not follow that well at all. Part of modern portfolio theory would be to have asset classes that move independently of each other and thus would have a lower R-squared so that the movement of the index doesn't indicate how an investment will do. Now, as for alpha and beta, do you remember the formula for a line in slope-intercept form, where y is the portfolio's return and x is the index's return: y=mx+b In this situation m is beta which is the multiple of the return, and b is the alpha or how much additional return one gets without the multiple. Going back to an index fund example, m will be near 1 and b will be near 0 and there isn't anything being done and so the portfolio's return computed based on the index's return is simply y=x. Other mutual funds may try to have a high alpha as this is seen as the risk-free return as there isn't the ups and downs of the market here. Other mutual funds may go for a high beta so that there is volatility for investors to handle. |
Double-entry bookkeeping: When selling an asset, does the money come from, Equity or Income? | Selling an asset is not earning income. You are basically moving value from one asset (the laptop) to another (your bank account.) So you reduce the equity that is "value of all my electronics" and you increase the asset that is your bank account. In your case, you never entered the laptop in some category called "value of all my electronics" so you don't have that to make a double-entry against. The temptation is high to call it income as a result. Depending on the reason for all this double-entry book-keeping for personal finances, that may be fine. Or, you can create a category for balancing and use that, and realize the (negative) value of that account doesn't mean much. |
Hedging against Exchange Rate Risk | How can I calculate my currency risk exposure? You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar. Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar. Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate. That would tell you how much risk you need to mitigate. how can I hedge against it? There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above. Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 . Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs. |
I have $10,000 sitting in an account making around $1 per month interest, what are some better options? | What is your risk tolerance? Personally I invest about $5k in digital currency as an experiment. A lot of people told me I am stupid, which I agree at some point. I plan to let the money sit for 5~10 years. I can tell you there is a lot of emotion in the digital currency though. |
How to manage $50k in Savings? | In today's market being paid 1% for risk and free access money is pretty darn good. If 50k is what you feel comfortable with an emergency fund, then you are doing a fine enough job. To me that is a lot to keep in an emergency fund, however several factors play into this: We both drive older cars, so I also keep enough money around to replace one of them. Considering all that I keep a specific amount in savings that for me earns .89%. Some of that is kept in our checking accounts which earns nothing. You have to go through some analysis of your own situation and keep that amount where it is. If that amount is less than 50K, you have some money to play with. Here are some options: |
Buying from an aggressive salesperson | From your question and how you have framed it, I get you find Agressive Sales tactics disturb the buying process for you. ;) I understand because I also find the whole process of Research / Negotiating / Buying / Owning / Using is all on one continuum, so anything that ruins the process will likely lose the sale or enjoyment of the item, at the end of the day. [Very long answer .... Sorry :) ] The answer to this is to KNOW what you want before you have to deal with the Sales people. A good Sales person likes a customer who knows what they want. I would suggest that you follow my 'Buying Process' (Much you have already done) : Before you Buy: Identify the item you want and the max/min 'realistic' price you would buy at. [Stick to this price else 'Buyers Remorse' may bite later.] Write the questions you have down on paper before you visit the Dealer. Write the answers you want on the same list, if known. Decide which questions are most important and therefore must get the answer you want. These should be the questions you ask first. Mark these on the list. Re-visit points 1-3 are they complete and to your satisfaction ? Would you buy if all the answers & the price are right ? If NO then re-visit point 1-3 else you are not ready to buy now !!! If YES then Organise your visit to the Dealer. [Book appointment etc if needed.] At Dealer: Meet your Sales person and clearly state what you want (the item) and importantly when you intend to buy, if all your questions are answered to your satisfaction. There is no need to discuss price at this point as the 'haggling' is only possible IF the questions are answered to your satisfaction. Do not give information such as your maximum budget or similar requests, as they give the sales person the upper hand to maximise