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What is a good 5-year plan for a college student with $15k in the bank? | I just checked TCF's rates, and they only pay a miserly rate of 0.25%. Banks like Capital One or Sallie Mae pay about 1.15%, which is more than 4x, though still nothing great. Do you expect to use these funds in 5 years (e.g. for down payment on a house), or could you contribute them to an IRA? |
In Canada, how much money can I gift a friend or family member without them being taxed on it? | If the person gifting the property owed any debt to Canada Revenue Agency on the date of gift, you may getting a nice letter from Canada Revenue Agency advising you to settle the donor's tax liability with the property gifted. |
How and why does the exchange rate of a currency change almost everyday? | It's simply supply and demand. First, demand: If you're an importer trying to buy from overseas, you'll need foreign currency, maybe Euros. Or if you want to make a trip to Europe you'll need to buy Euros. Or if you're a speculator and think the USD will fall in value, you'll probably buy Euros. Unless there's someone willing to sell you Euros for dollars, you can't get any. There are millions of people trying to exchange currency all over the world. If more want to buy USD, than that demand will positively influence the price of the USD (as measured in Euros). If more people want to buy Euros, well, vice versa. There are so many of these transactions globally, and the number of people and the nature of these transactions change so continuously, that the prices (exchange rates) for these currencies fluctuate continuously and smoothly. Demand is also impacted by what people want to buy and how much they want to buy it. If people generally want to invest their savings in stocks instead of dollars, i.e., if lots of people are attempting to buy stocks (by exchanging their dollars for stock), then the demand for the dollar is lower and the demand for stocks is higher. When the stock market crashes, you'll often see a spike in the exchange rate for the dollar, because people are trying to exchange stocks for dollars (this represents a lot of demand for dollars). Then there's "Supply:" It may seem like there are a fixed number of bills out there, or that supply only changes when Bernanke prints money, but there's actually a lot more to it than that. If you're coming from Europe and want to buy some USD from the bank, well, how much USD does the bank "have" and what does it mean for them to have money? The bank gets money from depositors, or from lenders. If one person puts money in a deposit account, and then the bank borrows that money from the account and lends it to a home buyer in the form of a mortgage, the same dollar is being used by two people. The home buyer might use that money to hire a carpenter, and the carpenter might put the dollar back into a bank account, and the same dollar might get lent out again. In economics this is called the "multiplier effect." The full supply of money being used ends up becoming harder to calculate with this kind of debt and re-lending. Since money is something used and needed for conducting of transactions, the number of transactions being conducted (sometimes on credit) affects the "supply" of money. Demand and supply blur a bit when you consider people who hoard cash. If I fear the stock market, I might keep all my money in dollars. This takes cash away from companies who could invest it, takes the cash out of the pool of money being used for transactions, and leaves it waiting under my mattress. You could think of my hoarding as a type of demand for currency, or you could think of it as a reduction in the supply of currency available to conduct transactions. The full picture can be a bit more complicated, if you look at every way currencies are used globally, with swaps and various exchange contracts and futures, but this gives the basic story of where prices come from, that they are not set by some price fixer but are driven by market forces. The bank just facilitates transactions. If the last price (exchange rate) is 1.2 Dollars per Euro, and the bank gets more requests to buy USD for Euros than Euros for USD, it adjusts the rate downwards until the buying pressure is even. If the USD gets more expensive, at some point fewer people will want to buy it (or want to buy products from the US that cost USD). The bank maintains a spread (like buy for 1.19 and sell for 1.21) so it can take a profit. You should think of currency like any other commodity, and consider purchases for currency as a form of barter. The value of currency is merely a convention, but it works. The currency is needed in transactions, so it maintains value in this global market of bartering goods/services and other currencies. As supply and demand for this and other commodities/goods/services fluctuate, so does the quantity of any particular currency necessary to conduct any of these transactions. A official "basket of goods" and the price of those goods is used to determine consumer price indexes / inflation etc. The official price of this particular basket of goods is not a fundamental driver of exchange rates on a day to day basis. |
Theoretically, if I bought more than 50% of a company's stocks, will I own the company? | It is also worth noting that one of the character defining features of a publicly traded company is that the management that is responsible for the day to day operations of the stands independent of those who have ownership. Shareholder of a public company typically don't have influence over the day to day running of the company. |
How do I determine ownership split on a franchise model? | There is no right and wrong answer to this question. What you and your business partner perceive as Fair is the best way to split the ownership of the new venture. First, regarding the two issues you have raised: Capital Contributions: The fact that you are contributing 90% of initial capital does not necessarily translate to 90% of equity. In my opinion, what is fair is that you transform your contributions into a loan for the company. The securitization of your contribution into a loan will make it easier to calculate your fair contribution and also compensate you for your risk by choosing whatever combination of interest income and equity you see suitable. For example, you might decide to split the company in half and consider your contributions a loan with 20%, 50% or 200% annual interest. Salary: It is common that co-founders of start-ups forgo their wages at the start of the company. I do not recommend that this forgone salary be compensated through equity because it is impossible to determine the suitable amount of equity to be paid. I suggest the translation of forgone wages into loans or preferred stocks in similar fashion to capital contribution Also, consider the following in deciding the best way to allocate equity between both of you and your partner Whose idea was it? Talk with you business partner how both of you value the inventor of the concept. In general, execution is more important but talking about how you both feel about it is good. Full-time vs. part-time: A person who works full time at the new venture should have more equity than the partner who is only a part-time helper. Control: It is important to talk about control and decision making of the company. You can separate the control and decision making of important decisions from ownership. You can also check the following article about this topic at http://www.forbes.com/sites/dailymuse/2012/04/05/what-every-founder-needs-to-know-about-equity/#726842f3668a |
How exactly does dealing in stock make me money? | If you have money and may need to access it at any time, you should put it in a savings account. It won't return much interest, but it will return some and it is easily accessible. If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds. These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts. You should not buy individual stocks unless you have enough money to buy a lot of them in different industries. Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred. There's also considerable research effort required to verify that the stocks are good buys. For most people, this is too much work. For most people, broad-based index funds are better purchases. You don't have as much upside, but you also are much less likely to find yourself holding worthless paper. If you do buy stocks, look for ones where you know something about them. For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing. But do your research, so that you don't get caught buying after everyone else has already overbid the price. The time to buy is right before everyone else notices how great they are, not after. Some people benefit from joining investment clubs with others with similar incomes and goals. That way you can share some of the research duties. Also, you can get other opinions before buying, which can restrain risky impulse buys. Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors. Only make the move into individual stocks if you're willing to be serious about it. There's considerable work involved. And don't forget diversification. You want to have stocks that benefit regardless of what the overall economy does. Some stocks should benefit from lower oil prices while others benefit from higher prices. You want to have both types so as not to be caught flat-footed when prices move. There are much more experienced people trying to guess market directions. If your strategy relies on outperforming them, it has a high chance of failure. Index-based mutual funds allow you to share the diversification burden with others. Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be. Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions. I.e. stocks tend to be good when bonds are weak and vice versa. |
Using simple moving average in Equity | One of the most obvious uses of SMAs is the detection of a trend reversal. A trend reversal happens when a short term SMA crosses over a longer term SMA. For example, if a 20 day moving average was, previously, above a 200 day moving average, but has crossed over the 200 day and is currently below the 200 day then the security has performed a 'death cross' and the trend is for lower and lower prices. Stockcharts.com has excellent 'chart school' for the beginning chart user. They also provide excellent charts. Here is a link: http://stockcharts.com/school/doku.php?id=chart_school I like to use a 20 day SMA, a 200 day SMA, and a 21 day EMA. |
Why do 10 year Treasury bond yields affect mortgage interest rates? | yield on a Treasury bond increases This primarily happens when the government increases interest rates or there is too much money floating around and the government wants to suck out money from the economy, this is the first step not the other way around. The most recent case was Fed buying up bonds and hence releasing money in to the economy so companies and people start investing to push the economy on the growth path. Banks normally base their interest rates on the Treasury bonds, which they use as a reference rate because of the probability of 0 default. As mortgage is a long term investment, so they follow the long duration bonds issued by the Fed. They than put a premium on the money lent out for taking that extra risk. So when the governments are trying to suck out money, there is a dearth of free flowing money and hence you pay more premium to borrow because supply is less demand is more, demand will eventually decrease but not in the short run. Why do banks increase the rates they loan money at when people sell bonds? Not people per se, but primarily the central bank in a country i.e. Fed in US. |
