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If a stock doesn't pay dividends, then why is the stock worth anything? | Securities change in prices. You can buy ten 10'000 share of a stock for $1 each one day on release and sell it for $40 each if you're lucky in the future for a gross profit of 40*10000 = 400'0000 |
Is it ever logical to not deposit to a matched 401(k) account? | One situation where it would be prudent not to contribute would be if expenses are so tight that you cannot afford to contribute because you need that cashflow for expenses. |
How can I detect potential fraud in a company before investing in them? | Given that such activities are criminal and the people committing them have to hide them from the law, it's very unlikely that an investor could detect them, let alone one from a different country. The only things that can realistically help is to keep in mind the adage "If something sounds too good to be true, it probably is", and to stick to relatively large companies, since they have more auditing requirements and fraud is much harder to hide at scale (but not impossible, see Enron). Edit: and, of course, diversify. This kind of thing is rare, and not systematic, so diversification is a very good protection. |
How does start-up equity end up paying off? | Equity could mean stock options. If that's the case if the company makes it big, you'll have the option to buy stocks cheap (which can then be sold at a huge profit) How are you going to buy those without income? 5% equity is laughable. I'd be looking for 30-40% if not better without salary. Or even better, a salary. To elaborate, 5% is fine, and even normal for an early employee taking a mild pay cut in exchange for a chance at return. That chance of any return on the equity is only about 1/20 (94% of startups fail) There is no reason for an employee to work for no pay. An argument could be made for a cofounder, with direct control and influence in the company to work for equity only, but it would be a /lot/ more (that 30-40%), or an advisory role (5% is reasonable) I also just noticed you mentioned "investing" in the startup with cash. As an angel investor, I'd still expect far more than 5%, and preferred shares at that. More like 16-20%. Read this for more info on how equity is usually split. |
Is the stock market a zero-sum game? | No. Share are equity in companies that usually have revenue streams and/or potential for creating them. That revenue can be used to pay out dividends to the shareholders or to grow the company and increase its value. Most companies get their revenue from their customers, and customers rarely give their money to a company without getting some good or service in exchange. |
How do I calculate tax liability on the turnover of a small vendor? | There are quite a few questions as to how you are recording your income and expenses. If you are running the bakery as a Sole Proprietor, with all the income and expense in a business account; then things are easy. You just have to pay tax on the profit [as per the standard tax bracket]. If you running it as individual, you are still only liable to pay tax on profit and not turnover, however you need to keep a proper book of accounts showing income and expense. Get a Accountant to do this for you there are some thing your can claim as expense, some you can't. |
How does one determine the width of a candlestick bar? | There's no rule of thumb but the purpose of candlesticks of any kind (fixed, volume weighted etc.) is to display the intra-period price action. So if you'd fit 3 years worth of 1 minute bars on a chart, candlesticks become useless and you might as well use a line chart. |
Where can I invest my retirement savings money, where it is safer than stocks? | Does your employer provide a matching contribution to your 401k? If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income). It's free money, take advantage of it. Next up, max out your Roth IRA. The limit is $5000 currently a year. After maxing your Roth, revisit your 401k. You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it. The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young. This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile. Bond funds are the usual choice. They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds. Rather, it is a gradual transition over time. As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds. Start to look at fixed-income and money market funds. |
Why invest for the long-term rather than buy and sell for quick, big gains? | The stock market's principal justification is matching investors with investment opportunities. That's only reasonably feasible with long-term investments. High frequency traders are not interested in investments, they are interested in buying cheap and selling expensive. Holding reasonably robust shares for longer binds their capital which is one reason the faster-paced business of dealing with options is popular instead. So their main manner of operation is leeching off actually occuring investments by letting the investors pay more than the recipients of the investments receive. By now, the majority of stock market business is indirect and tries guessing where the money goes rather than where the business goes. For one thing, this leads to the stock market's evaluations being largely inflated over the actual underlying committed deals happening. And as the commitment to an investment becomes rare, the market becomes more volatile and instable: it's money running in circles. Fast trading is about running in front of where the money goes, anticipating the market. But if there is no actual market to anticipate, only people running before the imagination of other people running before money, the net payout converges to zero as the ratio of serious actual investments in tangible targets declines. By and large, high frequency trading converges to a Ponzi scheme, and you try being among the winners of such a scheme. But there are a whole lot of people competing here, and essentially the net payoff is close to zero due to the large volumes in circulation as opposed to what ends up in actual tangible investments. It's a completely different game with different rules riding on the original idea of a stock market. So you have to figure out what your money should be doing according to your plans. |
Can you beat the market by investing in double long ETFs? [duplicate] | NO. All the leveraged ETFs are designed to multiply the performance of the underlying asset FOR THAT DAY, read the prospectus. Their price is adjusted at the end of the day to reflect what is called a NAV unit. Basically, they know that their price is subject to fluctuations due to supply and demand throughout the day - simply because they trade in a quote driven system. But the price is automatically corrected at the end of the day regardless. In practice though, all sorts of crazy things happen with leveraged ETFs that will simply make them more and more unfavorable to hold long term, the longer you look at it. |
Can someone explain how government bonds work? | The short of it is that bonds are valued based on a fundamental concept of finance called the "time value of money". Stated simply, $100 one year from now is not the same as $100 now. If you had $100 now, you could use it to make more money and have more than $100 in a year. Conversely, if you didn't invest it, the $100 would not buy as much in a year as it would now, and so it would lose real value. Therefore, for these two benefits to be worth the same, the money received a year from now must be more than $100, in the amount of what you could make with $100 if you had it now, or at least the rate of inflation. Or, the amount received now could be less than the amount recieved a year from now, such that if you invested this lesser amount you'd expect to have $100 in a year. The simplest bonds simply pay their face value at maturity, and are sold for less than their face value, the difference being the cost to borrow the cash; "interest". These are called "zero-coupon bonds" and they're around, if maybe uncommon. The price people will pay for these bonds is their "present value", and the difference between the present value and face value determines a "yield"; a rate of return, similar to the interest rate on a CD. Now, zero-coupon bonds are uncommon because they cost a lot. If I buy a zero-coupon bond, I'm basically tying up my money until maturity; I see nothing until the full bond is paid. As such, I would expect the bond issuer to sell me the bond at a rate that makes it worth my while to keep the money tied up. So basically, the bond issuer is paying me compound interest on the loan. The future value of an investment now at a given rate is given by FV = PV(1+r)t. To gain $1 million in new cash today, and pay a 5% yield over 10 years, a company or municipality would have to issue $1.629 million in bonds. You see the effects of the compounding there; the company is paying 5% a year on the principal each year, plus 5% of each 5% already accrued, adding up to an additional 12% of the principal owed as interest. Instead, bond issuers can offer a "coupon bond". A coupon bond has a coupon rate, which is a percentage of the face value of the bond that is paid periodically (often annually, sometimes semi-annually or even quarterly). A coupon rate helps a company in two ways. First, the calculation is very straightforward; if you need a million dollars and are willing to pay 5% over 10 years, then that's exactly how you issue the bonds; $1million worth with a 5% coupon rate and a maturity date 10 years out. A $100 5% coupon bond with a 10-year maturity, if sold at face value, would cost only $150 over its lifetime, making the total cost of capital only 50% of the principal instead of 62%. Now, that sounds like a bad deal; if the company's paying less, then you're getting less, right? Well yes, but you also get money sooner. Remember the fundamental principle here; money now is worth more than money later, because of what you can do with money between now and later. You do realize a lower overall yield from this investment, but you get returns from it quickly which you can turn around and reinvest to make more money. As such, you're usually willing to tolerate a lower rate of return, because of the faster turnaround and thus the higher present value. The "Income Yield %" from your table is also referred to as the "Flat Yield". It is a very crude measure, a simple function of the coupon rate, the current quote price and the face value (R/P * V). For the first bond in your list, the flat yield is (.04/114.63 * 100) = 3.4895%. This is a very simple measure that is roughly analogous to what you would expect to make on the bond if you held it for one year, collected the coupon payment, and then sold the bond for the same price; you'd earn one coupon payment at the end of that year and then recoup the principal. The actual present value calculation for a period of 1 year is PV = FV/(1+r), which rearranges to r = FV/PV - 1; plug in the values (present value 114.63, future value 118.63) and you get exactly the same result. This is crude and inaccurate because in one year, the bond will be a year closer to maturity and will return one less coupon payment; therefore at the same rate of return the present value of the remaining payout of the bond will only be $110.99 (which makes a lot of sense if you think about it; the bond will only pay out $112 if you bought it a year from now, so why would you pay $114 for it?). Another measure, not seen in the list, is the "simple APY". Quite simply, it is the yield that will be realized from all cash flows from the bond (all coupon payments plus the face value of the bond), as if all those cash flows happened at maturity. This is calculated using the future value formula: FV = PV (1+r/n)nt, where FV is the future value (the sum of the face value and all coupon payments to be made before maturity), PV is present value (the current purchase price), r is the annual rate (which we're solving for), n is the number of times interest accrues and/or is paid (for an annual coupon that's 1), and t is the number of years to maturity. For the first bond in the list, the simple APY is 0.2974%. This is the effective compound interest rate you would realize if you bought the bond and then took all the returns and stuffed them in a mattress until maturity. Since nobody does this with investment returns, it's not very useful, but it can be used to compare the yield on a zero-coupon bond to the yield on a coupon bond if you treated both the same way, or to compare a coupon bond to a CD or other compound-interest-bearing account that you planned to buy into and not touch for its lifetime. The Yield to Maturity, which IS seen, is the true yield percentage of the bond in time-valued terms, assuming you buy the bond now, hold it to maturity and all coupon payments are made on time and reinvested at a similar yield. This calculation is based on the simple APY, but takes into account the fact that most of the coupon payments will be made prior to maturity; the present value of these will be higher because they happen sooner. The YTM is calculated by summing the present values of all payments based on when they'll occur; so, you'll get one $4 payment a year from now, then another $4 in two years, then $4 in 3 years, and $104 at maturity. The present value of each of those payments is calculated by flipping around the future value formula: PV = FV/(1+r)t. The present value of the entire bond (its current price) is the sum of the present value of each payment: 114.63 = 4/(1+r) + 4/(1+r)2 + 4/(1+r)3 + 104/(1+r)4. You now have to solve for r, which is difficult to isolate; the easiest way to find the rate with a computer is to "goal seek" (intelligently guess and check). Based on the formula above, I calculated a YTM of .314% for the first bond if you bought on Sept 7, 2012 (and thus missed the upcoming coupon payment). Buying today, you'd also be entitled to about 5 weeks' worth of the coupon payment that is due on Sept 07 2012, which is close enough to the present day that the discounted value is a rounding error, putting the YTM of the bond right at .40%. This is the rate of return you'll get off of your investment if you are able to take all the returns from it, when you receive them, and reinvest them at a similar rate (similar to having a savings account at that rate, or being able to buy fractional shares of a mutual fund giving you that rate). |