his/her pricing. If asked state that your budget is conditional on the answers you get. As the questions are answered assess the answer and assign +/- to the question on your list. If any of your most critical / important questions are answered in the negative, they are the reasons you have to call it a day and walk out. You can assess whether they are worth ignoring but you will need to factor this into your price and if you have identified your questions correctly there should be little room for debate. Assuming you have got all your questions answered you should know what you are buying and have assessed what is a reasonable price for it, if you still want it as this point. If you have lost interest, say so and let the Sales person go. Don't waste their time. They may make some sort of offer to you BUT don't forget that if you have doubts now they will not go away easily no matter what the 'great' price is. If you want it then continue. Buying your Item: [None of the following is really usefull if you have told the Sales person your Budget, as they will be aiming for the highest end of your budget. You will often find that the best price is very close to your maximum budget !!! :)] Do not forget your realistic price range, this should limit your buying price no matter what tactics are used by the Sales person. Only you know what you are prepared to pay and if an extra 1% or 50% is considered worth it to you, if you have to have the item :) Regardless, you have to have some idea of your limit and be prepared to stick to it. You must be able to walk away if the price is silly and not worth it. Assuming you have not been smitten by your item and funds are NOT unlimited, ask for the price and assess it against your price range. At this point I can only offer pointers as there are no 'magic' rules to get what you want at the lowest price. The only advice I would offer is that you will be lucky to get something at your 1st offer price unless the seller really needs to sell, because of this your 1st offer should be less than your price range lowest band. You will need to assess how much less but be prepared to get a 'No' response. If you get a 'Yes' and your research is good 'Buy It !!!' If you get too enthusiastic a response, question your research & if not sure bail out [No Sale] :) At this point you are likely to be 'Haggling' so you need to be ready for all the 'Must buy Now' tactics. If you have clearly stated your wants and timescales there is no reason to be pulled in by these tactics and they can be ignored until the price has reached the level you are happy with. If the price is not moving where you want than clearly state you cannot 'buy at that price'. If you get a total stop and no movement than you need to assess your 'need' and if priced too high then you should walk out. Remember if you stated that you had a timescale to buy of 1/2/3 weeks you should act like you have 1/2/3 weeks to keep looking. Any eagerness on your part will tell the Sales person that you have lied !!! :) You can always come back and try again, reminding the Sales person that the 'item' is still there and perhaps it is priced too high to sell and make the same offer. !!! (A bit of cheek sometimes works.) If the price is close and you still want it and the Sales person is not moving you need to try walking out while stating that you would love the 'item' if it was priced better, if no improved offer as you go, try an increased offer but again you need to assess how much and remember you can only go up, or walk out and come back another day. If the price is at a level you are happy with then you should have no reason not to buy (if you have followed this process) but this does not mean that you should be forced into buying now if you do not want to. Regardless of any 'Must buy now' tactics if the price is right and you cannot buy now, tell the Sales person when you CAN buy and see if you can get an agreement with this. It is unfair to expect a price to be held for an indeterminate time, so you do need to state when you could buy if not now when a price has been agreed. This is a point where the deal may break down if the Sales person thinks they have a sale and trys to force the Sale now. Once again you have to assess your 'need' and whether buying now is better than walking out. If the deal breaks down there is nothing stopping you from coming back and offering the same price when you can buy. A final option is to agree if a deposit can be left to reserve the item until you can buy. This gives the Sales person some assurance that you will come back and is sometimes NON-Refundable unless you agree otherwise before you pay, so check this detail first. (This tends to be smaller Dealers but generally in the UK the large companies offer refundable deposits as part of their Customer Service, the advantage of using larger Stores/Dealers etc.) Apologies for the epic reply, hope it helps. |