Wage earners of age ≥ 60 with dependents: What Life Insurance, if any, should they buy? | The problem above is actually a pretty good list of the concerns around life insurance. While there is no correct answer to the question as posed, this will vary among different WSCs, there is a simpler way to think about insurance in general that may make finding what is right answer for you easier. Buying life insurance, like almost all insurance, is on average a money losing purchase. This is simply because the companies selling wouldn't offer it if they couldn't expect to make money on it. Think about buying insurance (a warranty) on a new cell phone, maybe if you are particularly prone to damaging cell phones it can be in your favor, but for most of the people that buy it will lose money on average. People, of course, still buy insurance anyway to protect themselves from unlikely but very bad consequences. The big reason to make this trade off is if the loss will have big lasting consequences. To stay with our cell phone example having to replace a cell phone, at least for me, would be annoying but not a catastrophic event. For myself, the protection is not worth the warranty cost, but that is not true for everyone. Life insurance is a pretty extreme case of this, but I find the best question to ask is "if you (you and your spouse) were to die will your dependents lives become so much worse that you really dislike the idea of not being insured?" For some working seniors, they already have enough saved to bridge their kids/spouse to adulthood/old-age that insurance makes no sense. For some, their children/husband/wife would be destitute and insurance is an obvious choice and an easy price to pay even if it is very high. The example you suggest seems on the border and good questions to ask are: Thinking about those questions may help you understand if the protection offers is worth the cost. |
Does material nonpublic information cover knowledge of unannounced products? | There's the question whether knowledge about unannounced products is actually "material" if everyone (the public) knows that something new will be released. If you work at Apple on the development of the iPhone 8, that's not material. If you worked at Apple and you knew that they stopped developing new phones, that would be very, very, very material information. The important thing as far as the stock market is concerned is what sales look like, and that's not something you know as a product developer. |
What is the meaning of “short selling” or “going short” a stock? | Rich's answer captures the basic essence of short selling with example. I'd like to add these additional points: You typically need a specially-privileged brokerage account to perform short selling. If you didn't request short selling when you opened your account, odds are good you don't have it, and that's good because it's not something most people should ever consider doing. Short selling is an advanced trading strategy. Be sure you truly grok selling short before doing it. Consider that when buying stock (a.k.a. going long or taking a long position, in contrast to short) then your potential loss as a buyer is limited (i.e. stock goes to zero) and your potential gain unlimited (stock keeps going up, if you're lucky!) Whereas, with short selling, it's reversed: Your loss can be unlimited (stock keeps going up, if you're unlucky!) and your potential gain is limited (i.e. stock goes to zero.) The proceeds you receive from a short sale – and then some – need to stay in your account to offset the short position. Brokers require this. Typically, margin equivalent to 150% the market value of the shares sold short must be maintained in the account while the short position is open. The owner of the borrowed shares is still expecting his dividends, if any. You are responsible for covering the cost of those dividends out of your own pocket. To close or cover your short position, you initiate a buy to cover. This is simply a buy order with the intention that it will close out your matching short position. You may be forced to cover your short position before you want to and when it is to your disadvantage! Even if you have sufficient margin available to cover your short, there are cases when lenders need their shares back. If too many short sellers are forced to close out positions at the same time, they push up demand for the stock, increasing price and deepening their losses. When this happens, it's called a short squeeze. In the eyes of the public who mostly go long buying stock, short sellers are often reviled. However, some people and many short sellers believe they are providing balance to the market and preventing it sometimes from getting ahead of itself. [Disambiguation: A short sale in the stock market is not related to the real estate concept of a short sale, which is when a property owner sells his property for less than he owes the bank.] Additional references: |
I earn $75K, have $30K in savings, no debt, rent from my parents who are losing their home. Should I buy a home now or save? | Plus, there's the feeling my parents want me to have a house in case we can't save the one we (my mom and brothers) all live in. First, you should not be forced to buy a home because your parents are telling you to. You should have your own life. Period. That said, while you are doing well from a salary perspective, your savings are somewhat borderline for a purchase if you ask me. Meaning your savings would essentially be the full downpayment & then your whole paycheck basically becomes payments on the mortgage. Not a good situation to be in. My advice would be that if you can invest in something smaller—like a small apartment for yourself—that is what you should purchase. That would allow you to invest in something but not be completely financially drained by the prospect. And then in a few years, you can sell that apartment & move onto something else. Perhaps a house at that stage? But right now, a full home purchase would be a fairly massive risk. |
Do credit checks affect credit scores? | I've seen my score dip a little bit after every hard pull. (Admittedly, a fako score.) You apply for credit or for a credit increase and your score is going to dip. Any check that is not intended to grant credit (either an existing creditor rechecking, or when you check your own credit) has no effect on your score. Likewise, a check done to screen for a solicitation have no effect as you are not trying to borrow. (Taking them up on the offer will normally cause a hit, though.) |
As an independent contractor, should I always charge the client the GST/HST? | Hourly rate is not the determinant. You could be selling widgets, not hours. Rather, there's a $30,000 annual revenue threshold for GST/HST. If your business's annual revenues fall below that amount, you don't need to register for GST/HST and in such case you don't charge your clients the tax. You could still choose to register for GST/HST if your revenues are below the threshold, in which case you must charge your clients the tax. Some businesses voluntarily enroll for GST/HST, even when below the threshold, so they can claim input tax credits. If your annual revenues exceed $30,000, you must register for GST/HST and you must charge your clients the tax. FWIW, certain kinds of supplies are exempt, but the kind of services you'd be offering as an independent contractor in Canada aren't likely to be. There's more to the GST/HST than this, so be sure to talk to a tax accountant. References: |
How to prevent myself from buying things I don't want | Since these are specific items that you don't really want to buy, it might help to figure out what you could spend that money on that you DO really want. It sounds like right now you are thinking "Wow, I can get this widget (that I don't really want) for so cheap with this discount code!" Try changing your thinking to something along the lines of "This widget is pretty cool, but I could buy this doodad that I really want instead" or "This widget is nice, but if I don't buy it, I could have a latte every other day this month." I've found this to be a very effective technique-- and I often don't end up buying the doodads or lattes either. It's just a good way to put the cost of your purchase in perspective. The other thing I do when I want something is to write it down and revisit it a week or so later. If I still want it and I still have the budget for it (and especially if I've skipped other purchases to save up for it), then I buy it. That advice doesn't sound like it will work for you though, since it sounds like you've wanted to buy these things for a long time. So... are you REALLY sure you don't want them, or do you just not want to want them? |
Most important skills needed to select profitable stocks | Coolness - It's not only a matter of staying calm when being up or down. You must keep yourself from chasing a stock that appears to be running away. Or from betting all your money that something(like say a crash) will happen tomorrow because that would be great for you. Use your head not your heart. Empathy - You need to understand what other speculators, investors, institutions and algorithms are going to do when there is a new development or technical signal. And why. For publicly traded corporations, fundamentals and technical indicators only have the value that people(and their algorithms) choose to assign to them at that particular moment. And every stock has a different population trading it. There is no rule of thumb. Patience - To trade successfully, you must avoid trading at all costs. Heh. If you can't find any good trade to do, don't open positions in order to meet your targets, buy a new smartphone, or to fight boredom. Diligence - If your strategy relies on tight stops, don't make exceptions. If your strategy relies on position sizing, don't close when you are a few points down. Luck - In the end almost every trade can turn against you very badly. You must prepare for the worst and hope for the best. You can't buy luck, or get luckier, but you can attempt to stack probabilities: diversify, buy options to insure your positions, reduce holding time, avoid known volatility events, etc. |
When can you use existing real estate as collateral to buy more? | @victor has the most descriptive and basic idea on how this is done. The only thing I would add is that one benefit to real estate is that you can control how much the property is worth. By increasing rents and making the property one of the best in the neighborhood, you increase the value. As for the comment that this is the type of investing that caused the 1929 stock market crash, there are many other aspects that are overlooked. Taking equity out of real estate has been happening long before and after the depression. People do it all the time by taking out home equity loans, just not everyone uses it to purchase another investment. |
The difference between Islamic Banks and Western Banks | I'm not sure of the theological basis against usury in sharia law. IIRC, sharia forbids excess compensation, and the modern interpretation of this includes interest. Rules about banking are common in religious faiths. The Catholic church viewed interest as the "selling of time", and since time is a force controlled by god, charging interest was a heretical practice. For private transactions, modern Islamic banking is a relatively new phenomenon that emerged in the postwar period. I don't think this method of banking is a "house of cards", it's just different. Some US states, like California, also subject lenders to higher levels of risk. (ie. borrowers can walk) |
Where or how can I model historical market purchases | This site should help you to accomplish what you are looking for: https://www.quantopian.com |
Why is stock dilution legal? | Alot of these answers have focused on the dilution aspect, but from a purely legal aspect, there are usually corporate bylaws that spell out what kind of vote and percentage of votes is needed to take this type of action. If all other holders of stock voted to do this, so 90% for, and you didn't, so 10% against, it's still legal if that vote meets the threshold for taking the action. As an example of this, I known of a startup where employees got $0/share for their vested shares when the company was sold because the voting stock holders agreed to it. Effectively the purchase amount was just enough to cover debts and preferred stock. |
How to check the paypal's current exchange rate? | The Paypal 'classic' site option has now been removed and you will not know what you will be charged UNTIL YOU COMMIT TO BUY. Paypal told me today ( brexit day 24th ) that their site is NOT connected to the Ebay site so when Ebay tells me '$77.00 approximately £52.43' for an item I would in fact pay £59.62. You will Not be aware of this UNTIL you commit to by. Paypal informs me there are no plans to restore the 'classic' option Paypal site. |
What should I do with the stock from my Employee Stock Purchase Plan? | Since you work there, you may have some home bias. You should treat that as any other stock. I sell my ESPP stocks periodically to reduce the over allocation of my portfolio while I keep my ESOP for longer periods. |