Net income correlation with Stock Price | Ideally, stock price reflects the value of the company, the dividends it is expected to pay, and what people expect the future value of the company to be. Only one of those (maybe one and a half) is related to current sales, and not always directly. Short-term motion of a stock is even less directly linked, since it also reflects previous expectations. A company can announce disappointing sales and see its stock go up, if the previous price was based on expecting worse news. |
At what point is it most advantageous to cease depositing into a 401k? | A fascinating view on this. The math of a 10% deposit and projected 10% return lead to an inevitable point when the account is worth 10X your income (nice) and the deposit, 10% of income only represents 1% of the account balance. The use of an IRA is neither here nor there, as your proposed deposit is still just 1% of your retirement account total. Pay off debt? For one with this level of savings, it should be assumed you aren't carrying any high interest debt. It really depends on your age and retirement budget. Our "number" was 12X our final income, so at 10X, we were still saving. For you, if you project hitting your number soon enough, I'd still deposit to the match, but maybe no more. It might be time to just enjoy the extra money. For others, their goal may be much higher and those extra years deposits are still needed. I'd play with a spreadsheet and see the impact of reduced retirement account deposits. Note - the question asks about funding the 401(k) vs paying down debt. I'd always advise to deposit to the match, but beyond that, one should focus on their high interest debt, especially by their 50's. |
Why pay estimated taxes? | Your logic is not wrong. But the risk is more significant than you seem to assume. Essentially you are proposing taking a 2.6% loan to buy stocks. Is that a good strategy? On average, probably. But if your stocks crash you might have significant liabilities. In 1929, the Dow Jones dropped 89%. In 1989, >30%. In 2008-9, 54%. This is a huge risk if this is money that you owe in taxes. If you operate the same system year after year the chance of it going horribly wrong increases. |
How Often Should I Chase a Credit Card Signup Bonus? | An inquiry to your credit report is a slight ding and lasts 2 years. I'd suggest that if you are playing the bonus game you watch your score closely, and if it drops below the level you'd like to maintain, hold off a while. Credit Karma offers a good simulation to show the impact of inquiries, utilization, new accounts, etc. |
Why would this FHA refinance cause my mortgage insurance payment to increase so much? | In the spring of this year FHA increased their rates for Mortgage Protection insurance. (I am looking for a good refernceon the government website) Non Government reference Annual MIP For an FHA Streamline Refinance that replaces a FHA loan endorsed on, or after, June 1, 2009, the annual MIP varies based on loan type and loan-to-value. The annual MIP schedule, for loans with case numbers assigned on, of after, June 1, 2009 : For your example the monthly payment would be: $184,192*(1.2/100)*(1/12) = ~ $184.19 You were quoted 179.57 a month |
Canadian accepting money electronically from Americans | I am not aware of a version of Interac available in the U.S., but there are alternative ways to receive money: Cheque. The problem with mailed cheques is that they take time to deliver, and time to clear. If you ship your wares before the cheque has cleared and the cheque is bad, you're out the merchandise. COD. How this works is you place a COD charge on your item at the post office in the amount you charge the customer. The post office delivers the package on the other end when the customer pays. The post office pays you at the time you send the package. There is a fee for this, talk to your local post office or visit the Canada Post website. Money order. Have your U.S. customers send an International Money Order, not a Domestic Money Order. Domestic money orders can only be cashed at a U.S. post office. The problem here is again delivery time, and verifying your customer sent an International Money Order. It can be a pain to have to send back a Domestic Money Order to a customer explaining what they have to do to pay you, even more painful if you don't catch the error before shipping your wares. Credit Card. There are a number of companies offering credit card processing that are much cheaper than a bank. PayPal, Square, and Intuit are three such companies offering these services. After I did my investigations I found Square to be the best deal for me. Please do your own research on these companies (and banks!) and find out which one makes the most sense for you. Some transaction companies may forbid the processing of payment for e-cig materials as they my be classed as tobacco. |
Do I need to write the date on the back of a received check when depositing it? | Changed to answer match the edited version of the question No, you do not need to write the date of your endorsement, but you can choose to do so if you want to. The bank stamp on the back will likely have the date and perhaps even the exact time when the check was deposited. The two lines are there in case you want to write something like "For deposit only to Acct# uvwxyz" above your signature (always a good idea if you are making the deposit by sending the paper check (with or without a deposit slip) by US mail or any other method that doesn't involve you handing the check to a bank teller). If you are wanting to get encash the check, that is, get cash in return for handing the check over to the bank instead of depositing the check in your account, then the rules are quite a bit different. |
I need a car for 2 years. Buy or lease (or something else)? | Have you considered getting a bike? you would be able to ride it in Europe the same as over here because of no left right bias, also cost wise they are much much cheaper to run. |
Options for dummies. Can you explain how puts & calls work, simply? | Great answer by @duffbeer. Only thing to add is that the option itself becomes a tradeable asset. Here's my go at filling out the answer from @duffbeer. "Hey kid... So you have this brand-new video game Manic Mazes that you paid $50 for on Jan 1st that you want to sell two months from now" "Yes, Mr. Video Game Broker, but I want to lock in a price so I know how much to save for a new Tickle Me Elmo for my baby sister." "Ok, for $3, I'll sell you a 'Put' option so you can sell the game to me for $40 in two months." Kid says "Ok!", sends $3 to Mr Game Broker who sends our kid a piece of paper saying: The holder of this piece of paper can sell the game Manic Mazes to Mr Game Broker for $40 on March 1st. .... One month later .... News comes out that Manic Mazes is full of bugs, and the price in the shops is heavily discounted to $30. Mr Options Trader realizes that our kid holds a contract written by Mr Game Broker which effectively allows our kid to sell the game at $10 over the price of the new game, so maybe about $15 over the price in the second-hand market (which he reckons might be about $25 on March 1st). He calls up our kid. "Hey kid, you know that Put option that Mr Game Broker sold to you you a month ago, wanna sell it to me for $13?" (He wants to get it a couple of bucks cheaper than his $15 fair valuation.) Kid thinks: hmmm ... that would be a $10 net profit for me on that Put Option, but I wouldn't be able to sell the game for $40 next month, I'd likely only get something like $25 for it. So I would kind-of be getting $10 now rather than potentially getting $12 in a month. Note: The $12 is because there could be $15 from exercising the put option (selling for $40 a game worth only $25 in the second-hand market) minus the original cost of $3 for the Put option. Kid likes the idea and replies: "Done!". Next day kid sends the Put option contract to Mr Options Trader and receives $13 in return. Our kid bought the Put option and later sold it for a profit, and all of this happened before the option reached its expiry date. |
Are there any hedged international funds in India? | There aren't and for a good reason. The long term trend of INR against USD, GBP, EUR and other harder currencies is down. Given the inflation differential between these economies and India's, fund managers and investors should expect this to continue. Therefore, if you are invested for any reasonable length of time, you would expect the forex movements to add to your returns. Historically, this has been true of international funds run in India. |
What does a Dividend “will not be quoted ex” mean? | The ex indicator is meant to be a help for market participants. On the ex-day orders will go into a different order book, the ex order book, which at the start of the ex day will be totally empty, i.e. no orders from the non-ex day book have been copied over. Why does this help? Well imagine you had a long-standing buy order in the book, well below the current price, and now the share price halves due to a 2-for-1 split, would you want to see your order executed? If so, your order should have gone into the ex-book which is only active on the ex-day (and orders in the ex book are usually copied over to the normal book on the day after the ex-day but this is exchange-specific). Think of it as an additional safety net to tell the exchange: "I know what I'm doing: I want to buy this stock totally overpriced after the 2-for-1 split". Now some exchanges and/or some securities (mostly derivatives) linked with the security in question don't have this notion of ex or the ex-book, and they will tell you by "will not be quoted ex" or "the ex indicator is missing". In your case (SNE) it is a sponsored ADR, the ex-date was Mar 28 2016, one day before the ex date of the Japanese original. According to my understanding of NYSE rules, there is no specific rule for or against omitting the ex-indicator. It seems to be a decision on a case by case basis. Looking through the dividends of other Japanese ADRs I drew the conclusion none of them have an ex-book and so all of them are announced as: "Will not be quoted ex by the exchange". Again, this is based on my observations. |
How to calculate stock price (value) based on given values for equity and debt? | There is no formula for calculating a stock price based on the financials of a company. A stock price is set by the market and always has a component built into it that is based on something outside of the current valuation of a company using its financials. Essentially, the stock price of a company per share is whatever the best price it can get on the open market. If you are looking at how to evaluate if a stock is a good value at the current price, then look at some of the answers, but I wanted to answer this based on the way you phrased the question. |
Where should I invest to hedge against the stock market going down? | There are multiple ETFs which inversely track the common indices, though many of these are leveraged. For example, SDS tracks approximately -200% of the S&P 500. (Note: due to how these are structured, they are only suitable for very short term investments) You can also consider using Put options for the various indices as well. For example, you could buy a Put for the SPY out a year or so to give you some fairly cheap insurance (assuming it's a small part of your portfolio). One other option is to invest against the market volatility. As the market makes sudden swings, the volatility goes up; this tends to be true more when it falls than when it rises. One way of invesing in market volatility is to trade options against the VIX. |
What's the point of a benchmark? | Yes an index is by definition any arbitrary selection. In general, to measure performance there are 2 ways: By absolute return - meaning you want a positive return at all times ie. 10% is good. -1% is bad. By relative return - this means beating the benchmark. For example, if the benchmark returns -20% and your portfolio returns -10%, then it has delivered +10% relative returns as compared to the benchmark. |
Confirm Dividend Yield | There are lots of provisos, but in general you are correct. The provisos, off the top of my head: The only fees will be any brokerage fees when you purchase the stock. I haven't seen any handling fees when you get the dividend, but it may depend on how you hold the stock. |