How can the Samsung Upgrade Programme offer 0% APR? | The financing is built into the price. I do not have hard facts, but I strongly suspect that very few people buy brand-new smartphones at full price upfront. Most pay a monthly installment to the carrier or retailer equal to 1/24 of the full price, which in effect is "0% financing for 2 years". Samsung might be able to advertise a lower retail price and then offer financing at some rate of interest, but from a marketing standpoint, offering "0%" financing makes it feel like you're getting "free money", when in fact it's built into the overall price. Which sounds better, buying an $840 phone with 0% financing for two years or buying an $800 phone at 4.85% APR for two years (both have a $35 monthly payment)? |
How could the 14th amendment relate to the US gov't debt ceiling crisis? | It's a disturbing development -- someone is floating the idea that the executive has the ability to issue debt without the consent of congress to measure the public's reaction. Why disturbing? Because people are using language like this: The president, moreover, can move quickly, but court cases take time. “At the point at which the economy is melting down, who cares what the Supreme Court is going to say?” Professor Balkin said. “It’s the president’s duty to save the Republic.” The implication to your personal finances is that we continue to live in interesting times, and you need to be aware of the downside risks that your investments are exposed to. If your portfolio is built around the idea that US government obligations are risk-free, you need to rethink that. |
How would bonds fare if interest rates rose? | When interest rates rise, the price of bonds fall because bonds have a fixed coupon rate, and since the interest rate has risen, the bond's rate is now lower than what you can get on the market, so it's price falls because it's now less valuable. Bonds diversify your portfolio as they are considered safer than stocks and less volatile. However, they also provide less potential for gains. Although diversification is a good idea, for the individual investor it is far too complicated and incurs too much transaction costs, not to mention that rebalancing would have to be done on a regular basis. In your case where you have mutual funds already, it is probably a good idea to keep investing in mutual funds with a theme which you understand the industry's role in the economy today rather than investing in some special bonds which you cannot relate to. The benefit of having a mutual fund is to have a professional manage your money, and that includes diversification as well so that you don't have to do that. |
What's the fuss about Credit Score / History? | If human beings were Homo Economicus, i.e. textbook rational and self-interested economic-minded beings, as opposed to simply human, then yes, simple advice like "just stay out of debt and your credit score will take care of itself" could work. Your simplification would be very persuasive to such a being. However, people are not perfectly rational. We buy something we shouldn't have, we charge it on a credit card, we can't afford to pay it off at the end of the month. We lose our job. Our furnace breaks down, or our roof leaks, and we didn't anticipate the replacement cost. Some of this is our fault, some of it isn't – basically, shit happens .. and we get into debt... maybe even knowing all the while we shouldn't have. Our credit history and score takes a hit. Only then do we find out there are consequences! Our interest rates go up, our insurance companies raise premiums, our prospective new employers or landlords run credit checks and either deny us the job or the apartment. Telling a person who asks for help about their credit history/score that they shouldn't have taken on debt in the first place is like telling the farmer he should have kept the barn door shut so the horse wouldn't run out. While it is not "bad" advice, it's not the only kind of advice to offer when somebody finds themselves in such a situation. Adding advice about corrective actions is more helpful. The person probably already know that they shouldn't have overspent in the first place and got into debt. Yes, remind them of the value of being sensible about debt in the first place – it's good reinforcement – but add some helpful advice to the mix. e.g. "So you're in debt. You shouldn't have lived beyond your means. But now that you are in this mess, here's what you can do to improve the situation." |
How accurate is Implied Volatility in predicting future moves? | How accurate is Implied Volatility in predicting future moves? How would you measure this? If the implied volatility says that there's a 1% chance that a stock will double, and it doubles, was it "right"? You could also say that it says there's a 99% change that it doesn't double, so was it "wrong"? What you could measure is the variance of daily returns over a time period, and see how well that compares to implied volatility, but there's no way to compare IV with the absolute price movement. If a stock goes up 0.01 each day, then the variance is 0 (the daily returns are the same each day), but over 250 the stock would go up $2.50. |