Query regarding international transaction between governments | Buyer A didn't send money to the US government, Buyer A sent money to Seller B, a US resident. I think the most common way to facilitate a transaction like this is a regular old international wire transfer. Buyer A in India goes to their bank to exchange X INR to $1mm USD. $1mm USD is then wire transferred to Seller B's bank account. The USD was sold to Buyer A, either by funds held by Buyer A's bank, or foreign exchange markets, or possibly the US government. Seller B may owe taxes on the gain derived from the sale of this thing to Buyer A, but that taxation would arise regardless of who the buyer was. Buyer A may owe an import tax in India upon importing whatever they bought. I don't think it's common to tax imported money in this sort of transactional setting though. |
Does receiving a 1099-MISC require one to file a tax return even if he normally would not be required to file? | Does he need to file a tax return in this situation? Will the IRS be concerned that he did not file even if he received a 1099? No. However, if you don't file the IRS may come back asking why, or "make up" a return for you assuming that the whole amount on the 1099-MISC is your net earnings. So in the end, I suspect you'll end up filing even though you don't have to, just to prove that you don't have to. Bottom line - if you have 1099 income (or any other income reported to the IRS that brings you over the filing threshold), file a return. |
Do I have to pay tax on money I earn as a tutor? | You would be required to report it as self-employment income and pay tax accordingly. It's up to you to keep proper records (like a receipt book, for example), especially when it comes to cash. If you can't prove exactly how much you earned and the government decides to guess the amount for you then you won't like the outcome! |
Purpose of having good credit when you are well-off? | there are several reasons you might want good credit even if you could afford to pay for all your expenses in cash. having pointed out all the above reasons to have good credit, it is probably worth noting that many people with good credit choose to not borrow simply because they are more comfortable with the risks of not borrowing (e.g. inflation risk), than they are with the risks of borrowing (e.g. investment volatility). |
What are the financial advantages of living in Switzerland? | In addition to what George said, there are other things that probably benefit Switzerland: |
Can one use dollar cost averaging to make money with something highly volatile? | Dollar cost averaging is beneficial if you don't have the money to make large investments but are able to add to your holding over time. If you can buy the same monetary amount at regular intervals over time, your average cost per share will be lower than the stock's average value over that time. This won't necessarily get you the best price, but it will get you, on the whole, a good price and will enable you to increase your holdings over time. If you're doing frequent trading on a highly volatile stock, you don't want to use this method. A better strategy is to buy the dips: Know the range, and place limit orders toward the bottom of the range. Then place limit orders to sell toward the high end of the range. If you do it right, you might be able to build up enough money to buy and sell increasing numbers of shares over time. But like any frequent trader, you'll have to deal with transaction fees; you'll need to be sure the fees don't eat all your profit. |
Capital Gains Tax - Does this apply only to the actual “gains” or to the entire amount of my sale? | Assuming you bought the stocks with after-tax money, you only pay tax on the difference. Had you bought he shares in a pretax retirement account, such as an IRA or 401(k), the taxation waits until you withdraw, at which point, it's all taxed as ordinary income. |
Will a credit card issuer cancel an account if it never incurs interest? | While technically true, a card issuer can cancel your card for almost any reason they want, it's highly unlikely they'll cancel it because you pay your bills! There are many, many people out there that pay their bills in full every month without ever paying a cent in credit card interest. I wouldn't ever purposefully incur any interest on a credit card. Related anecdote: I used to have a credit card that I only used for gas purchases because they gave 5% off for fuel. The issuer eventually discontinued the program (I assume because people like me took advantage of it.) So while they didn't cancel my card, the bonus eventually went away. I miss that card. My conclusion: if you can take advantage of promotional rates, by all means, go for it. You don't owe them any favors. Enjoy it as long as it lasts. |
As an employer, how do I start a 401k or traditional IRA plan? | OK, so first of all, employers don't set up IRAs. IRA stands for Individual Retirement Account. You can set up a personal IRA for yourself, but not for employees. If that is what you're after, then just set one up for yourself - no special rules there for self employment. As far as setting up a 401(k), I'd suggest checking with benefits management companies. If you're small, you probably don't have an HR department, so managing a 401(k) yourself would likely be overly burdensome. Outsourcing this to a company which handles HR for you (maybe running payroll, etc. also), would be the best option. Barring that, I'd try calling a large financial institution (Schwab, Fidelity, etc.) for clear guidance. |
Should I invest or repay my debts? | Like azam pointed out, fundamentally you need to decide if the money invested elsewhere will grow faster than the Interest you are paying on the loan. In India, the safe returns from Fixed Deposits is around 8-9% currently. Factoring taxes, the real rate of return would be around 6-7%. This is less than what you are paying towards interest. The PPF gives around 9% with Tax break [if there are no other options] and tax free interest, the real return can be as high as 12-14%. There is a limit on how much you can invest in PPF. However this looks higher than your average interest. The stock markets in long term [7 Years] averages give you around 15% returns, but are not predictable year to year. So the suggest from azam is valid, you would need to see what are the high rate of interest loans and if they accept early repayment, you should complete it ASAP. If there are loans that are less than average, say in the range of 7-8%, you can keep it and pay as per schedule. |
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. |
Pay cash for a home, get a reverse mortgage, and buy stock | I think you're missing a couple of things. First - why do you think its a reverse mortgage? More likely than not its a regular mortgage - home equity loan. If so, if they expect the stock market to rise significantly more than the amount of interest they pay on the loan - then its a totally sensible course of action. Second - the purchase in cash only to take out a loan later can definitely be a sensible way to do things. For example, if the seller wants to close fast, or if there are competing offers where not having a contingency is the tipping point. Another reason might be purchasing in an entity name (for example holding the title as an LLC), and in this case it is easier to get a loan if you already have the house, since the banks see the owner's actual commitment and not just promises. |
When to trade in a relatively new car for maximum value | So this has been bugging me for a while, because I am facing a similar dilemma and I don't think anyone gave a clear answer. I bought a 2012 kia soul in 2012. 36 months financing at 300/mo. Will be done with my car loan in 2015. I plan on keeping it, while saving the same amount of money 300/mo until I buy my next car. But, I also have an option of trading it in for the the next car. Question: should I trade it in in 2015. should I keep it for 2 years more? 3 years more, before I buy the next car? What makes most financial sense and savings. I tried to dig up some data on edmunds - the trade-in value and "true cost to own" calculator. The make and model of my car started in 2010, so I do not have historical data, as well as "cost to own" calculator only spans 5 years. So - this is what I came up with: Where numbers in blue are totally made up/because I don't have the data for it. Granted, the trade-in values for the "future" years are guesstimated - based on Kia Soul's trade-in values from previous years (2010, 2011, 2012) But, this is handy, and as it gets closer to 2015 and beyond, I can re-plug in the data where it is available and have a better understanding of the trade-in vs keep it longer decision. Hope this helps. If the analysis is totally off the rocker, please let me know - i'll adjust it/delete it. Thank you |
Good book-keeping software? | You can try Wave Accounting. Its a free software for Small Business and web-based. http://waveaccounting.com/ |
Is the ESPP discount profit? | The difference is ordinary income. If the price drops and you sell for exactly what you paid, you have an income of D and a capital loss of D which usually cancel each other, but not always. For example, if you already have over $3000 in losses, this loss won't help you, it will carry forward. The above changes a bit if you hold the stock for 2 years after the beginning of the purchase period. If sold between your purchase price and fair market the day you bought, the gain is only the difference, no gain to fair market + loss. Pretty convoluted. Your company should have provided you with a brief FAQ / Q&A to explain this. My friends at Fairmark have an article that explains the ESPP process clearly, Tax Reporting for Qualifying Dispositions of ESPP Shares. |
Will I be liable for taxes if I work for my co. in India for 3 months while I am with my husband in UK | The finance team from your company should be able to advise you. From what I understand you are Indian Citizen for Tax purposes. Any income you receive globally is taxable in India. In this specific case you are still having a Employee relationship with your employer and as such the place of work does not matter. You are still liable to pay tax in India on the salary. If you are out of India for more than 182 days, you can be considered as Non-Resident from tax point of view. However this clause would not be of any benefit to you as are having a Employee / Employer relationship and being paid in India. Edit: This is only about the India portion of taxes. There maybe a UK protion of it as well, plus legally can you work and your type of Visa in UK may have a bearing on the answer |
Previous owner of my home wants to buy it back but the property's value is less than my loan… what to do? | I would not trust Zillow for an appraisal. The numbers I see on there vary a lot from real prices. I'm not sure I'd get a full appraisal either, as that means you "know" the value of the house and may be obliged to reveal it. I'd ask for the loan amount and see what the previous owner says. |
Is Bogleheadism (index fund investing) dead? | I think you can do better than the straight indexes. For instance Vanguard's High Yield Tax Exempt Fund has made 4.19% over the past 5 years. The S&P 500 Index has lost -2.25% in the same period. I think good mutual funds will continue to outperform the markets because you have skilled managers taking care of your money. The index is just a bet on the whole market. That said, whatever you do, you should diversify. List of Vanguard Funds |
Can a US bank prevent you from making early payments to the principal on a home mortgage? | Some lenders want to discourage the borrower from making these additional payments because they want to sell this as a service. They might set this up for you, or they have a contract with a 3rd party to set it up. These services generally charge you to initiate the process, and may have a recurring fee. They take 1/2 a payment every 2 weeks. Then forward the money on the first of the month to the lender. Once a year they will send in the 13th monthly payment. This gives them control of up to a months payment per account. There is no law that says they have to accept early payments. So check the documents to make sure it is allowed for that mortgage. Then send in a test payment directing that the excess funds go to pay down principal. Verify online that the extra funds were credited correctly. Even it works once the borrower will have to keep checking to make sure it is handled correctly each month. |