What should I be doing to protect myself from identity theft? | http://annualcreditreport.com gives you free access to your 3 credit bureau records. (Annual, not "free". The "free" guys will try to sell you something.) |
No-line-of-credit debit card? | Having worked at a financial institution, this is a somewhat simple, two-part solution. 1) The lendor/vendor/financial institution simply turns off the overdraft protection in all its forms. If no funds are available at a pin-presented transaction, the payment is simply declined. No fee, no overdraft, no mess. 2) This sticking point for a recurring transaction, is that merchants such as Netflix, Gold's Gym etc, CHOOSE to allow payments like this, BECAUSE they are assured they are going to get paid by the financial institution. It prevents them from having issues. Only a gift card will not cost you more money than you put in, BUT I know of several institutions, that too many non-payment periods can cause them to cease doing business with you in the future. TL:DR/IMO If you don't want to pay more than you have, gift cards are the way to go. You can re-charge them whenever you choose, and should you run into a problem, simply buy a new card and start over. |
Starting with Stocks or Forex? | This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, "both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market." This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice. |
How can I lookup the business associated with a FEIN? | In most cases you cannot do "reverse lookup" on tax id in the US. You can verify, but for that you need to have more than just the FEIN/SSN. You should also have a name, and some times address. Non-profits, specifically, have to publish their EIN to donors, so it may be easier than others to identify those. Other businesses may not be as easy to find just by EIN. |
How many days does Bank of America need to clear a bill pay check | I just had this happen to me with Chase and speaking with my executive support contact, they will not return the funds unless you request them back. Which I find appalling and just one more reason that I don't like working with Chase! |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | I think that Dave Ramsey has a good approach to emergency funds. Save $1,000 that is immediately accessible in an emergency, pay off your debts, then build a 3-6 month fund. Two years is great, but takes a really long time to build up. |
Does the stock market create any sort of value? | When you own stock in a company, you do literally own part of the business, even if it's a small portion. Anyone amassing over 50% of shares really does have a controlling interest. No, you can't trade a handful of AAPL shares back to Apple for an iPod, but you can sell the shares and then go buy an iPod with the proceeds. Stock prices change over time because the underlying companies are worth more or less and people are willing to pay more or less for those shares. There is no Ponzi scheme because each share you own can be bought or sold on the open market. Dividends come from the company profits, not from other investors. On the other hand, money only has value because everyone believes it has value. There's the real conspiracy. |
How to read Google Finance data on dividends | However, you have to remember that not all dividends are paid quarterly. For example one stock I recently purchased has a price of $8.03 and the Div/yield = 0.08/11.9 . $.08 * 4 = $0.32 which is only 3.9% (But this stock pays monthly dividends). $.08 * 12 = $0.96 which is 11.9 %. So over the course of a year assuming the stock price and the dividends didn't change you would make 11.9% |
Covered calls: How to handle this trade? | I would expect that your position will be liquidated when the option expires, but not before. There's probably still some time value so it doesn't make sense for the buyer to exercise the option early and take your stock. Instead they could sell the option to someone else and collect the remaining time value. Occasionally there's a weird situation for whatever reason, where an option has near-zero or negative time value, and then you might get an early exercise. But in general if there's time value someone would want to sell rather than exercise. If the option hasn't expired, maybe the stock will even fall again and you'll keep it. If the option just expired, maybe the exercise just hasn't been processed yet, it may take overnight or so. |
Clarifications On PFIC Rules | Are these PFIC rules new? No, PFIC rules are not new, they've been around for a very long time. what would that mean if a person owned a non-US company stock, like a company in Europe that makes chocolate? Is that considered assets that produces passive income? No. But if a person owned a non-US company stock like a company that holds a company that makes chocolate - that would be passive income. this is non-US mutual funds that hold foreign shares, like a mutual fund in India, not a US fund which owns Indian stocks? Non-US fund. For those of you who are tax advisors, is the time length (30 hours) true for filing form 8621? I would suggest not to fill this form on your own. Find a tax adviser specializing on providing services to expats, and have her do this. 30 hours for a person who has never dealt with taxes on this level before is probably not enough to learn all about PFIC, the real number is closer to 300 hours. While ZeroHedge article may be a sales pitch, PFIC rules should frighten you if they apply to your investments. Do not take them lightly, as penalties are steep and if you don't plan ahead you may end up paying way too much taxes than you could have. |
Trading : how to deal with crashes (small or big) | caveat: remember that complex derivatives can be very bad for your wealth (even if you FULLY understand them). |
What would the broker do about this naked call option? | If the underlying is currently moving as aggressively as stated, the broker would immediately forcibly close positions to maintain margin. What securities are in fact closed depends upon the internal algorithms. If the equity in the account remains negative after closing all positions if necessary, the owner of the account shall owe the broker the balance. The broker will close the account and commence collections if the owner of the account does not pay the balance quickly. Sometimes, brokers will impose higher margin requirements than mandated to prevent the above eventuality. Brokers frequently close positions that violate internal or external margin requirements as soon as they are breached. |
Relation between inflation rates and interest rates | Is it true that due the to the increase in interest rates that inflation is likely to increase as well? It is typically the reverse where inflation causes interest rates to rise. Interest rates fundamentally reflect the desire for people to purchase future goods over present day goods. If I loan money to someone for 5 years I lose the ability to use that money. In order to entice me to loan the money the borrower would have to offer me an incentive, that is, they would have to give me additional money at the end of that 5 years. This additional money is the interest rate and it reflects the desire of people to spend money in the future versus the present day. If offered the same amount of money today versus 5 years from now almost everyone would chose to take the money now. Money in the present is more valuable than the same amount of money in the future. Interest rates would still exist even with a currency that could not be printed. I would still prefer to have the currency today than in the future. If the currency is continually devalued (i.e. the issuer is printing more of the currency) than borrowers may charge additional interest to compensate for the loss in purchasing power when they make a loan. Also, it is hard to compare interest rates and inflation. Inflation is very difficult to calculate. New products and services, as well as ever changing consumer desires, continually change the mixture of goods in the market so it is nearly impossible to compare a basket of goods today to a basket of goods 5, 10, 20, or 30 years ago. |
How much of my capital should I spend on subscribing to a stock research company? | You should spend zero on your stock research company. If the management of the company actually had persistent skill in picking stocks, they would not be peddling their knowledge to the retail market for a few hundred dollars. They would rake in millions and billions by running a huge hedge fund and buy themselves a private island or something. Unfortunately for them, hedge fund investors are not as gullible as retail investors and are more likely to sue when they discover they have been lied to. Many stock "research" companies are trying to manipulate you into paying too high a price for stocks. They buy a small stock, recommend it, and then sell it at the artificially (and temporarily) high price. Others are simply recommending stocks pretty much at random. You could do that just as well as they can, and for free. Portfolio performance evaluation is a complex problem. The research company knows that its recommendations will "make good money" about half the time and that's enough to bring in a lot of uninformed people. To know whether your portfolio actually did well you need to know how much risk there was in the portfolio and how a competing "dumb" portfolio with similar characteristics fared over the same time period. And you need to repeat the experiment enough times (or long enough) to know the outcome wasn't luck. I can say confidently that your portfolio performance doesn't back up the claim that the research company has skill above and beyond luck. Much less $599 worth of skill. I can also say very confidently that there are no investors with a total of 20 thousand dollars to invest for whom purchasing stock recommendations is worth the cost, even if those recommendations do have some value. Real stock information is valuable only to large investors because the per-dollar value is low. Please do not give money to or otherwise support a semi-criminal "stock research" enterprise. |
Section 179 vs depreciation of laptop | The CPA's mention of $2,500 is probably referring to the recently increased de minimis safe harbor under the final tangible property regulations (used to be $500) without an applicable financial statement. The IRS will not challenge your choice of expense or capitalization on amounts on or below $2500 if you elect the de minimis safe harbor election on your return. However, you must follow whatever you're doing for your books. (So if you are capitalizing your laptops for book purposes, you would also need to capitalize for tax purposes). Section 179 allows you to expense property that you would have otherwise have had to capitalize and depreciate. Section 179 can be annoying, especially if your LLC is treated as a passthrough, because there are recapture provisions when you dispose of the asset too early. For the tax return preparer, it makes the return preparation much more simple if there are no fixed assets to account for in the first place, which is quite possible if you are expensive all items/invoices less than $2,500. |
Evidence For/Against Real Estate Investing Vis-a-vis Investing in ETFs | Real Estate potentially has two components of profit, the increase in value, and the ongoing returns, similar to a stock appreciating and its dividends. It's possible to buy both badly, and in the case of stocks, there are studies that show the typical investor lags the market by many percent. Real estate is not a homogeneous asset class. A $200K house renting for $1,000 is a far different investment than a $100K 3 family renting for $2,000 total rents. Both exist depending on the part of the country you are in. If you simply divide the price to the rent you get either 16.7X or 4.2X. This is an oversimplification, and of course, interest rates will push these numbers in one direction or another. It's safe to say that at any given time, the ratio can help determine if home prices are too high, a bargain, or somewhere in between. As one article suggests, the median price tracks inflation pretty closely. And I'd add, that median home prices would track median income long term. To circle back, yes, real estate can be a good investment if you buy right, find good tenants, and are willing to put in the time. Note: Buying to rent and buying to live in are not always the same economic decision. The home buyer will very often buy a larger house than they should, and turn their own 'profit' into a loss. e.g. A buyer who would otherwise be advised to buy the $150K house instead of renting is talked into a bigger house by the real estate agent, the bank, the spouse. The extra cost of the $225K house is the 1/3 more cost of repair, utilities, interest, etc. It's identical to needing a 1000 sq ft apartment, but grabbing one that's 1500 sq ft for the view. |
How can someone with a new job but no credit history get a loan to settle another debt? | I believe the best way to go about it is to approach a good friend or relative to borrow the money, interest free. Do discuss with them the repayment schedule. If you have any assets such as house / stocks, you can pledge them in exchange for $5000 cash. I believe the banks would be more than happy to lend to you. You could try one of these Peer to Peer lending sites where you could borrow money from other people instead of banks. |
