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Is insurance worth it if you can afford to replace the item? If not, when is it? | The answer to this question is very different depending on the type of item. From a purely financial perspective you would want to answer these questions which you may not have enough information to answer: Realistically the question I prefer to ask are: When something fails there is a big difference to me between having the cash and having an insurance policy that is suppose to cover it even if they are theoretically the same value. Some insurance policies may even be better than cash, like homeowners insurance might help take care of details like finding a contractor to fix the issue, finding temporary housing if your house burns down, etc. |
When is it better to rent and when is better buy in a certain property market? | The first question is low long will you wish to stray there? It costs of lot in legal changes other changes plus taxes to buy and sell, so if you are not going to wish to live somewhere for at least 5 years, then I would say that renting was better. Do you wish to be able to make changes? When you rent, you can’t change anything without getting permission that can be a pain. Can you cope with unexpected building bills? If you own a home, you have to get it fixed when it breaks, but you don’t know when it will break or how much it will cost to get fixed. Would you rather do a bit of DIY instead of phone up a agent many times to get a small problem fixed? When you rent, it can often take many phone calls to get the agent / landlord to sort out a problem, if own your home, out can do yourself. Then there are the questions of money that other people have covered. |
I'm in Australia. What should I look for in an online stock broker, for trading mostly on the ASX? | I don't know where your trade figures are from. ETrade, TD Ameritrade, Fidelity, etc all have trading costs under 10 USD per share, so I'm not sure where your costs are coming from. I doubt currency conversion or anything like that will double the cost. As for your question, the answer is: It depends How much trading will you do? In what types of investments? For example, Schwab charges no commission on ETF purchases, but this is not an advantage if you wont buy ETFs. Consider minimums. Different brokers have different minimum cash balance/deposit requirements, so make sure you can meet those. It's true that you can get real time quotes anywhere, but consider the other services. For example, TD Ameritrade pools research reports for many publicly traded companies which are nice to read about what analysts have to say. Different brokers given different research tools, so read about offerings and see what's most useful to you. You can open different brokerage accounts, but it's much more convenient to have a one-stop place where you can do all you trading. Pick a broker which is low cost and offers a variety of investments as well as good customer support and a straightforward system. |
Which market orders to meet this recommendation : 'Take a position on the purchase of the fooBar share, protect your capital by placing a stop' | You would place a stop buy market order at 43.90 with a stop loss market order at 40.99 and a stop limit profit order at 49.99. This should all be entered when you place your initial buy stop order. The buy stop order will triger and be traded once the price reaches 43.90or above. At this point both the stop loss market order and the stop limit profit order will become active. If either of them is triggered and traded the other order will be cancelled automatically. |
Tax implications of having some self-employment income? | You would put your earnings (and expenses, don't forget) on Schedule C, and then do a Schedule SE for self-employment tax. http://www.irs.gov/businesses/small/article/0,,id=98846,00.html 1040ES isn't used to compute taxes, it's used to pay taxes. Generally you are supposed to pay taxes as you go, rather than when you file. There are exceptions where you won't be penalized for paying when you file, "most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller" from http://www.irs.gov/taxtopics/tc306.html i.e. there's a safe harbor as long as you pay as much as you owed the year before. If you owe a lot at the end of the year a second time in a row, then you get penalized. |
Can I transfer self-employed income into LLC? | An LLC is a very flexible company when it comes to taxation. You have three basic tax options: There are other good reasons to create an LLC (mainly to protect your personal assets) so even if you decide that you don't want to deal with the complications of an S-Corp LLC, you should still consider creating a sole proprietorship LLC. |
What does “issued XXX and YYY shares” mean? | authorized 100,000,000 shares They cannot issue shares more than that so 102M isn't possible. Common stock - $.01 par value, authorized 100,000,000 shares, issued 51,970,721 and 51,575,743 shares If you look at the right 2 columns it become clear what it means. You missed the $ symbol and on the top (In thousands, except share amounts) ouststanding share 51,970,721 -> 520 On Sept 30, 2014 outstanding shares * 0.01 and rounded off to arrive at 520. ouststanding share 51,575,743 -> 516 On June 30, 2014 outstanding shares * 0.01 and rounded off to arrive at 516. |
Pros/cons of borrowing money using a mortgage loan and investing it in a low-fee index fund? | Risk is the problem, as others have pointed out. Your fixed mortgage interest rate is for a set period of time only. Let's say your 3% might be good for five years, because that's typical of fixed-rate mortages in Canada. So, what happens in five years if your investment has dropped 50% due to a prolonged bear market, and interest rates have since moved up from 3% to 8%? Your investment would be underwater, and you wouldn't have enough to pay off the loan and exit the failed strategy. Rather, you might just be stuck with renewing the mortage at a rate that makes the strategy far less attractive, being more likely to lose money in the long run than to earn any. Leverage, or borrowing to invest, amplifies your risk considerably. If you invest your own money in the market, you might lose what you started with, but if you borrow to invest, you might lose much more than you started with. There's also one very specific issue with the example investment you've proposed: You would be borrowing Canadian dollars but investing in an index fund of U.S.-based companies that trade in U.S. dollars. Even if the index has positive returns in U.S. dollar terms, you might end up losing money if the Canadian dollar strengthens vs. the U.S. dollar. It has happened before, multiple times. So, while this strategy has worked wonderfully in the past, it has also failed disastrously in the past. Unless you have a crystal ball, you need to be aware of the various risks and weigh them vs. the potential rewards. There is no free lunch. |