How is your credit score related to credit utilization? | Curious, why are you interested in building/improving your credit score? Is it better to use your card and pay off the bill completely every month? Yes. How is credit utiltization calculated? Is it average utilization over the month, or total amount owed/credit_limit per month? It depends on how often your bank reports your balances to the reporting agencies. It can be daily, when your statement cycle closes, or some other interval. How does credit utilization affect your score? Closest to zero without actually being zero is best. This translates to making some charges, even $1 so your statement shows a balance each statement that you pay off. This shows as active use. If you pay off your balance before the statement closes, then it can sometimes be reported as inactive/unused. Is too much a bad thing? Yes. Is too little a bad thing? Depends. Being debt free has its advantages... but if your goal is to raise your credit score, then having a low utilization rate is a good metric. Less than 7% utilization seems to be the optimal level. "Last year we started using a number, not as a recommendation, but as a fact that most of the people with really high FICO scores have credit utilization rates that are 7 percent or lower," Watts said. Read more: http://www.bankrate.com/finance/credit-cards/how-to-bump-up-your-credit-score.aspx Remember that on-time payment is the most important factor. Second is how much you owe. Third is length of credit history. Maintain these factors in good standing and you will improve your score: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx |
What is needed to be a “broker”? | You must understand that: So, if you -- the prospective buyer -- are in Waukegan, do you take the train all the way to New York City just to buy 100 shares of stock? No. That would be absurdly expensive. So, you hire an agent in NYC who will broker a deal for you in the exchange. Fast forward 100 years, to the time when instant communications is available. Why do we now still need brokerages, when the Exchanges could set up web sites and let you do the trading? The answer is that the Exchanges don't want to have to develop the accounting systems to manage the transactions of hundreds of thousands of small traders, when existing brokerage firms already have those computerized processes in place and are opening their own web sites. Thus, in 2017 we have brokerage firms because of history. |
What to do with a distribution as a young person? | I have money to invest. Where should I put it? Anyone who answers with "Give it to me, I'll invest it for you, don't worry." needs to be avoided. If your financial advisor gives you this line or equivalent, fire him/her and find another. Before you think about where you should put your money, learn about investing. Take courses, read books, consume blogs and videos on investing in stocks, businesses, real estate, and precious metals. Learn what the risks and rewards are for each, and make an informed decision based on what you learned. Find differing opinions on each type of investment and come to your own conclusions for each. I for example, do not understand stocks, and so do not seriously work the stock market. Mutual funds make money for the folks selling them whether or not the price goes up or down. You assume all the risk while the mutual fund advisor gets the reward. If you find a mutual fund advisor who cannot recommend the purchase of a product he doesn't sell, he's not an advisor, he's a salesman. Investing in business requires you either to intimately understand businesses and how to fund them, or to hire someone who can make an objective evaluation for you. Again this requires training. I have no such training, and avoid investing in businesses. Investing in real estate also requires you to know what to look for in a property that produces cash flow or capital gains. I took a course, read some books, gained experience and have a knowledgeable team at my disposal so my wins are greater than my losses. Do not be fooled by people telling you that higher risk means higher reward. Risks that you understand and have a detailed plan to mitigate are not risks. It is possible to have higher reward without increasing risk. Again, do your own research. The richest people in the world do not own mutual funds or IRAs or RRSPs or TFSAs, they do their own research and invest in the things I mentioned above. |
Pay off credit card debt or earn employer 401(k) match? | For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match. Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years. So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say "don't take a 401(k) loan." Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix. The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%? |
If I have $1000 to invest in penny stocks online, should I diversify risk and invest in many of them or should I invest in just in one? | These stocks have no value to them, are just waiting for paper work to liquefy and vanish. The other gamblers are bots waiting for some sucker to buy so they can sell right away. So maybe a fresh new penny stock that hasn't been botted yet gives some higher chance of success, but you probably need to be a bot to sell it quickly enough. All in all not that much different from buying regular stocks... |
Will I be paid dividends if I own shares? | What is a dividend? Essentially, for every share of a dividend stock that you own, you are paid a portion of the company’s earnings. You get paid simply for owning the stock! For example, let’s say Company X pays an annualized dividend of 20 cents per share. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of 20 cents (or 5 cents) for each share you own. This may not seem like a lot, but when you have built your portfolio up to thousands of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years. The key is to reinvest those dividends! Source: http://www.dividend.com/dividend-investing-101/what-are-dividend-stocks/ What is an ex dividend date Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date is usually set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. Source: https://www.sec.gov/answers/dividen.htm That said, as long as you purchased the stock before 6/4/17 you are entitled to the next dividend. If not, you'll get the following one after that. |
Unmarried couple buying home, what are the options in our case? | Personally I would advise only buying what you can afford without borrowing money, even if it means living in a tent. Financially, that is the best move. If you are determined to borrow money to buy a house, the person with income should buy it as sole owner. Split ownership will create a nightmare if any problems develop in the relationship. Split ownership has the advantage that it doubles the tax-free appreciation deduction from $250,000 to $500,000, but in your case my sense is that that is not a sufficient reason to risk dual ownership. Do not charge your "partner" rent. That is crazy. |
I spend too much money. How can I get on the path to a frugal lifestyle? | Agree wholeheartedly with the first point - keep track! It's like losing weight, the first step is to be aware of what you are doing. It also helps to have a goal (e.g. pay for a trip to Australia, have X in my savings account), and then with each purchase ask 'what will I do with this when I go to Australia' or 'how does this help towards goal x?' Thrift stores and the like require some time searching but can be good value. If you think you need something, watch for sales too. |
Why are Rausch Coleman houses so cheap? Is it because they don't have gas? | They are cheap because they are made from cheap material. All the homes in my addition are Ruasch Coleman and a lot of them are having issues (Oklahoma). Several are around 5 years old and have already had to get new roofs. On our neighborhood FB page there have been complaints with the plumbing system and flooding in yards that weren't leveled properly once the ground settled. I know I regret my purchase. You get what you pay for. |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | This question has been absolutely perplexing to me. It has spawned a few heated debates amongst fellow colleagues and friends. My laymen understanding has provided me with what I believe to be a simple answer to the originator's question. I'm trying to use common sense here; so be gentle. FICO scores, while very complex and mysterious, are speculatively calculated from data derived from things like length of credit history, utilization, types of credit, payment history, etc. Only a select few know the actual algorithms (closely guarded secrets?). Are these really secrets? I don't know but it's the word on the street so I'm going with it! Creditors report data to these agencies on certain dates- weekly, monthly or annually. These dates may be ascertained by simply calling the respective creditor and asking. Making sure that revolving credit accounts are paid in full during the creditors "data dump" may or may not have a positive impact on ones FICO score. A zero balance reported every time on a certain account may appear to be inactive depending on how the algorithm has been written and vice versa; utilization and payment history may outweigh the negativity that a constantly zero balance could imply. Oh Lord, did that last sentence just come out of my head? I reread it four times just make sure it makes sense. My personal experience with revolving credit and FICO I was professionally advised to: Without any other life changing credit instances- just using the credit card in this fashion- my FICO score increased by 44 points. I did end up paying a little in interest but it was well worth it. Top tier feels great! In conclusion I would say that the answer to this question is not cut and dry as so many would imply. HMMMMM |
Totally new to finance, economy, where should I start? | I'm going to be a bit off topic and recommend 'The Only Investment Book You'll Ever Need' by Andrew Tobias. It doesn't start with describe the workings of the stock market. Instead, it starts with making sure you have a budget and have your basic finances in order BEFORE going into the stock market. This may not sound like what you are looking for, but it really is a valuable book to read, even if you think you are all set up in that department. |
How do I enter Canadian tax info from US form 1042-S and record captial gains from cashing in stock options? | Depending on what software you use. It has to be reported as a foreign income and you can claim foreign tax paid as a foreign tax credit. |
Stochastic Oscillator for Financial Analysis | While trading in stochastic I've understood, one needs reference (SMA/EMA/Bolinger Band and even RSI) to verify trade prior entering it. Stochastic is nothing to do with price or volume it is about speed. Adjusting K% has ability to turn you from Day trader to -> swing trader to -> long term investor. So you adjust your k% according to chart time-frame. Stochastic setup for 1 min, 5 min ,15, 30, 60 min, daily, weekly, monthly, quarterly, half yearly and yearly are all different. If you try hopping from one time-frame to another just because it is below oversold or above overbought region with same K%, you may get confused. Worst you may not square-off your loss making trade. And rather not use excel; charts gives better visual for oscillators. |
interest rate on online banks | I beg to differ: Israel has an incredibly well managed central bank, and the usury market is wonderfully competitive. It's a shame Stanley Fischer has retired. His management is the case study in central bank management. Rates are low because inflation is low. The nominal rate is irrelevant to return because a 2% nominal return with 1% inflation is superior to a 5% nominal return with 9% inflation. A well-funded budget is the best first step, so now a tweak is necessary: excess capital beyond budgeting should be moved quickly to internationally diversified equities after funding, discounted and adjusted, longer term budgets. Credit will not pay the rate necessary for long term investment. Higher variance is the price to pay for higher returns. |