Should we prepay our private student loans, given our particular profile? | Don't frett to much about your retirement savings just put something towards it each year. You could be dead in ten years. You should always try to clear out debt when you can. But don't wipe yourself out! Expedite the repayment process. |
Options strategy - When stocks go opposite of your purchase? | Robert is right saying that options' prices are affected by implied volatility but is wrong saying that you have to look at the VIX index. For two reasons: 1) the VIX index is for S&P500 options only. If you are trading other options, it is less useful. 2) if you are trading an option that is not at the money, your implied volatility may be very different (and follow a different dynamics) that the VIX index. So please look at the right implied volatility. In terms of strategy, I don't think that not doing anything is a good strategy. I accept any point of view but you should consider that option traders should be able to adjust positions depending on market view. So you are long 1 call, suppose strike 10. Suppose the underlying price at the time of entry was 10 (so the call was at the money). Now it's 9. 1) you still have a bullish view: buy 1 call strike 9 and sell 2 calls strike 10. This way you have a bull call spread with much higher probability of leading to profit. You are limiting your profit potential but you are also reducing the costs and managing the greeks in a proper way (and in line with your expectations). 2) you become bearish: you can sell 1 call strike 9. This way you end up with a bear call spread. Again, you are limiting your profit potential but you are also reducing the costs and managing the greeks in a proper way (and in line with your expectations). 3) you become neutral: buy 1 call strike 8 and sell 2 calls strike 9. This way you end up with a call butterfly. You are almost delta neutral and you can wait until your view becomes clear enough to become directional. At that point you can modify the butterfly to make it directional. These are just some opportunities you have. There is no reason for you to wait. Options are eroding contracts and you must be fast and adjust the position before time starts eroding your capital at risk. It's true that buying a call doesn't make you loose more than the premium you paid, but it's better to reduce this premium further with some adjustment. Isn't it? Hope that helps. :) |
How to plan in a budget for those less frequent but mid-range expensive buys? | You would simply plan for misc. expenses in your budget, and allocate a small amount to this every time you do your budget, eventually building up a pool of money that you can then use whenever you have to make a purchase such as that. |
Employer options when setting up 401k for employees | If you were looking to maximize your ability to save in a qualified plan, why not setup a 401K plan in Company A and keep the SEP in B? Setup the 401K in A such that any employee can contribute 100% of their salary. Then take a salary for around 19K/year (assuming under age 50), so you can contribute and have enough to cover SS taxes. Then continue to move dividends to Company A, and continue the SEP in B. This way if you are below age 50, you can contribute 54K (SEP limit) + 18K (IRA limit) + 5500 (ROTH income dependent) to a qualified plan. |
Did an additional $32 billion necessarily get invested into Amazon.com stock on October 26th, 2017? | No. The market cap has no relation to actual money that flowed anywhere, it is simple the number of shares multiplied by the current price, and the current price is what potential buyers are (were) willing to pay for the share. So any news that increases or decreases interest in shares changes potentially the share price, and with that the market cap. No money needs to flow. |
question regarding W4 | Yes. W4 determines how much your employer will withhold from your wages. Leaving everything at default would mean that your salary is your only taxable income, and you only take default deductions. Your employee will calculate your tax withholding based on that. But, if your salary is >200k, I assume that you have other income (investment/capital gains, interest on your bank account), which you will have to pay taxes on. You're probably going to have some deductible expenses (business/partnership expenses, mortgage interest, donations, college funds etc) as well. So it is very likely, unless you're really not smart about money, that you have more to do with your taxes than just the employers' withholding. |
why do I need an emergency fund if I already have investments? | Let me first start by defining an emergency fund. This is money which is: Because emergency's usually need to be deal with ASAP, boiler breaks, gears box in a car. Generally you need these to be solved as soon as possible, because ou depend on these things working and you can't budget for this type of expenditure using just your monthly salary. This is a personal opinion but I prefer investment types that don't have another fee on access. I really don't like having another fee on top on money that I need right now. Investment Options: Market based investments should be seen as long term investments, therefore they do not really satisfy requirement one, they can also have broker fees, therefore you might pay a small extra charge for taking money out, and so do not satisfy requirement two. Investment Options for Emergency Funds You want to get the best return on your money even if it's your emergency fund. So use regular saving accounts, but from you emergency fund or use tax effective savings accounts, like a cash ISA if based in the UK. Don't think of an emergency money as just sitting there, you have options just makes sure the options fit the requirements. UPDATE Given feedback I appreciate there are levels of emergency fund, the above details things which might be about 1-2 month salary in cost, car repairs, leaks, boiler repairs. Now I have another fund which is in P2P funds which is higher risk than a deposit account but then gives me a better return and is less subject to market fluctuations and it would be the place I go to for loss of job level emergencies say 6 months of salary, this takes a bit longer to access but given I have the above emergency fund I have given myself time to get the money from the P2P account. |
Who buys variable annuities? | An annuity makes sense in a few different scenarios: In general, they are not the best deal around (and are often ripoffs), and will almost certainly be a bad deal if pitched by a tax preparer, insurance salesman, etc. Keep in mind that any "guarantees" offered are guarantees made by an insurance company. The only backing up of that claim in the event of a company failing is protection from your state's Guaranty Association. (ie. not the Feds) |
What are some of the key identifiers/characters of an undervalued stock? | P/E = price per earnings. low P/E (P/E < 4) means stock is undervalued. |
In USA, what circumstances (if any) make it illegal for a homeless person to “rent” an address? | It depends on the rules in the specific places you stay. Specific places being countries or states. Some states may consider pension payments to be taxable income, others may not. Some may consider presence for X days to constitute residency, X days may be 60 days in a calendar year whether or not those days are continuous. It doesn't matter so much where your mailbox or mail handling service is located, it matters: You may owe taxes in more than one place. Some states will allow you to offset other states' taxes against theirs. Some states in the US are really harsh on income taxes. It's my understanding that if you own real estate in New York, all of your income, no matter the source, is taxable income in New York whether or not you were ever in the state that year. Ultimately, you can't just put up your hand and say, "that's my tax domicile so I'm exempt from all your taxes." There is no umbrella US regulation on this topic, the states determine who they consider to be residents and how those residents are to be taxed. While it's possible you may be considered a resident of multiple states and owe income taxes in multiple states, it's equally possible that you won't meet the residency criteria for any state regardless of whether or not that state has an income tax. The issue you face, as addressed in @Jay's answer, Oklahoma will consider you a resident of OK until you have established residency somewhere else. |
How do I analyse moving averages? | If you are going to be a long term investor you are only going to buy and hold. You will not sell. Thus future price is not relevant. Only dividend payout is relevant. Divide the dividend by the price you paid to get the yeald. Edit: once again the sitesite will not allow me to add a comment, so I have to edit a previous post... What you call 'active investor' is not really investing, it is speculating. When you try to 'buy low, sell high' you have, at best, a 50-50 chance of picking the low. You then pay a commission on that buy. After you buy then you have a 50-50 chance, at best, of picking the high. You also have to pay the commission on the sell. 50% times 50% is 25%.So you have, at best a 25% chance of buying low and selling high. You are churning your account which makes money for the broker whether you make money or not. If, instead, you buy and hold a dividend paying security then the going price is irrelevant. You paid for the security once and do not have to pay for it again. Meanwhile the dividends roll in forever. 'Buy low, sell high' is a fools game. Warren Buffet does not do it, he buys and holds. |
Is Real Estate ever a BAD investment? If so, when? | Real estate is a lousy investment because: Renting a home and buying a home, all else being equal, are pretty similar in costs in the long term (if you can force yourself to invest the would-be down payment). So, buy a home if you want to enjoy the benefits of home ownership. Buy a home if you need to hedge against rising housing prices (e.g. you're on a fixed income and couldn't cope if rent increased a bunch when the economy heated up). Maybe buy a home if you're in a high tax bracket to save yourself from being taxed on your imputed rent, if it works out that way (consult your financial advisor). But don't consider it a really great investment vehicle. Returns are average and the risk profile isn't that attractive. |
How much is inflation? | FYI...prices don't always go up. Inflation is a monetary phenomenon. I'm simplifying greatly here: if more money is printed (or the money supply increases through fractional reserve banking) and it is chasing the same amount of goods then prices will go up. Conversely, if money is held constant and the economy becomes more productive, producing more goods, then a constant amount of money is chasing an increasing amount of goods and prices go down. After the Civil War the greenback went back to being on a gold standard in 1879. After 1879 greenbacks could be redeemed for gold. Gold restricts money growth since it is difficult to obtain. Here are the price and wage indexes from 1869 - 1889 (from here): Notice from 1879 to 1889 that wholesale and consumer prices fall but wages start to increase. Imagine your salary staying the same (or even increasing) but the prices of items falling. Still don't think inflation is a monetary phenomenon? Here is a CPI chart from 1800 to 2007: Notice how the curve starts to go drastically up around 1970. What happen then? The US dollar went off the gold-exchange standard and the US dollar became a purely fiat currency backed by nothing but government decree which allows the Federal Reserve to print money ad nauseum. |
At what point do index funds become unreliable? | private investors that don't have the time or expertise for active investment. This may be known as every private investor. An index fund ensures average returns. The bulk of active trading is done by private institutions with bucketloads of experts studying the markets and AI scraping every bit of data it can get (from the news, stock market, the weather reports, etc...). Because of that, to get above average returns an average percent of the time, singular private investors have to drastically beat the average large team of individuals/software. Now that index ETF are becoming so fashionable, could there be a tipping point at which the market signals that active investors send become so diluted that this "index ETF parasitism" collapses? How would this look like and would it affect only those who invest in index ETF or would it affect the stock market more generally? To make this question perhaps more on-topic: Is the fact (or presumption) that index ETF rely indirectly on active investment decisions by other market participants, as explained above, a known source of concern for personal investment? This is a well-covered topic. Some people think this will be an issue. Others point out that it is a hard issue to bootstrap. I gravitate to this view. A small active market can support a large number of passive investors. If the number of active investors ever got too low, the gains & likelihood of gains that could be made from being an active investor would rise and generate more active investors. Private investing makes sense in a few cases. One example is ethics. Some people may not want to be invested, even indirectly, in certain companies. |