Is a “total stock market” index fund diverse enough alone? | You're missing the concept of systemic risk, which is the risk of the entire market or an entire asset class. Diversification is about achieving a balance between risk and return that's appropriate for you. Your investment in Vanguard's fund, although diversified between many public companies, is still restricted to one asset class in one country. Yes, you lower your risk by investing in all of these companies, but you don't erase it entirely. Clearly, there is still risk, despite your diversification. You may decide that you want other investments or a different asset allocation that reduce the overall risk of your portfolio. Over the long run, you may earn a high level of return, but never forget that there is still risk involved. bonds seem pretty worthless, at least until I retire According to your profile, you're about my age. Our cohort will probably begin retiring sometime around 2050 or later, and no one knows what the bond market will look like over the next 40 years. We may have forecasts for the next few years, but not for almost four decades. Writing off an entire asset class for almost four decades doesn't seem like a good idea. Also, bonds are like equity, and all other asset classes, in that there are different levels of risk within the asset class too. When calculating the overall risk/return profile of my portfolio, I certainly don't consider Treasuries as the same risk level as corporate bonds or high-yield (or junk) bonds from abroad. Depending on your risk preferences, you may find that an asset allocation that includes US and/or international bonds/fixed-income, international equities, real-estate, and cash (to make rebalancing your asset allocation easier) reduces your risk to levels you're willing to tolerate, while still allowing you to achieve returns during periods where one asset class, e.g. equities, is losing value or performing below your expectations. |
What college degree should I pursue to learn about stock and forex markets? | There are several paths of study you could undertake. If you want to learn the fundamentals of the stock market and become a financial analyst, then finance, economics, and accounting (yes, accounting) are all good to study either on your own or in an institution. Furthermore, if you want to study a specific industry, it can't hurt to know a fair amount of the science behind that particular industry. For example, if you want to understand the pharmaceutical or biotechnology industries, knowledge of clinical trials, the FDA's approval process (in the US, at least), off-label uses for drugs, genetic engineering, etc. are all good to know. You don't have to become an expert, but having a firm grasp on the science is extremely useful when evaluating a company's prospects. If you're interested in becoming an algorithmic trader or a quant, then physics, certain fields of engineering, signals processing, applied math, computer science, or econometrics will get you much farther than a standard finance or accounting degree. Most people can learn the basics of finance; not everyone can learn advanced mathematics. A lot of the above applies to learning about the forex market as well. Economics is certainly helpful, especially central bank policy, but since the forex market is so massive and liquid, many mathematical tools are necessary because algorithms play a key role as well. Per littleadv's suggestion, an MBA with a concentration in finance may be an option for someone who already has a degree. Also, an MSF (Master of Science in Finance) or a degree in financial engineering (called an MFE, or ORFE, for Operations Research and Financial Engineering) are other, potentially better options for someone pursuing a more technical career. A high-octane trading firm may not care that you've taken marketing and management classes; they want to hire someone who can understand complex algorithms and design and implement new ones quickly. Some MSF programs are pre-experience programs, which means that in exchange for taking more time to complete, they don't expect you to have significant work experience in the financial industry. An MBA might require such experience, however. |
What does market cap (or market capitalization) mean? | Market cap is basically the amount of money that it would cost to buy all of the shares of public stock in a company. Or share cost * number of outstanding shares. It is a measure of how much a company is worth. http://en.wikipedia.org/wiki/Market_capitalization |
What are the pros and cons of investing in a closed-end fund? | Pro: - Faces less redemption pressure and hence the Fund Manager can focus more on long term gains rather than immediate gains. - Works well in emerging markets. - Less churn out in case the market falls sharply, there by making more money in long run. Cons: - No additional money to invest/take advantage of market situation. - Less liquid for investor as he is locked in for a period. |
Investing thought experiment | The market cap always reflect the company's equity. Except that you cannot fix a stock price in a free market. A company with such profit pattern would have stock price behave like present value of a perpetuity (future income stream discounted by risk free rate) Since your assumption is unachievable, there is no point in determining the logic. |
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