Does this plan make any sense for early 20s investments? | The plan doesn't make sense. Don't invest your money. Just keep it in your bank account. $5000 is not a lot, especially since you don't have a steady income stream. You only have $1000 to your name, you can't afford to gamble $4000. You will need it for things like food, books, rent, student loans, traveling, etc. If you don't get a job right after you graduate, you will be very happy to have some money in the bank. Or what if you get a dream job, but you need a car? Or you get a job at a suit & tie business and need to get a new wardrobe? Or your computer dies and you need a new one? You find a great apartment but need $2500 first, last & security? That money can help you out much more NOW when you're starting out, then it will when you're ready to retire in your 60's. |
How will the fall of the UK Pound impact purchasing my first property? | There are two impacts: First, if the pound is dropping, then buying houses becomes cheaper for foreign investors, so they will tend to buy more houses as investments, which will drive house prices up. Second, in theory you might be able to get a mortgage in a foreign country, let's say in Euro, and you might hope that over the next few years the pound would go up again, and the Euros that you owe the foreign bank become worth less. |
HSBC Hong Kong's “Deposit Plus” Product: What is it, and what strategies to employ? | HSBC Hong Kong's “Deposit Plus” Product" the same as "Dual Currency Product" . it's Currency link Sell base Currency Call / Alternative Currency Put FX Option It's not protected by the Deposit Insurance System in HK You can search Key Word "Dual Currency Product" & "Dual Currency Investment" & "Dual Currency Deposit" The only one of the world's foreign exchange structured product book 『雙元貨幣產品 Dual Currency Product』 ISBN 9789574181506 |
Alternatives to Intuit's PayTrust service for online bill viewing and bill payment? | Paytrust seems to be the only game in town. We've changed banks several times over the last 15 years and I can tell you that using a bank's bill pay service locks you in, big time. I loved paytrust because I could make one change if we changed banks. If you're using a bank directly for your bills, the ides of recreating your payee list is daunting. |
Can individuals day-trade stocks using High-Frequency Trading (HFT)? | I just finished a high frequency trading project. Individuals can do it, but you need a lot of capital. You can get a managed server in Times Square for $1500/month, giving you access to 90% of the US exchanges that matter, their data farms are within 3 milliseconds of distance (latency). You can also get more servers in the same building as the exchanges, if you know where to look ;) thats all I can divulge good luck |
How much time should be spent on Penny Stocks Trading a day? | 1) Don't trade individual stocks. You expose yourself to unnecessary risk. 2) Pick a fund with low expenses that pays a dividend. Reinvest the dividend back into the fund. To quote Einstein: The greatest power on earth is compound interest. Something is wrong with the software of the site. It will not allow me to answer mark with another comment. So I have to edit this answer to be able to answer him. @mark No, I am not hoping the price will go up. The price is only relevant in comparison to the dividend. It is the dividend that is important, not the price. The price is irrelevant if you never sell. Dividend paying securities are what you buy and hold. Then you reinvest the dividend and buy more of the security. As I am buying the security with the dividend I am actually pleasantly surprised when the price goes down. When the price goes down, but the dividend remains the same, I am able to buy more shares of the security withwith that dividend. So if the price goes down, and the dividend remains the same, it is a good thing. Again, the site will not allow me to add another comment. @mark I profit from my investment, without selling, by receiving the dividend. I used to be a speculator, trying to get ahead of the market by 'buy low, sell high' but all that did was make money for the broker. I lost as much as I gained trying to do that. The broker made money on each transaction, regardless if I did or not. It took me decades to learn the lesson that 'buy and hold' of dividend paying securities is the way to go. Don't make my mistake. I now get, at least, 5.5% yeald on my investment (look at PGF, which forms the backbone of my investments). That is almost 0.5% per month. Each month that dividend is reinvested into PGF, with no commission. You can't beat that with a stick. |
What emergencies could justify a highly liquid emergency fund? | Since no one else mentioned it, there are sometimes amazing deals that require being the first person to take advantage of them. I'm not talking about black Friday sales, I'm talking about the woman who decided to sell the Porsche (she had bought for her cheating husband) for $1000. You might not run into those types of deals often, but having liquid investments will allow you to take advantage of them instead of kicking yourself. I just bought some real estate with some of my emergency fund that needed several months before I could properly finance it due to some legal issues with the deed that needed to go through court because there was a deceased person on the title. I will make far more on the deal when it's done than I ever could have made with that money invested in the market. |
How to make a decision for used vs new car if I want to keep the car long term? | This is my opinion as a car nut. It depends on what you want out of a car. For your situation (paying cash, want to keep the car long-term but also save money) I recommend seriously considering a slightly used vehicle, maybe 2 or 3 years old, or a "certified pre-owned vehicle". Reasons: Much less expensive than a brand new car because the first two years have the biggest depreciation hit. Cars come with a 4-year warranty, so a 3 year old car will still be in warranty. Yes, a certified pre-owned car will have a bit of a premium compared to a private-party used car, but the peace of mind of knowing it's in good shape is worth the extra cost considering you want to keep it long term. Consumer Reports will have good advice on the best values in used cars. |
How should residents of smaller economies allocate their portfolio between domestic and foreign assets? | We face the same issue here in Switzerland. My background: Institutional investment management, currency risk management. My thoughs are: Home Bias is the core concept of your quesiton. You will find many research papers on this topic. The main problems with a high home bias is that the investment universe in your small local investment market is usually geared toward your coutries large corporations. Lack of diversification: In your case: the ASX top 4 are all financials, actually banks, making up almost 25% of the index. I would expect the bond market to be similarly concentrated but I dont know. In a portfolio context, this is certainly a negative. Liquidity: A smaller economy obviously has less large corporations when compared globally (check wikipedia / List_of_public_corporations_by_market_capitalization) thereby offering lower liquidity and a smaller investment universe. Currency Risk: I like your point on not taking a stance on FX. This simplifies the task to find a hedge ratio that minimises portfolio volatility when investing internationally and dealing with currencies. For equities, you would usually find that a hedge ratio anywhere from 0-30% is effective and for bonds one that ranges from 80-100%. The reason is that in an equity portfolio, currency risk contributes less to overall volatility than in a bond portfolio. Therefore you will need to hedge less to achieve the lowest possible risk. Interestingly, from a global perspective, we find, that the AUD is a special case whereby, if you hedge the AUD you actually increase total portfolio risk. Maybe it has to do with the AUD being used in carry trades a lot, but that is a wild guess. Hedged share classes: You could buy the currency hedged shared classes of investment funds to invest globally without taking currency risks. Be careful to read exactly what and how the share class implements its currency hedging though. |
Can I participate in trading Facebook shares on their IPO day from any brokerage? | Any retail equity brokerage will give you access to the NYSE, and thus Facebook shares as they become available. However, it is important to note that you nor any retail investor will be able to purchase FB at the IPO prices ($33-38 IIRC). The only people who will be able to buy in at that price are the underwriting investment banks and major investors who have subscribed to the IPO. You, and all the other retail investors will only be able to buy in as those major investors offer shares on the secondary market. This being Facebook, there will probably be a significant premium over the IPO price, both due to demand and systemic underpricing of IPOs to encourage the opening 'pop'. So, if you're intent on buying in at the IPO, pay close attention as the date approaches. Look at how the recent big IPOs have performed (GRPN, LNKD come to mind). Know how much you're willing to commit and what price you want. However, no one is going to know what the opening market price will be come Friday morning. Be watching your financial data source / analysis of choice and be prepared to make a judgement. |
I'm 23 and was given $50k. What should I do? | I would be realistic and recognize that however you invest this money, it is unlikely to be a life-changing sum. It is not going to provide an income which significantly affects your monthly budget, nor is it going to grow to some large amount which will allow you to live rent-free or similar. Therefore my advice is quite different to every other answer so far. If I was you, I would: I reckon this might get you through half the money. Take the other $25,000 and go travelling. Plan a trip to Europe, South America, Asia or Australia. Ask your job for 3 or 6 months off, and quit it they won't give it you. Find a few places which you would really like to visit, and schedule around them a lot of time to go where you want. Book your flights in advance, or book one way, and put aside enough money for the return when you know where you'll be coming back from. Stay in hostels, a tent or cheap AirBnB. Make sure you have a chance to meet other people, especially other people who are travelling around. Figure out in advance how much it will cost you a day to live basically, and budget for a few beers/restaurants/cinema/concert tickets/drugs/whatever you do to have fun. It's really easy nowadays to go all sorts of places, and be very spontaneous about what you want to do next. You will find that everywhere in the world is different, all people have something unusual about them, and everywhere is interesting. You will meet some great people and probably become both more independent and better at making friends with strangers. Your friends in other countries could stay friends for life. The first time you see Rome, the Great Barrier Reef, the Panama canal or the Tokyo fish market will be with you forever. You have plenty of years to fill up your 401K. You won't have the energy, fearlessness and openmindedness of a 23 year old forever. Go for it. |
JCI headache part 2: How to calculate cost basis / tax consequences of JCI -> ADNT spinoff? | I am using the same logic as the two answers above. I got almost the same result ($46.60 instead of $46.59 per share) using the sold fractional share basis. However, the JCI Qualified Dividend (on the 1099-DIV, not the 1099-B) divided by the number of shares spun off yields a basis per share of only $40.97 That compares to $45.349 in answer two above. It seems that we should get the approximately same basis per share using the same arithmetic, and I do not know why we don't. For my tax files, I plan to use the Adient basis equal to the dividend from the 2016 1099-DIV of JCI (the PLC after the merger). My reasoning is that I cannot use an amount for the Adient basis that is greater than the dividend I paid taxes on. [In case this part of the question comes up again, you can get historical quotes at various websites such as https://finance.yahoo.com/quote, which does show $45.51 as the Adient closing price on 10/31/16.] |