Protecting Gains: Buying a Put vs. Leveraged Bear Market vs. Liquidating Long Positions? | Buying a put is hedging. You won't lose as much if the market goes down, but you'll still lose capital: lower value of your long positions. Buying an ultrashort like QID is safer than shorting a stock because you don't have the unlimited losses you could have when you short a stock. It is volatile. It's not a whole lot different than buying a put; it uses futures and swaps to give the opposing behavior to the underlying index. Some places indicate that the tax consequences could be severe. It is also a hedge if you don't sell your long positions. QID opposes the NASDAQ 100 which is tech-heavy so bear (!) that in mind. Selling your long positions gets you out of equities completely. You'll be responsible for taxes on capital gains. It gets your money off of the table, as opposed to playing side bets or buying insurance. (Sorry for the gambling analogy but that's a bit how I feel with stock indices now :) ). |
Why would a company care about the price of its own shares in the stock market? | The other answer has some good points, to which I'll add this: I believe you're only considering a company's Initial Public Offering (IPO), when shares are first offered to the public. An IPO is the way most companies get a public listing on the stock market. However, companies often go to market again and again to issue/sell more shares, after their IPO. These secondary offerings don't make as many headlines as an IPO, but they are typical-enough occurrences in markets. When a company goes back to the market to raise additional funds (perhaps to fund expansion), the value of the company's existing shares that are being traded is a good indicator of what they may expect to get for a secondary offering of shares. A company about to raise money desires a higher share price, because that will permit them to issue less shares for the amount of money they need. If the share price drops, they would need to issue more shares for the same amount of money – and dilute existing owners' share of the overall equity further. Also, consider corporate acquisitions: When one company wants to buy another, instead of the transaction being entirely in cash (maybe they don't have that much in the bank!), there's often an equity component, which involves swapping shares of the company being acquired for new shares in the acquiring company or merged company. In that case, the values of the shares in the public marketplace also matter, to provide relative valuations for the companies, etc. |
For very high-net worth individuals, does it make sense to not have insurance? | There are 2 maxims that help make sense of insurance: Following those 2 rules, "normal" insurance makes sense. Can't afford to replace your car? insure it. Can afford to lose your TV? Don't insure it. People with a net worth in the low millions have very similar insurance needs to the middle class. For example, they might be able to afford a new car when they total it, but they probably can't afford to pay for the long term care of the person they accidentally ran over. Similarly, they probably need to insure their million dollar house, just like average people insure more affordable housing. "Very wealthy" people still have the same basic choices, but for different assets. If you are a billionaire, then you might not bother to insure your $30k childhood home or your fleet vehicles, but you probably would insure your $250m mansion, your $100m yacht and your more pricey collectible cars. It's also worth noting that "very wealthy" people are at much higher risk of being sued for negligence or personal injury. As such, they are more likely to purchase personal liability or umbrella insurance coverage to protect against such risks. Multi-million-dollar personal injury suits would never be filed against a poorer person simply because they couldn't afford to pay even the plaintiff's lawyer fees when they lost the court case. Insurance also makes sense when the insurance company is likely to (grossly) underestimate the risk they are taking. For example, if I am a really bad driver, but i have a clean record thanks to my army of lawyers, then insurance might actually be a good deal for me even on average. To take the "very wealthy" stereotypes to the extreme, perhaps my eccentric billionaire neighbor and I are in an escalating feud which I think will result in my butler "accidentally" running his car into my neighbor's precious 1961 Ferrari. |
Why would you ever turn down a raise in salary? | In Australia there are cases for the argument. 1) We have laws against unfair dismissal that do not apply above certain thresholds. Your position is more secure with the lower salary. 2) Tax benefits for families are unfairly structured such that take home pay may actually be less, again due to a threshold. This tends to benefit charities as people need to shed the taxable income if a repayment of benefits would otherwise be triggered. 3) You do not want to "just cross" a tax bracket in a year where levies are being raised for natural disasters or budget shortfall. In this case a raise could be deferred ? |
How come we can find stocks with a Price-to-Book ratio less than 1? | A lower Price/Book Value means company is undervalued. It could also mean something horribly wrong. While it may look like a good deal, remember; |
What are the economic benefits of owning a home in the United States? | Altough this may vary a lot depending on where you live and your actual finance, here what convinced me buying a home instead of renting : Other benefits : |
How should I handle student loans when leaving University and trying to buy a house? | Concise answers to your questions: Depends on the loan and the bank; when you "accelerate" repayment of a loan by applying a pre-payment balance to the principal, your monthly payment may be reduced. However, standard practice for most loan types is that the repayment schedule will be accelerated; you'll pay no less each month, but you'll pay it off sooner. I can neither confirm nor deny that an internship counts as job experience in the field for the purpose of mortgage lending. It sounds logical, especially if it were a paid internship (in which case you'd just call it a "job"), but I can't be sure as I don't know of anyone who got a mortgage without accruing the necessary job experience post-graduation. A loan officer will be happy to talk to you and answer specific questions, but if you go in today, with no credit history (the student loan probably hasn't even entered repayment) and a lot of unknowns (an offer can be rescinded, for instance), you are virtually certain to be denied a mortgage. The bank is going to want evidence that you will make good on the debt you have over time. One $10,000 payment on the loan, though significant, is just one payment as far as your credit history (and credit score) is concerned. Now, a few more reality checks: $70k/yr is not what you'll be bringing home. As a single person without dependents, you'll be taxed at the highest possible withholdings rate. Your effective tax rate on $70k, depending on the state in which you live, can be as high as 30% (including all payroll/SS taxes, for a 1099 earner and/or an employee in a state with an income tax), so you're actually only bringing home 42k/yr, or about $1,600/paycheck if you're paid biweekly. To that, add a decent chunk for your group healthcare plan (which, as of 2014, you will be required to buy, or else pay another $2500 - effectively another 3% of gross earnings - in taxes). And even now with your first job, you should be at least trying to save up a decent chunk o' change in a 401k or IRA as a retirement nest egg. That student loan, beginning about 6 months after you leave school, will cost you about $555/mo in monthly payments for the next 10 years (if it's all Stafford loans with a 50/50 split between sub/unsub; that could be as much as $600/mo for all-unsub Stafford, or $700 or more for private loans). If you were going to pay all that back in two years, you're looking at paying a ballpark of $2500/mo leaving just $700 to pay all your bills and expenses each month. With a 3-year payoff plan, you're turning around one of your two paychecks every month to the student loan servicer, which for a bachelor is doable but still rather tight. Your mortgage payment isn't the only payment you will make on your house. If you get an FHA loan with 3.5% down, the lender will demand PMI. The city/county will likely levy a property tax on the assessed value of land and building. The lender may require that you purchase home insurance with minimum acceptable coverage limits and deductibles. All of these will be paid into escrow accounts, managed by your lending bank, from a single check you send them monthly. I pay all of these, in a state (Texas) that gets its primary income from sales and property tax instead of income, and my monthly payment isn't quite double the simple P&I. Once you have the house, you'll want to fill the house. Nice bed: probably $1500 between mattress and frame for a nice big queen you can stretch out on (and have lady friends over). Nice couch: $1000. TV: call it $500. That's probably the bare minimum you'll want to buy to replace what you lived through college with (you'll have somewhere to eat and sleep other than the floor of your new home), and we're already talking almost a month's salary, or payments of up to 10% of your monthly take-home pay over a year on a couple of store credit cards. Plates, cookware, etc just keeps bumping this up. Yes, they're (theoretically) all one-time costs, but they're things you need, and things you may not have if you've been living in dorms and eating in dining halls all through college. The house you buy now is likely to be a "starter", maybe 3bed/2bath and 1600 sqft at the upper end (they sell em as small as 2bd/1bt 1100sqft). It will support a spouse and 2 kids, but by that point you'll be bursting at the seams. What happens if your future spouse had the same idea of buying a house early while rates were low? The cost of buying a house may be as little as 3.5% down and a few hundred more in advance escrow and a couple other fees the seller can't pay for you. The cost of selling the same house is likely to include all the costs you made the seller pay when you bought it, because you'll be selling to someone in the same position you're in now. I didn't know it at the time I bought my house, but I paid about $5,000 to get into it (3.5% down and 6 months' escrow up front), while the sellers paid over $10,000 to get out (the owner got married to another homeowner, and they ended up selling both houses to move out of town; I don't even know what kind of bath they took on the house we weren't involved with). I graduated in 2005. I didn't buy my first house until I was married and pretty much well-settled, in 2011 (and yes, we were looking because mortgage rates were at rock bottom). We really lucked out in terms of a home that, if we want to or have to, we can live in for the rest of our lives (only 1700sqft, but it's officially a 4/2 with a spare room, and a downstairs master suite and nursery/office, so when we're old and decrepit we can pretty much live downstairs). I would seriously recommend that you do the same, even if by doing so you miss out on the absolute best interest rates. Last example: let's say, hypothetically, that you bite at current interest rates, and lock in a rate just above prime at 4%, 3.5% down, seller pays closing, but then in two years you get married, change jobs and have to move. Let's further suppose an alternate reality in which, after two years of living in an apartment, all the same life changes happen and you are now shopping for your first house having been pre-approved at 5%. That one percentage point savings by buying now, on a house in the $200k range, is worth about $120/mo or about $1440/yr off of your P&I payment ($921.42 on a $200,000 home with a 30-year term). Not chump change (over 30 years if you had been that lucky, it's $43000), but it's less than 5% of your take-home pay (month-to-month or annually). However, when you move in two years, the buyer's probably going to want the same deal you got - seller pays closing - because that's the market level you bought in to (low-priced starters for first-time homebuyers). That's a 3% commission for both agents, 1% origination, 0.5%-1% guarantor, and various fixed fees (title etc). Assuming the value of the house hasn't changed, let's call total selling costs 8% of the house value of $200k (which is probably low); that's $16,000 in seller's costs. Again, assuming home value didn't change and that you got an FHA loan requiring only 3.5% down, your down payment ($7k) plus principal paid (about another $7k; 6936.27 to be exact) only covers $14k of those costs. You're now in the hole $2,000, and you still have to come up with your next home's down payment. With all other things being equal, in order to get back to where you were in net worth terms before you bought the house (meaning $7,000 cash in the bank after selling it), you would need to stay in the house for 4 and a half years to accumulate the $16,000 in equity through principal payments. That leaves you with your original $7,000 down payment returned to you in cash, and you're even in accounting terms (which means in finance terms you're behind; that $7,000 invested at 3% historical average rate of inflation would have earned you about $800 in those four years, meaning you need to stick around about 5.5 years before you "break even" in TVM terms). For this reason, I would say that you should be very cautious when buying your first home; it may very well be the last one you'll ever buy. Whether that's because you made good choices or bad is up to you. |