What's “wrong” with taking money from your own business? | It's wrong in several situations: One, the business owner counts this as a business expense, which it is not, and therefore reduces the company's profit and taxes. That would be tax avoidance and probably criminal. Two, someone who is not the sole owner counts this as a business expense, which it is not, reduces the company's profit and when profits are shared, the company pays out less money to the other owners. That's probably fraud. Third, if the owner or owners of a limited liability company draw out lots of money from the company with the intent that the company should go bankrupt with tons of debt that the owners are not going to pay, while keeping the money they siphoned off for themselves. That would probably bankruptcy fraud. Apart from being wrong, there is the obvious risk that you lose control over your company's and your own expenses, and might be in for a nasty surprise if the company has to pay out money and there's nothing left. That would be ordinary stupidity. If you have to tell your employees that you can't pay their salaries but offer them to admire your brand new Ferrari, that's something I'd consider deeply unethical. |
If I have no exemptions or deductions, just a simple paycheck, do I HAVE to file taxes? | If you took advantage of options like a home buyers plan (HBP) you definitely need to file since you must designate how much of the plan to repay. Your employer does not know about what you do with your money so cannot take this into account for the withheld taxes. If you do not report repayment of the HBP it will be treated as a withdrawal from your RRSP i.e. additional income for that tax year. |
Why do stock prices of retailers not surge during the holidays? | Excellent question for a six year old! Actually, a good question for a 20 year old! One explanation is a bit more complicated. Your son thinks that after the Christmas season the company is worth more. For example, they might have turned $10 million of goods into $20 million of cash, which increases their assets by $10 million and is surely a good thing. However, that's not the whole picture: Before the Christmas season, we have a company with $10 million of goods and the Christmas season just ahead, while afterwards we have a company with $20 million cash and nine months of slow sales ahead. Let's say your son gets $10 pocket money every Sunday at 11am. Five minutes to 11 he has one dollar in his pocket. Five minutes past 11 he has 11 dollars in his pocket. Is he richer now? Not really, because every minute he gets a bit closer to his pocket money, and five past eleven he is again almost a week away from the next pocket money On the other hand... on Monday, he loses his wallet with $10 inside - he is now $10 poorer. Or his neighbour unexpectedly offers him to wash his car for $10 and he does it - he is now $10 richer. So if the company got robbed in August with all stock gone, no insurance, but time to buy new stock for the season, they lose $10 million, the company is worth $10 million less, and the share price drops. If they get robbed just before Christmas sales start, they don't make the $20 million sales, so they are $10 million poorer, but they are $20 million behind where they should be - the company is worth $20 millions less, and the share price drops twice as much. On the other hand, if there is a totally unexpected craze for a new toy going on from April to June (and then it drops down), and they make $10 million unexpectedly, they are worth $10 million more. Expected $10 million profit = no increase in share price. Unexpected $10 million profit - increase in share price. Now the second, totally different explanation. The share price is not based on the value of the company, but on what people are willing to pay. Say it's November and I own 100 shares worth $10. If everyone knew they are worth $20 in January, I would hold on to my shares and not sell them for $10! It would be very hard to convince me to sell them for $19! If you could predict that the shares will be worth $20 in January, then they would be worth $20 now. The shareprice will not go up or down if something good or bad happens that everyone expects. It only goes up or down if something happens unexpectedly. |
Why do stocks tend to trade at high volumes at the end of (or start) the trading day? | Is it possible that mutual funds account for a significant portion of this volume. Investors may decide to buy or sell anytime within a 24 hour period, but the transaction only happened at the close of the market. Therefore at 3:59 pm the mutual fund knows if they will be buying or selling stocks that day. As nws pointed out the non-market hours are longer and therefore accumulate more news event. Some financial news is specifically given during the time the market is closed. Therefore the reaction to that news has to either be in the morning when the market opens or in the late afternoon if they are trying to anticipate the news. Also in the US market the early morning trader may be reacting to European market activities. |
How can I calculate total return of stock with partial sale? | There are many ways to calculate the return, and every way will give you a different results in terms of a percentage-value. One way to always get something meaningful - count the cash. You had 977 (+ 31) and in the end you have 1.370, which means you have earned 363 dollars. But what is your return in terms of percentage? One way to look at it, is by pretending that it is a fund in which you invest 1 dollar. What is the fund worth in the beginning and in the end? The tricky part in your example is, you injected new capital into the equation. Initially you invested 977 dollars which later, in the second period became worth 1.473. You then sold off 200 shares for 950 dollars. Remember your portfolio is still worth 1.473, split between 950 in cash and 523 in Shares. So far so good - still easy to calculate return (1.473 / 977 -1 = 50.8% return). Now you buy share for 981 dollars, but you only had 950 in cash? We now need to consider 2 scenarios. Either you (or someone else) injected 31 dollars into the fund - or you actually had the 31 dollars in the fund to begin with. If you already had the cash in the fund to begin with, your initial investment is 1.008 and not 977 (977 in shares and 31 in cash). In the end the value of the fund is 1.370, which means your return is 1.370 / 1.007 = 36%. Consider if the 31 dollars was paid in to the fund by someone other than you. You will then need to recalculate how much you each own of the fund. Just before the injection, the fund was worth 950 in cash and 387 in stock (310 - 200 = 110 x 3.54) = 1.339 dollars - then 31 dollars are injected, bringing the value of the fund up to 1.370. The ownership of the fund is split with 1.339 / 1.370 = 97.8% of the value for the old capital and 2.2% for the new capital. If the value of the fund was to change from here, you could calculate the return for each investor individually by applying their share of the funds value respective to their investment. Because the value of the fund has not changed since the last period (bullet 3), the return on the original investment is (977 / 1.339 - 1 = 37.2%) and the return on the new capital is (31 / 31 = 0%). If you (and not someone else) injected the 31 dollar into the fund, you will need to calculate the weight of each share of capital in each period and get the average return for each period to get to a total return. In this specific case you will still get 37.2% return - but it gets even more comlex for each time you inject new capital. |
What are some good ways to control costs for groceries? | Please stay away from snakes. Don't use a credit card to buy your food. Those credit companies will eat you alive. Those are reward points they're giving you. It's like the casino giving you a free $50 to start out with. They designed the game. They are going to win. As for groceries, if you are a coupon clipper, check out thegrocerygame.com: "Teri's List is a weekly publication of the lowest-priced products at your supermarket or drugstore matched with manufacturers' coupons and specials - advertised and unadvertised. Teri does all the hard work and research, and presents it to you in a straightforward format. Log in each week and print your list!" Nathon HouseholdBudgetNerd.com Family Budgets for Both of Us |
How does on-demand insurance company Trov prevent insurance fraud or high prices? | Anything can be insured for the right price... this product is offered for devices at higher risk, which would be logical purpose of owner needing coverage for a specific length of time. Typically this would be a type of adverse selection, but TROV targets customers that typically would not require insurance on their device, but as you said they may be traveling and putting their devices at added risk. Like all insurance companies, their Loss Ratio (Losses/Premiums) will depend on the law of large numbers and spread of risk. As we know, the majority of the time trips are taken, electronics make it back home safely. Like many tech companies, their advantage over conventional insurers is likely low overhead costs. Being on a mobile platform, they likely have a fraction of the claims handling cost of a conventional insurer. Payments are likely automated by linking bank accounts, so there is little transaction cost burden on this company. In short, their operation is likely highly automated with few staff and low expenses, allowing them to take on a higher loss ratio than conventional insurers and still leave room for profit. Without having ever used this service, I can tell you they likely price in anticipated fraud, the same way Walmart prices in inventory loss (shoplifting) into their prices. I personally would share your concern that it'd be difficult to combat fraud on such a platform, especially with no claims adjusters whom are typically the first line of defense. Again, I answer this never having used their service, but I work as an Analyst at a large insurer and these would be my assumptions based on what I know of TROV. |
When people say 'Interest rates are at all time low!" … Which interest rate are they actually referring to? | I would say people are generally talking about the prime lending rate. I have heard the prime lending rate defined as "The rate that banks charge each other when they borrow money overnight." But it often defined as the rate at which banks lend their most creditworthy customers. That definition comes with the caveat that it is not always held to strictly. Either definition has the same idea: it's the lowest rate at which anyone could currently borrow money. The rate for many types of lending is based upon the prime rate. A variable rate loan might have an interest rate of (Prime + x). The prime rate is in turn based upon the Federal Funds Rate, which is the rate that the Fed sets manually. When the news breaks that "the Fed is raising interest rates by a quarter of a point" (or similar) it is the Federal Funds Rate that they control. Lending institutions then "fall in line" and adjust the rates at which they lend money. So to summarize: When people refer to "high" or "low" or "rising" interest rates they are conceptually referring to the prime lending rate. When people talk about the Fed raising/lowering interest rates (In the U.S.) they are referring specifically to the Federal Funds Rate (which ultimately sets other lending rates). |
Pay index fund expense ratios with cash instead of fund balance | In many cases the expenses are not pulled out on a specific day, so this wouldn't work. On the other hand some funds do charge an annual or quarterly fee if your investment in the fund is larger than the minimum but lower than a "small balance" value. Many funds will reduce or eliminate this fee if you signup for electronic forms or other electronic services. Some will also eliminate the fee if the total investment in all your funds is above a certain level. For retirement funds what you suggest could be made more complex because of annual limits. Though if you were below the limits you could decide to add the extra funds to cover those expenses as the end of the year approached. |
How to calculate PE ratios for indices such as DJIA? | One thing to keep in mind when calculating P/E on an index is that the E (earnings) can be very close to zero. For example, if you had a stock trading at $100 and the earnings per share was $.01, this would result in a P/E of 10,000, which would dominate the P/E you calculate for the index. Of course negative earnings also skew results. One way to get around this would be to calculate the average price of the index and the earnings per share of the index separately, and then divide the average price of the index by the average earnings per share of the index. Different sources calculate these numbers in different ways. Some throw out negative P/Es (or earnings per share) and some don't. Some calculate the price and earnings per share separate and some don't, etc... You'll need to understand how they are calculating the number in order to compare it to PEs of individual companies. |
Is a car loan bad debt? | A car loan might be considered "good" debt, if the following circumstances apply: If, on the other hand, you only qualify for a subprime loan, or you're borrowing to buy a needlessly expensive car, that's probably not a good idea. |
How to keep control of shared expenses inside marriage? | I'd say its time to merge finances! |
How do you find reasonably priced, quality, long lasting clothing? | Are specific brand recommendations allowed? I'm a big fan of Lands' End. They have good quality clothing at reasonable prices in all the basic styles. They have great customer service and you con order online and avoid clothes shopping at the mall (which I hate). |
Getting a USD cheque, without too many fees, and with a sensible exchange rate? | UPDATE: Unfortunately Citibank have removed the "standard" account option and you have to choose the "plus" account, which requires a minimum monthly deposit of 1800 sterling and two direct debits. Absolutely there is. I would highly recommend Citibank's Plus Current Account. It's a completely free bank account available to all UK residents. http://www.citibank.co.uk/personal/banking/bankingproducts/currentaccounts/sterling/plus/index.htm There are no monthly fees and no minimum balance requirements to maintain. Almost nobody in the UK has heard of it and I don't know why because it's extremely useful for anyone who travels or deals in foreign currency regularly. In one online application you can open a Sterling Current Account and Deposit Accounts in 10 other foreign currencies (When I opened mine around 3 years ago you could only open up to 7 (!) accounts at any one time). Citibank provide a Visa card, which you can link to any of your multi currency accounts via a phone call to their hotline (unfortunately not online, which frequently annoys me - but I guess you can't have everything). For USD and EUR you can use it as a Visa debit for USD/EUR purchases, for all other currencies you can't make debit card transactions but you can make ATM withdrawals without incurring an FX conversion. Best of all for your case, a free USD cheque book is also available: http://www.citibank.co.uk/personal/banking/international/eurocurrent.htm You can fund the account in sterling and exchange to USD through online banking. The rates are not as good as you would get through an FX broker like xe.com but they're not terrible either. You can also fund the account by USD wire transfer, which is free to deposit at Citibank - but the bank you issue the payment from will likely charge a SWIFT fee so this might not be worth it unless the amount is large enough to justify the fee. If by any chance you have a Citibank account in the US, you can also make free USD transfers in/out of this account - subject to a daily limit. |
Friend was brainwashed by MLM-/ponzi investment scam. What can I do? | First, there are MLM businesses that are legitimate and are not Ponzi schemes; I actually work with one (I will not name it lest I give the impression of trying to sell here). One thing I learned was how to respond when a prospect raises objections related to the actual scams, which are abundant; the answer being to point out, and you mentioned this yourself, that in an illegitimate scheme, there is no actual product being offered - the only thing money is ever spent on is the expectation of a future profit. Ask your friend, "Would you buy the product this company sells, at the price they ask, if there were not a financial opportunity attached to it?" If not, "How can you expect anyone else to buy it from you?" There are only 3 ways he can respond to this question: he can realize that you're right and get out now; he can change the subject to the concept of making money by climbing the ranks and earning off of a salesforce, in which case it's time to educate him on Ponzi; or he can claim to be able to sell something he doesn't believe in, in which case you should run fat, far away. If he does indicate that he would be a customer even without the chance to sell the product, then offer him the chance to prove it, by giving you one sales pitch on the condition that he is not allowed to breathe a word about joining the business. Do him the courtesy of listening with an open mind, and decide for yourself whether you could ever be a customer. If the possibility exists, even if not today, he has found one of the few legitimate MLM companies, and you should not try to stop him. If not, you'll have to determine whether it's because the product just isn't for you, or because it's inherently worthless, and whether you should encourage or discourage your friend going forward. |
CD interest rate US vs abroad, is there a catch? | If you invest in a foreign bank you are subject to their financial rules and regulations. If you put your money with their CD it will be converted to UAH (grivna) and you will be paid back in UAH, which introduces the exchange rate risk. FDIC is not the only reason why a CD in a US bank pays a lower interest, but it could be seen as a contributing factor. It all comes down to risk and what the bank is willing to pay for your money, when a bank issues a CD they are entering the debt market and competing against other banks, governments, or anyone looking for money. If the yield from lending to one bank is the same as the yield of another, the logical choice would be whichever loan is less risky. So in order for the riskier bank to receive loans they must entice investors by offering a greater rate of return. In addition, if a bank isn't looking for loans they might be less inclined to pay for them. - See "What is the “Bernanke Twist” and “Operation Twist”? What exactly does it do?" If your looking to invest in the CD's of foreign banks I would suggest doing research on their regulations. Especially if and how your money is protected in the event the bank goes bust. |
Why do some stores have card-only self-checkouts? | There are a couple of advantages that I can think of. Since the machines are less complicated because they don't have to handle cash, they are less expensive and require less maintenance. Machines that handle cash require lots of moving parts. Cash machines require lots of employee interaction. The machines need to be stocked with cash each day, and at the end of the day the cash needs to be taken out and counted. With a cashless machine, the computer does all the work. |
How to pay with cash when car shopping? | You could write a personal check after the final price has been set and you're ready to purchase. Another option would be to get the final price - then walk over to your bank and get a cashier's check. |
Tax treatment of dividends paid on short positions | In the USA there are two ways this situation can be treated. First, if your short position was held less than 45 days. You have to (when preparing the taxes) add the amount of dividend back to the purchase price of the stock. That's called adjusting the basis. Example: short at $10, covered at $8, but during this time stock paid a $1 dividend. It is beneficial for you to add that $1 back to $8 so your stock purchase basis is $9 and your profit is also $1. Inside software (depending what you use) there are options to click on "adjust the basis" or if not, than do it manually specifically for those shares and add a note for tax reviewer. Second option is to have that "dividednd payment in lieu paid" deducted as investment expence. But that option is only available if you hold the shorts for more than 45 days and itemize your deductions. Hope that helps! |
Can I get a discount on merchandise by paying with cash instead of credit? | There are two fundamentally different reasons merchants will give cash discounts. One is that they will not have to pay interchange fees on cash (or pay much lower fees on no-reward debit cards). Gas stations in my home state of NJ already universally offer different cash and credit prices. Costco will not even take Visa and MasterCard credit cards (debit only) for this reason. The second reason, not often talked about but widely known amongst smaller merchants, is that they can fail to declare the sale (or claim a smaller portion of the sale) to the authorities in order to reduce their tax liability. Obviously the larger stores will not risk their jobs for this, but smaller owner-operated ("mom and pop") stores often will. This applies to both reduced sales tax liability and income tax liability. This used to be more limited per sale (but more widespread overall), since tax authorities would look closely for a mismatch between declared income and spending, but with an ever-larger proportion of customers paying by credit card, merchants can take a bigger chunk of their cash sales off the books without drawing too much suspicion. Both of the above are more applicable to TVs than cars, since (1) car salesmen make substantial money from offering financing and (2) all cars must be registered with the state, so alternative records of sales abound. Also, car prices tend to be at or near the credit limit of most cards, so it is not as common to pay for them in this way. |
What is the point of the stock market? What is it for, and why might someone want to trade or invest? | In finance, form is function, and while a reason for a trade could be anything, but since the result of a trade is a change in value, it could be presumed that one seeks to receive a change in value. Stock company There may have been more esoteric examples, but currently, possession of a company (total ownership of its' assets actually) is delineated by percentage or a glorified "banknote" frequently called a "share". Percentage companies are usually sole proprietorship and partnerships, but partnerships can now trade in "units". Share companies are usually corporations. With shares, a company can be divided into almost totally indistinguishable units. This allows for more flexible ownership, so individuals can trade them without having to change the company contract. Considering the ease of trade, it could be assumed that common stock contract provisions were formulated to provide for such an ease. Motivation to trade This could be anything, but it seems those with the largest ownership of common stock have lots of wealth, so it could be assumed that people at least want to own stocks to own wealth. Shorting might be a little harder to reason, but I personally assume that the motivation to trade is still to increase wealth. Social benefit of the stock market Assuming that ownership in a company is socially valuable and that the total value of ownership is proportional to the social value provided, the social benefit of a stock market is that it provided the means to scale ownership through convenience, speed, and reliability. |
Most Efficient Way to Transfer Money from Israel to the USA? | How much are we talking about here? My own experience (Switzerland->US, under $10K) was that the easiest way was just $100 bills. Alternatively, I just left a bunch in the Swiss bank, and used my ATM card to make withdrawals when needed. That worked for several years (I was doing contract work remotely for the Swiss employer, who paid into that account), until the bank had issues with the IRS (unrelated to me!) and couriered me a check for the balance. |
How can one protect oneself from a dividend stock with decreasing price? | Your question reminds me of a Will Rogers quote: buy some good stock, and hold it till it goes up, then sell it. If it don’t go up, don’t buy it. There's no way to prevent yourself from buying a stock that goes down. In fact all stocks go down at some times. The way to protect your long term investment is to diversify, which increases the chances that you have more stocks that go up than go down. So many advisors will encourage index funds, which have a low cost (which eats away at returns) and low rick (because of diversification). If you want to experiment with your criteria that's great, and I wish you luck, but Note that historically, very few managed funds (meaning funds that actively buy and sell stocks based on some set of criteria) outperform the market over long periods. So don't be afraid of some of your stocks losing - if you diversify enough, then statistically you should have more winners than losers. It's like playing blackjack. The goal is not to win every hand. The goal is to have more winning hands than losing hands. |