I have an extra 1000€ per month, what should I do with it? | If I were you, I would save 200 euros for retirement each month and another 800 I would stash away with the hope to start investing soon. I think you have to invest a bigger lump sum, then 1000 euros. It makes sense to invest at least 30K to see any tangible results. My acquaintances started from 50K and now see pretty handsome returns. Investing is profitable, as long as you approach it smartly. Also, do not ever hire an overly expensive financial consultant - this expenses will never pay off. Of course, check their credentials and reputation... But never pay much to these guys. Not worth it. |
How does a bank make money on an interest free secured loan? | Other answers didn't seem to cover it, but most "0%" bank loans (often offered to credit card holders in the form of balance transfer checks), aside from less-obvious fees like already-mentioned late fees, also charge an actual loan fee, typically 2-3% (or a minimum floor amount) - that was the deal with every single transfer 0% offer I ever saw from a bank. So, effectively, even if you pay off the loan perfectly, on time, and within 0% period, you STILL got a 3% loan and not 0% (assuming 0% period lasts 12 months which is often the case). |
In India, what is the difference between Dividend and Growth mutual fund types? | A growth fund is looking to invest in stocks that will appreciate in stock price over time as the companies grow revenues and market share. A dividend fund is looking to invest in stocks of companies that pay dividends per share. These may also be called "income" funds. In general, growth stocks tend to be younger companies and tend to have a higher volatility - larger up and down swings in stock price as compared to more established companies. So, growth stocks are a little riskier than stocks of more established/stable companies. Stocks that pay dividends are usually more established companies with a good revenue stream and well established market share who don't expect to grow the company by leaps and bounds. Having a stable balance sheet over several years and paying dividends to shareholders tends to stabilize the stock price - lower volatility, less speculation, smaller swings in stock price. So, income stocks are considered lower risk than growth stocks. Funds that invest in dividend stocks are looking for steady reliable returns - not necessarily the highest possible return. They will favor lower, more reliable returns in order to avoid the drama of high volatility and possible loss of capital. Funds that invest in growth stocks are looking for higher returns, but with that comes a greater risk of losing value. If the fund manager believes an industry sector is on a growth path, the fund may invest in several small promising companies in the hopes that one or two of them will do very well and make up for lackluster performance by the rest. As with all stock investments, there are no guarantees. Investing in funds instead of individual stocks allows you invest in multiple companies to ride the average - avoid large losses if a single company takes a sudden downturn. Dividend funds can lose value if the market in general or the industry sector that the fund focuses on takes a downturn. |
Why would selling off some stores improve a company's value? | Maybe the location isn't yet, but will soon become a new loss. For example older soon out of warranty equipment, new tax laws in the locality soon to take affect or even just declining sales over the past periods of measurement. Perhaps labor disputes or other locality issues make running the store difficult. There is the possibility that the land the location occupies is worth more sold to the new big box retailer than it will be in the next 10 years of operation. In some cases, companies want to have a ton of cash on hand, or would sell assets to pay off debt. |
Personal Loan issuer online service | It is pretty easy to setup a spreadsheet for calculating interest payments and remaining balance. Do a quick search online. You may want to put it in something like Google Docs, where brother can view the status, but only you can edit it. When you get a payment, a portion goes to interest and another to principle. The formulas will do the work for you. However, I feel that there is a bigger issue. The math may seem like a good deal for the both of you, but I would be very hesitant to loan a family member money. What if he does not pay? What if he is late with a payment and goes on a vacation himself? What if his significant other resents the payment that you collect which precludes her from buying a new TV, etc... People come to hate/resent big corporations that they have to make payments. How much more so one that has a face....that comes over and eats? While this loan is outstanding holidays may never be the same. Is the loan a real need? Are you in a position to give them the money? You may want to consider the latter. Is there a reason he can't just borrow the money from the bank? |
If I invest in securities denominated in a foreign currency, should I hedge my currency risk? | As the other answer already states, whether you should or shouldn't currency-hedge your equity investments depends on a lot of factors. If you decide to do so, depending on your investment vehicles, there might be a more cost-efficient way than arranging a separate futures contract with a bank: If you are open to (or are already investing in) ETFs, there are currency-hedged versions of some popular ETFs. These are hedged against the currency risk for a specific currency; for example, if you are buying in (and expecting to sell for) USD, you would buy an ETF hedged to USD. Of course they have a higher expense ratio than non-hedged ETFs since the costs of the necessary contracts are included in the expenses. |
How to start investing for an immigrant? | For starting with zero knowledge you certainly did a great job on research as you hit on most of the important points with your question. It seems like you have already saved up around six months of expenses in savings so it is a great time to look into investing. The hardest part of your question is actually one of the most important details. Investing in a way that minimizes your taxes is generally more important, in the end, than what assets you actually invest in (as long as you invest even semi-reasonably). The problem is that the interaction between your home country's tax system and the U.S. tax system can be complex. It's probably (likely?) still worth maxing out your 401(k) (IRA, SEP, 529 accounts if you qualify) to avoid taxes, but like this question from an Indian investor it may be worth seeing an investment professional about this. If you do, see a fee-based professional preferably one familiar with your country. If tax-advantaged accounts are not a good deal for you or if you max them out, a discount broker is probably a good second option for someone willing to do a bit of research like you. With this money investing in broadly-diversified, low fee, index mutual funds or exchange traded funds is generally recommended. Among other benefits, diversified funds make sure that if any particular company fails you don't feel too much pain. The advantages of low fees are fairly obvious and one very good reason why so many people recommend Vanguard on this site. A common mix for someone your age is mostly stocks (local and international) and some bonds. Though with how you talk about risk you may prefer more bonds. Some people recommend spicing this up a bit with a small amount of real estate (REITs), sometimes even other assets. The right portfolio of the above can change a lot given the person. The above mentioned adviser and/or more research can help here. If, in the future, you start to believe you will go back to your home country soon that may throw much of this advice out the window and you should definitely reevaluate then. Also, if you are interested in the math/stats behind the above advice "A Random Walk Down Wall Street" is a light read and a good place to start. Investing makes for a very interesting and reasonably profitable math/stats problem. |
Borrowing money and then investing it — smart or nart? | The biggest concern is how you get $250,000 in unsecured credit. It's unlikely that you will be loaned that amount at a percentage lower than what you expect to earn. Unsecured credit lines are rarely lower than 10% and usually approach 20%. On top of that, for a bank to approve you for that credit line, you have to have a high credit score and an income to support the payments on that credit line. But lets suspend disbelief and assume that you can get the money you want on loan. You would then be expected to pay back that 10%, but investments don't go up uniformly. Some years they go up 15-20% and other years they go down 10%. What do you do if you have to sell some of your investments in a down year? That money is no longer invested, and you can't recover it with the following up year because you had to take too much out to cover the loan payments. You'll be out of money long before the loan is repaid because you can expect there will be bad years in the stock market that will eat away at your investment. There were a lot of people who took their money out of the market after the crash of 2008. If they had left their money in through 2009, they would have made all that money back, but if you have a loan to pay you have to pull money out in the bad years as well as the good years. Unless you have a lucky streak of all good years, you're doomed. |
Beginner questions about stock market | First, welcome to Money.SE. If you are interested in saving and investing, this is a great site to visit. Please take the tour and just start to read the questions you find interesting. 1 - even though this is hypothetical, it scales down to an average investor. If I own 1000 shares of the 1 billion, am I liable if the company goes under? No. Stocks don't work that way. If all I have is shares, not a short position, not options, I can only see my investment go to zero. 2 - Here, I'd ask that you edit your country in the tags. I can tell you that my newborn (who is soon turning 17) had a stock account in her name when she was a few months old. It's still a custodian account, meaning an adult has to manage it, and depending on the state within the US, the age that it's hers with no adult, is either 18 or 21. Your country may have similar regional rules. Also - each country has accounts specifically geared toward retirement, with different favorable rules regarding taxation. In the US, we have accounts that can be funded at any age, so long as there's earned income. My daughter started one of these accounts when she started baby sitting at age 12. She will have more in her account by the time she graduates college than the average retiree does. It's good for her, and awful for the general population that this is the case. |
International (ex-US) ETFs with low exposure to financial sector? | If you are looking for a European financials ETF to short, you could take a look at the iShares EURO STOXX Banks, which is traded on a a few German stock exchanges (Frankfurt etc.): iShares Euro Stoxx Banks Website You find its current holdings here: holdings. |
Buying my first car: why financing is cheaper than paying cash here and now? | The advice given at this site is to get approved for a loan from your bank or credit union before visiting the dealer. That way you have one data point in hand. You know that your bank will loan w dollars at x rate for y months with a monthly payment of Z. You know what level you have to negotiate to in order to get a better deal from the dealer. The dealership you have visited has said Excludes tax, tag, registration and dealer fees. Must finance through Southeast Toyota Finance with approved credit. The first part is true. Most ads you will see exclude tax, tag, registration. Those amounts are set by the state or local government, and will be added by all dealers after the final price has been negotiated. They will be exactly the same if you make a deal with the dealer across the street. The phrase Must finance through company x is done because they want to make sure the interest and fees for the deal stay in the family. My fear is that the loan will also not be a great deal. They may have a higher rate, or longer term, or hit you with many fee and penalties if you want to pay it off early. Many dealers want to nudge you into financing with them, but the unwillingness to negotiate on price may mean that there is a short term pressure on the dealership to do more deals through Toyota finance. Of course the risk for them is that potential buyers just take their business a few miles down the road to somebody else. If they won't budge from the cash price, you probably want to pick another dealer. If the spread between the two was smaller, it is possible that the loan from your bank at the cash price might still save more money compared to the dealer loan at their quoted price. We can't tell exactly because we don't know the interest rates of the two offers. A couple of notes regarding other dealers. If you are willing to drive a little farther when buying the vehicle, you can still go to the closer dealer for warranty work. If you don't need a new car, you can sometimes find a deal on a car that is only a year or two old at a dealership that sells other types of cars. They got the used car as a trade-in. |
What tax laws apply to Meetup group income? | In the United States tax law, a group of people who are neither an individual nor an incorporated entity is called "partnership". Here's the IRS page on partnerships. Income derived by such a "meetup.com" group is essentially a partnership income with the group members being the partners. However, as you can see from the questions in the comments, the situation can become significantly more complex if this partnership is not managed properly. |
Tax liability in US for LLC's owned by an Indian Citzen | The LLC will not be liable for anything, it is disregarded for tax purposes. If you're doing any work while in the US, or you (or your spouse) are a green card holder or a US citizen - then you (not the LLC) may be liable, may be required to file, pay, etc. Unless you're employing someone, or have more than one member in your LLC, you do not need an EIN. Re the bank - whatever you want. If you want you can open an account in an American bank. If you don't - don't. Who cares? |
Can you explain the mechanism of money inflation? | In simple terms, inflation is a result of too much money chasing too few goods, i.e. there is an imbalance between demand and supply. The demand exceeds the supply. With all other things being constant it leads to increase in price, i.e. inflation. |
How to represent “out of pocket” purchases in general ledger journal entry? | You're lending the money to your business by paying for it directly. The company accounts must reflect a credit (the amount you lend to it) and a debit (what it then puts that loan towards). It's fairly normal for a small(ish) owner-driven company to reflect a large loan-account for the owners. For example, if you have a room at home dedicated for the business it is impractical to pay rent directly via the company. The rental agreement is probably in your name, you pay the rent, and you reconcile it with the company later. You could even charge your company (taxable) interest on this loan. When you draw down the loan from the company you reverse this, debit your loan account and credit the company (paying off the debt). As far as tracking that expenditure, simply handle those third-party invoices in the normal way and file them for reference. |
Buy securities at another stock exchange | Yes, it does matter very much. There's a thing called fungible instruments. These are the instruments where it doesn't matter. E.g. most options I ever dealt with in the US are fungible no matter which US exchange you trade them on. A fungible instrument is an instrument where you buy 1 lot on exchange A, then sell 1 lot on exchange B, and as a result you have 0 lots. With another instrument, you can buy 1 lot on exchange A, sell 1 lot on exchange B, and even tough they are the exact same thing, you now own 1, and owe 1 - they don't cancel each other out. Other than that, in different countries there are obviously different laws and regulations. For a small at home trader who just gambles for fun and isn't interested in negative positions (sell what you don't have), there isn't much of a difference . I think that's what the other answers are saying. |
As a total beginner, how do I begin to understand finance & stocks? | Your questions seek answers to specifics, but I feel that you may need more general help. There are two things, I feel, that you need to learn about in the general category of personal finance. Your asking questions about investing, but it is not as important, IMHO, as how you manage your day-to-day operations. For example, you should first learn to budget. In personal finance often times "living on a budget" equates to poor, or low income. That is hardly the case. A budget is a plan on how to spend money. It should be refreshed each and every month and your income should equal your expenses. You might have in your budget a $1200 trip into the city to see a concert, hardly what a low income person should have in theirs. Secondly you need to be deliberate about debt management. For some, they feel that having a car payment and having student loans are a necessary part of life and argue that paying them off is foolish as you can earn more from investments. Others argue for zero debt. I fall in the later. Using and carrying a balance on high interest CCs and having high leases or car payments are just dumb. They are also easy to wander into unless you are deliberate. Third you need to prepare for emergencies. Engineers still get laid off and hurt where they are unable to work. They get sued. Having the proper insurance and sufficient reserves in the bank help prevent debt. Now you can start looking into investments. Start off slow and deliberate with investing. Put some in your company 401K or open some mutual funds on the side. You can read about them and talk with advisers, for free, at Fidelity and Vanguard. Read books from the library. Most of all don't get caught up in too much hype. Things like Forex, options, life insurance, gold/silver, are not investments. They are tools for sales people to make fat commissions off the ignorant. You are fortunate in that Engineers are very likely to retire wealthy. They are part of the second largest demographic of first generation rich. The first is small business owners. To start out I would read Millionaire Next Door and Stop Acting Rich. For a debt free approach to life, check out Financial Peace University (FPU) by Dave Ramsey (video course). His lesson on insurance is excellent. I am an engineer, and my wife a project manager we found FPU life changing and regretted not getting on board sooner. Along these lines we have had some turmoil, recently, that became little more than an inconvenience because we were prepared. |
Should I open a credit card when I turn 18 just to start a credit score? | I also feel it's important to NOT get a credit card. I'm in my mid 30's and have had credit cards since I was 20, as has everyone I know. Every single one of those people, with the exception of my dad, is currently carrying some amount of credit card debt - almost always in the thousands of dollars. Here is the essential problem with credit cards. Everyone sets out with good intentions, to use the credit card like a debit card, and pay charges off before interest accrues. However, almost no-one has the discipline to remember to do this, and a balance quickly builds up on the card. Also, it's extremely easy to prioritize other bill payments before credit card payments, resulting in a balance building up on the card. It's almost magical how quickly a balance will build up on a credit card. Ultimately, they are simply too convenient, too tempting for most human beings. The world, and especially the North American world, is in a massive debt crisis. It is very easy to borrow money these days, and our culture is at the point where "buy now pay later" is an accepted practice. Now that I have young children, I will be teaching them the golden rule of "don't buy something until you have cash to pay for it in full!" It sounds like an over simplification but this one rule will save you an incredible amount of financial grief over time. |
Is it better to buy this used car from Craigslist or from a dealership? | The 200K vehicle is likely the better deal. Get your own mechanic to check it out. If it doesn't have major issues, it will likely cost you less. Why? Because you've wisely included $6000 in expected maintenance. Yet it has the possibility of not needing more than $500 of maintenance during the 4 years you plan on owning it. It's a gamble, but you have the chance to save $5500 of that estimated cost with that vehicle. Note that you will also need to factor in tires for either vehicle, unless that is included in your maintenance estimate. |
Is it really possible to get rich in only a few years by investing? | Short answer: Not likely. Long answer: As a rule of thumb, over the long run if you are generating 20% compounded returns on your money consistently, you are doing very good. Since in the average case your 10k would compound to $61.4k YoY, you are very unlikely to be rich in a decade starting with 10k. |
What does quantitative easing 2 mean for my bank account? | QE2 will mean that there are about $500 billion dollars in existence which weren't there before. These dollars will all be competing with the existing dollars for real goods and services, so each dollar will be worth a little less, and prices will rise a little. This is inflation. You can probably expect 1.5%-2% annual inflation for the US dollar over the next several years (the market certainly does in the aggregate, anyway). This is in terms of US-based goods and services. QE2 will also reduce the amount of other currencies you can get for the same dollar amount. The extent to which this will occur is less clear, in part because other currencies are also considering quantitative easing. Your long-term savings should probably not be in cash anyway, because of the low returns; this will probably affect you far more than the impact of quantitative easing. As for your savings which do remain in cash, what you should do with them depends on how you plan to dispose of them. The value of a currency is usually pretty stable in terms of the local economy's output of goods and services - it's the value in international trade which tends to fluctuate wildly. If you keep your savings in the same currency you plan to spend them in, they should be able to maintain their value decently well in the intermediate term. |
Is selling put options an advisable strategy for a retiree to generate stable income? | There is only one way to create "stable" income using options: write COVERED calls. This means you must own some stocks which offer an active and liquid option market (FB would be good; T would be useless.) In other words, you need to own some "unstable" stocks, tickers that have sometimes scary volatility, and of course these are not great stocks for a retiree. But, let's assume you own 500 shares of FB, which you bought in June of 2015 for $75. Today, you could have been paid $2,375 for selling five Mar18'16 $105 Calls. Your reasoning is: So, the rule is: ONLY SELL COVERED CALLS AT A PRICE YOU WOULD BE HAPPY TO ACCEPT. If you follow the rule, you'll generate more-or-less "stable" income. Do not venture off this narrow path into the rest of Option Land. There be dragons. You can select strike prices that are far out of the money to minimize the chance of being exercised (and sweeten the deal by collecting an even higher price if the stock flies that high). If you are thinking about doing this, study the subject thoroughly until you know the terminology backwards and forwards. (Don't worry about "the greeks" since market makers manipulate implied volatility so wildly that it overrides everything else.) |
How to sell a stock in a crashing market? | Your question contains a faulty assumption: During crashes and corrections the amount of sellers is of course higher than the amount of buyers, making it difficult to sell stocks. This simply isn't true. Every trade has two sides; thus, by definition, for every seller there is buyer and vice versa. Even if we broaden the definition of "buyers" and "sellers" to mean "people willing to buy (or sell) at some price", the assumption still isn't true. When a stock is falling it is generally not because potential buyers are exiting the market; it is because they are revising the prices they are willing to buy at downward. For example, say there are a bunch of orders to buy Frobnitz Consolidated (DUMB) at $5. Suppose DUMB announces a downward revision to its earnings guidance. Those people might not be willing to buy at $50 anymore, so they'll probably cancel their $50 buy orders. However, just because DUMB isn't worth as much as they thought it was, that doesn't mean it's completely worthless. So, those prospective buyers will likely enter new orders at some lower value, say, $45. With that, the value of DUMB has just dropped by $5, a 10% correction. However, there are still plenty of buyers, and you can still sell your DUMB holdings, if you're willing to take $45 for them. In other words, the value of a security is not determined by the relative numbers of buyers and sellers. It is determined by the prices those buyers and sellers are willing to pay to buy or accept to sell. Except for cases of massive IT disruptions, such as we saw in the "flash crash", there is always somebody willing to buy or sell at some price. |
If a trendline or pattern breaks due to some bad news but it returns back what to do? | There is a technique called the Elliott wave which explains these 'shocks'. The reversal directions you are questioning are part of the pattern, it is known as corrections. The Elliott wave is an indicator based on psychology of investors. Think about it this way, if you see a huge up trend what are you most likely to do, sell and make profit or continue, this is why there is a shock before it continues. Many people will sell to be safe, especially after hearing the bad news they won't risk it. By learning the Elliott wave you'll be able to make an educated decision on whether or not to stay or leave. Here are websites on the Elliott wave: http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:elliott_wave_theory http://www.swing-trade-stocks.com/elliott-wave.html The Elliott wave is helpful in any time frame and works well with momentum. Hope this helps. |