Should an ADR that is being delisted be sold off? | I'm a bit out of my element here, but my guess is the right way to think about this is: knowing what you do now about the underlying company (NZT), pretend they had never offered ADR shares. Would you buy their foreign listed shares today? Another way of looking at it would be: would you know how to sell the foreign-listed shares today if you had to do so in an emergency? If not, I'd also push gently in the direction of selling sooner than later. |
Option trading: High dollar value stock option and equity exposure | Seems like you are concerned with something called assignment risk. It's an inherent risk of selling options: you are giving somebody the right, but not the obligation, to sell to you 100 shares of GOOGL. Option buyers pay a premium to have that right - the extrinsic value. When they exercise the option, the option immediately disappears. Together with it, all the extrinsic value disappears. So, the lower the extrinsic value, the higher the assignment risk. Usually, option contracts that are very close to expiration (let's say, around 2 to 3 weeks to expiration or less) have significantly lower extrinsic value than longer option contracts. Also, generally speaking, the deeper ITM an option contract is, the lower extrinsic value it will have. So, to reduce assignment risk, I usually close out my option positions 1-2 weeks before expiration, especially the contracts that are deep in the money. edit: to make sure this is clear, based on a comment I've just seen on your question. To "close out an options position", you just have to create the "opposite" trade. So, if you sell a Put, you close that by buying back that exact same put. Just like stock: if you buy stock, you have a position; you close that position by selling the exact same stock, in the exact same amount. That's a very common thing to do with options. A post in Tradeking's forums, very old post, but with an interesting piece of data from the OCC, states that 35% of the options expire worthless, and 48% are bought or sold before expiration to close the position - only 17% of the contracts are actually exercised! (http://community.tradeking.com/members/optionsguy/blogs/11260-what-percentage-of-options-get-exercised) A few other things to keep in mind: certain stocks have "mini options contracts", that would correspond to a lot of 10 shares of stock. These contracts are usually not very liquid, though, so you might not get great prices when opening/closing positions you said in a comment, "I cannot use this strategy to buy stocks like GOOGL"; if the reason is because 100*GOOGL is too much to fit in your buying power, that's a pretty big risk - the assignment could result in a margin call! if margin call is not really your concern, but your concern is more like the risk of holding 100 shares of GOOGL, you can help manage that by buying some lower strike Puts (that have smaller absolute delta than your Put), or selling some calls against your short put. Both strategies, while very different, will effectively reduce your delta exposure. You'd get 100 deltas from the 100 shares of GOOGL, but you'd get some negative deltas by holding the lower strike Put, or by writing the higher strike Call. So as the stock moves around, your account value would move less than the exposure equivalent to 100 shares of stock. |
Why don't banks give access to all your transaction activity? | Things are the way they are because they got that way. - Gerald Weinberg Banks have been in business for a very long time. Yet, much of what we take for granted in terms of technology (capabilities, capacity, and cost) are relatively recent developments. Banks are often stuck on older platforms (mainframe, for instance) where the cost of redundant online storage far exceeds the commodity price consumers take for granted. Similarly, software enhancements that require back-end changes can be more complicated. Moreover, unless there's a buck (or billion) to be made, banks just tend to move slowly compared to the rest of the business world. Overcoming "but we've always done it that way" is an incredible hurdle in a large, established organization like a bank — and so things don't generally improve without great effort. I've had friends who've worked inside technology divisions at big banks tell me as much. A smaller bank with less historical technical debt and organizational overhead might be more likely to fix a problem like this, but I doubt the biggest banks lose any sleep over it. |
How often do typical investors really lose money? | How often do investors really lose money? All the time. And it's almost always reason number 1. Let's start with the beginner investor, the person most likely to make some real losses and feel they've "learned" that investing is no better than Vegas. This person typically gets into it because they've been given a hot stock tip, or because they've received a windfall, decided to give this investing lark a try, and bought stock in half a dozen companies whose names they know from their everyday lives ("I own a bit of Google! How cool is that?"). These are people who don't understand the cyclic nature of the market (bear gives way to bull gives way to bear, and on and on), and so when they suddenly see that what was $1000 is now $900 they panic and sell everything. Especially as all the pundits are declaring the end of the world (they always do). Until the moment they sold, they only had paper losses. But they crystallised those losses, made them real, and ended at a loss. Then there's the trend-follower. These are people who don't necessarily hit a bear market, or even a downturn, in their early days, but never really try to learn how the market works in any real sense. They jump into every hot stock, then panic and sell out of anything that starts to go the wrong way. Both of these reactive behaviours seem reasonable in the moment ("It's gone up 15% in the past week? Buy buy buy!" and "I've lost 10% this month on that thing? Get rid of it before I lose any more!"), but they work out over time to lots of buying high and selling low, the very opposite of what you want to do. Then there's the day-trader. These are people who sit in their home office, buying and selling all day to try and make lots of little gains that add up to a lot. The reason these people don't do well in the long run is slightly different to the other examples. First, fees. Yes, most platforms offer a discount for "frequent traders", but it still ain't free. Second, they're peewees playing in the big leagues. Of course there are exceptions who make out like bandits, but day traders are playing a different game than the people I'd call investors. That game, unlike buy-and-hold investing, is much more like gambling, and day-traders are the enthusiastic amateurs sitting down at a table with professional poker players – institutional investors and the computers and research departments that work for them. Even buy-and-hold investors, even the more sophisticated ones, can easily realise losses on a given stock. You say you should just hold on to a stock until it goes back up, but if it goes low enough, it could take a decade or more to even just break even again. More savvy stock-pickers will have a system worked out, something like "ok, if it gets down to 90% of what I bought it for, I cut my losses and sell." This is actually a sensible precaution, because defining hard rules like that helps you eliminate emotion from your investing, which is incredibly important if you want to avoid becoming the trend-follower above. It's still a loss, but it's a calculated one, and hopefully over time the exception rather than the rule. There are probably as many other ways to lose money as there are people investing, but I think I've given you a taste. The key to avoiding such things is understanding the psychology of investing, and defining the rules that you'll follow no matter what (as in that last example). Or just go learn about index investing. That's what I did. |
Exercise a put option when shorting is not possible | You can buy a put and exercise it. The ideal option in this case will have little time premium left and very near the money. Who lent you the shares? The person that sold you the option! In reality, when you exercise, assignment can be random, but everything is [supposedly] accounted for as the option seller had to put up margin collateral to sell the option. |
Why is it rational to pay out a dividend? | Firstly, investors love dividend paying company as dividends are proof of making profit (sometimes dividend can be paid out of past profits too) Secondly, investor cash in hand is better than potential earnings by the company by way of interest. Investor feels good to redeploy received cash (dividend) on their own Thirdly, in some countries dividend are tax free income as tax on dividends has already been paid. As average tax on dividend is lower than maximum marginal tax; for some investor it generates extra post tax income Fourthly, dividend pay out ratio of most companies don't exceed 30% of available fund for paying (surplus cash) so it is seen as best of both the world Lastly, I trust by instinct a regular dividend paying company more than not paying one in same sector of industry |
How could a company survive just on operations cash flow, i.e. no earnings? | It is true that operation profit comes from gross profit however it is possible for a company to have negative net profit yet have postive cash flow , it has to do with the accounting practice A possible example is that a company has extremely high depreciation expense of fixed asset hence net profit will be negative but cash flow will be positive. Assuming the fixed asset has been fully paid for in earlier years |
Should I purchase a whole life insurance policy? (I am close to retirement) | There's nothing new about Whole Life Insurance. The agent stands to earn a pretty hefty commission if he can sell it to you. I don't think your assets warrant using it for avoiding the taxes that would be due on a larger estate. I don't see a compelling reason to buy it. |
Why is day trading considered riskier than long-term trading? | Short-term, the game is supply/demand and how the various participants react to it at various prices. On longer term, prices start to better reflect the fundamentals. Within something like week to some month or two, if there has not been any unique value affecting news, then interest, options, market maker(s), swing traders and such play bigger part. With intraday, the effects of available liquidity become very pronounced. The market makers have algos that try to guess what type of client they have and they prefer to give high price to large buyer and low price to small buyer. As intraday trader has spreads and commissions big part of their expenses and leverage magnifies those, instead of being able to take advantage of the lower prices, they prefer to stop out after small move against them. In practise this means that when they buy low, that low will soon be the midpoint of the day and tomorrows high etc if they are still holding on. Buy and sell are similar to long call or long put options position. And options are like insurance, they cost you. Also the longer the position is held the more likely it is to end up with someone with ability to test your margin if you're highly leveraged and constantly making your wins from the same source. Risk management is also issue. The leveraged pros trade through a company. Not sure if they're able to open another such company and still open accounts after the inevitable. |
Fractional Reserve Banking and Insolvency | Your question points out how most fractional reserve banks are only a couple of defaults away from insolvency. The problem arises because of the terms around the depositors' money. When a customer deposits money into a bank they are loaning their money to the bank (and the bank takes ownership of the money). Deposit and savings account are considered "on-demand" accounts where the customer is told they can retrieve their money at any time. This is a strange type of loan, is it not? No other loan works this way. There are always terms around loans - how often the borrower will make payments, when will the borrower pay back the loan, what is the total time frame of the loan, etc.. The bank runs into problems because the time frame on the money they borrowed (i.e. deposits) does not match the time frame on the money they are lending. |
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