Why does capital gains tax apply to long term stock holdings? | It's a matter of social policy. The government wants people to make long term investments because that would lead to other long-term government goals: employment, manufacturing, economical growth in general. While speculative investments and day-trading are not in any way discouraged, investments that contribute to the economy as a whole and not just the investor are encouraged by the lower tax rates on the profits. While some people consider it to be a "fig leaf", I consider these people to be populists and dishonest. Claiming that long term social goals are somehow bad is hypocrisy. Claiming that short-term trading contributes to the economy as a whole is a plain lie. |
I spend too much money. How can I get on the path to a frugal lifestyle? | My father imparted this advice to me when I was a teenager, and it hasn't failed me yet. > Pay yourself first What this means is that the first "bill" you pay should always be your savings. Preferably in a way that automatically comes out of your paycheck or account without requiring you to take an active step to make it happen. I save a ton of money, but I am no more disciplined than anyone else. I just realized that over the years of progressing in my career that I gradually got higher and higher salaries, yet never had a substantial increase in the money I had leftover in my bank at the end of the month despite the fact that I make about 8x the money I used to live reasonably comfortably on. Therein is the point, we spend whatever money we see, so you almost have to hide it from yourself. First, participate to the fullest in your company's 401k if they offer it. After a while you will adjust naturally to the net take home pay and won't miss the savings you are accumulating. Absent that, or in addition to that, set up a separate bank or investment account and arrange an automatic transfer from your checking account every month. Then set up automatic investing in CD's or some other less-liquid-than-cash investment so you it is just enough hassle to get at the money that you won't do it on a whim. It sounds too simple, but it works. |
Changing Bank Account Number regularly to reduce fraud | We change it every so often to reduce fraud. If you're absolutely sure you didn't just send money to a scammer impersonating a landlord, this has nothing to do with fraud-- they're playing a game with you. By changing the account number frequently, it makes it more likely you make a mistake in entering the payment account. When they come back to you a few days past due saying "we never received your rent," you'll eventually realize it got sent to the wrong account. Now you owe them late fees, and there's really nothing you can do about it-- you did not in fact pay them on time; you sent it to the wrong account! It's an easy way for them to collect an additional few thousand dollars a year. Anytime a small business or landlord says they have to do something "weird" to reduce fraud, chances are it's a pretense to you getting hosed in some way. |
Multiple accounts stagnant after quitting job. | What is my best bet with the 401K? I know very little about retirement plans and don't plan to ever touch this money until I retire but could this money be of better use somewhere else? If you don't know your options, I would suggest reading some material on it that might be a little more extensive than an answer here (for instance, http://www.getrichslowly.org/blog/ has some good and free information about a myriad of financial topics). With retirement accounts you can roll it over or leave it in the current account. Things to look at would be costs of the accounts, options you have in each account, and the flexibility of moving it if you need to. Depending on what type of retirement account it is (Roth 401K, Traditional 401K, etc, you may have some advantages with moving it to another type). The student loans.... pay them off in one shot? I have the extra money and it would not be a hardship to do so unless that money can be best used somewhere else? Unless I was making more money in a savings/investing/business opportunity, I would pay off the student loans in a lump sum. The reason is basic opportunity cost (economics) - if a better opportunity isn't on the horizon with your money, kill the interest you're paying because it's money you're losing every month. With the money just sitting in the bank I get a little sick feeling thinking that I can be doing something better with that. Outside of general savings you could look at investing in stocks, ETFs, mutual funds, currencies, lending club loans (vary by state), or something similar. Or you could try to start a business or invest in a start up directly (though, depending on the start up, they may not accept small investors). Otherwise, if you don't have a specific idea at this time, it's best to have money in savings while you ponder where else it would serve you. Keep in mind, having cash on hand, even if it's not earning anything, can bail you out in emergencies or open the door if an opportunity arises. So, you're really not "losing" anything by having it in cash if you're patiently waiting on opportunities. |
How many days does Bank of America need to clear a bill pay check | We have a local bank that changed to a bill pay service. The money is held as "processing" when the check is supposed to be cut and shows as cleared on the date the check is supposed to be received. Because our business checking is with the same bank, we discovered recently that the although the check shows cleared from our account, the recipient has not received the paper check yet - and may not for 2-3 days. We discovered this because the payroll checks we write this way (to ourselves) never arrive on the due date but clear the business account. It appears to be a new way for banks to ride the "float" and draw interest on the money. It happens with every check processed through the bill pay system and not with electronic transfers. |
Can rent be added to your salary when applying for a mortgage? | The decision as to what counts as income is up to the bank. You'll need to ask them whether or not rental income can be included in the total. I can offer some anecdotal evidence: when I applied for a mortgage to buy my home, I already had a rental property with a buy-to-let mortgage on it. Initially the bank regarded that property as a liability, not an asset, because it was mortgaged! However, once I was able to show that there was a good history of receiving enough rent, they chose to ignore the property altogether -- i.e. it wasn't regarded as a liability, but it wasn't regarded as a source of income either. More generally, as AakashM says, residential mortgages are computed based on affordability, which is more than just a multiple of your salary. To answer your specific questions: Covered above; it's up to the bank. If you're married, and you don't have a written tenancy agreement, and you're not declaring the "rent" on your tax return, then it seems unlikely that this would be regarded as income at all. Conversely, if your partner is earning, why not put their name on the mortgage application too? Buy-to-let mortgages are treated differently. While it used to be the case that they were assessed on rental income only, nowadays lenders may ask for proof of the landlord's income from other sources. Note that a BTL cannot be used for a property you intend to live in, and a residential mortgage cannot be used for a property you intend to let to tenants -- at least, not without the bank's permission. |
What happens to my stocks when broker goes bankrupt? | If you are using a US broker, you are protected by SIPC up to $500,000. SIPC also oversees the liquidation of the broker itself, either by appointing a trustee, or by directly contacting clients. If they are able to transfer accounts to a healthy broker before bankruptcy, they will do so, but if not, you will need to file a claim with them. |
How to deposit a cheque issued to an associate in my business into my business account? | Have the check reissued to the proper payee. |
What U.S. banks offer two-factor authentication (such as password & token) for online banking? | Some credit unions also offer them and support Business banking as well. First Tech Credit Union is a great example. They also have the most security-oriented banking website I've seen to date. https://www.firsttechfed.com/ As a side note I've found that Credit Unions are a MUCH better deal for personal and business banking. |
Should I stockpile nickels? | The question I think is not: "What is a certain material worth in a coin" but "What is a certain material worth in a coin and how much does it cost to get it out of there". Just because something contains a certain element doesn't mean that you can get to it cheaply. Also as George Marian said: I don't think that it is legal to melt coins. So if the time comes you would first have to find a company willing to process the coins etc. Also you should not only compare what it is worth now and at a later time but also what that money would be worth if you put it into a high yielding savings account or something like that. |
I'm 23 and was given $50k. What should I do? | First of all, I am sorry for your loss. At this time, worrying about money is probably the least of your concerns. It might be tempting to try to pay off all your debts at once, and while that would be satisfying, it would be a poor investment of your inheritance. When you have debt, you have to think about how much that debt is costing you to keep open. Since you have 0%APR on your student loan, it does not make sense to pay any more than the minimum payments. You may want to look into getting a personal loan to pay off your other personal debts. The interest rates for a loan will probably be much less than what you are paying currently. This will allow you to put a payment plan together that is affordable. You can also use your inheritance as collateral for the loan. Getting a loan will most likely give you a better credit rating as well. You may also be tempted to get a brand new sports car, but that would also not be a good idea at all. You should shop for a vehicle based on your current income, and not your savings. I believe you can get the same rates for an auto loan for a car up to 3 years old as a brand new car. It would be worth your while to shop for a quality used car from a reputable dealer. If it is a certified used car, you can usually carry the rest of the new car warranty. The biggest return on investment you have now is your employer sponsored 401(k) account. Find out how long it takes for you to become fully vested. Being vested means that you can leave your job and keep all of your employer contributions. If possible, max out, or at least contribute as much as you can afford to that fund to get employee matching. You should also stick with your job until you become fully vested. The money you have in retirement accounts does you no good when you are young. There is a significant penalty for early withdrawal, and that age is currently 59 1/2. Doing the math, it would be around 2052 when you would be able to have access to that money. You should hold onto a certain amount of your money and keep it in a higher interest rate savings account, or a money market account. You say that your living situation will change in the next year as well. Take full advantage of living as cheaply as you can. Don't make any unnecessary purchases, try to brown bag it to lunch instead of eating out, etc. Save as much as you can and put it into a savings account. You can use that money to put a down payment on a house, or for the security and first month's rent. Try not to spend any money from your savings, and try to support yourself as best as you can from your income. Make a budget for yourself and figure out how much you can spend every month. Don't factor in your savings into it. Your savings should be treated as an emergency fund. Since you have just completed school, and this is your first big job out of college, your income will most likely improve with time. It might make sense to job hop a few times to find the right position. You are much more likely to get a higher salary by changing jobs and employers than you are staying in the same one for your entire career. This generally is true, even if you are promoted at the by the same employer. If you do leave your current job, you would lose what your employer contributed if you are not vested. Even if that happened, you would still keep the portion that you contributed. |
I'm thinking of getting a new car … why shouldn't I LEASE one? | It's a very simple equation. If we forget about the stress and limitations that come with the so-called "lease", and make the following assumptions: Then after 3 years of using this new car: I will never understand why people still "lease" a car. Even for very low income people who have to have a car, financing a per-owned decent car would do, but it's just "show off" seduction and lure that either unknowing minded or idiot teenagers fall for. |
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