What benefits are there to having a Pension (Retirement Account) In Ireland? | As you point out, the main benefits of a pension/retirement account over a traditional cash/taxable account are the legal and tax benefits. Most Western countries establish a specific legal definition for an account which is often taxed less or not at all relative to taxable accounts and which contains some protection for the owner in case of a bankruptcy. The typical drawbacks for investing within such structures are limited investment choice, limited withdrawal rights (either in terms of age or rate of withdrawal), and maximum contributions. The benefits are usually very clear, and your decision whether or not to open a pension/retirement account should depend on a careful weighing of the benefits and drawbacks. As to whether you may end up with less than you started, that depends on what you invest in. As with all of finance, you must take more risk to get more return. Although the choices inside a pension/retirement account may be worded somewhat differently, they are usually fundamentally no different than some of the most popular investments available for ordinary taxable accounts. |
How much of a down payment for a car should I save before purchasing it? | If and only if by coincidence the car you were already considering from your research includes a 0% finance offer, go ahead a take the financing and save your cash. If however you are being tempted to a different car, or would spend more than you initially thought were wanted to, 0% financing is just another trick to get more of you money. Just be honest why you want the car: is it a good price, or does the financing seem like a good deal? Even if you are not paying interest, you are paying principal. |
Buying a small amount (e.g. $50) of stock via eToro “Social Trading Network” using a “CFD”? | As many people here have pointed out, a CFD is a contract for difference. When you invest in stock at eToro, you buy a CFD reflecting a bid on the price movement of the underlying stock, however, you do not actually own the stock or hold any rights shareholders have. The counterparty to the CFD is eToro. When you close your position, eToro shall pay you the amount representing the difference between your buy and sell price for each stock. I suggest you read the following article about CFDs, it explains everything clearly and thoroughly: http://www.investopedia.com/articles/stocks/09/trade-a-cfd.asp#axzz2G9ZsmX3A As some of the responders have pointed out, and as is mentioned in the article, a broker can potentially misquote the prices of underlying assets in order to manipulate CFDs to their advantage. However, eToro is a highly reputable broker, with over 2 million active accounts, and we guarantee accurate stock quotes. Furthermore, eToro is regulated in Europe (Germany, UK, France, etc.) by institutions that exact strict regulations on the CFD trading sector, and we are obligated to comply with these regulations, which include accurate price quoting. And of course, CFD trading at eToro has tremendous benefits. Unlike a direct stock investment, eToro allows you to invest as much or as little as you like in your favorite stocks, even if the amount is less than the relevant stock price (i.e. fraction stocks). For example: if you invest $10 in Microsoft, and on the day of execution eToro’s average aggregated price was $30 after a spread of 0.1%, you will then have a CFD representing 0.33 stocks of Microsoft in your eToro account. In addition, with eToro you can invest in stock in the context of a social trading network, meaning that you can utilize the stock trading expertise of other trader to your advantage by following them, learning their strategies, and even copying their stock investments automatically. To put it briefly, you won’t be facing the stock market alone! Before you make a decision, I suggest that you try stock trading with an eToro demo account. A free demo account grants you access to all our instruments at real market rates, as well as access to our social network where you can view and participate in trader discussions about trading stocks with eToro, all without risking your hard earned money. Bottom line – it’s free, there are no strings attached, and you can get a much firmer idea of what trading stocks with eToro is like. If you have any further questions, please don’t hesitate to contact us through our site: www.etoro.com. |
What tax law loophole is Buffet referring to? | A Section 1256 contract is any: Non-equity options include debt options, commodity futures options, currency options, and broad-based stock index options. A broad-based stock index is based upon the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). 60% of the capital gain or loss from Section 1256 Contracts is deemed to be long-term capital gain or loss and 40% is deemed to be short-term capital gain or loss. What this means is a more favorable tax treatment of 60% of your gains. http://www.tradelogsoftware.com/tax-topics/futures/ It's a really wierd rule (arbitraty 60% designation, so broad, etc), but section 1256 contracts get preferential tax treatment and that's what Buffett's talking about. |
How does the value of an asset (valued in two different currencies) change when the exchange rate changes? | The value of the asset doesn't change just because of the exchange rate change. If a thing (valued in USD) costs USD $1 and USD $1 = CAN $1 (so the thing is also valued CAN $1) today and tomorrow CAN $1 worth USD $0.5 - the thing will continue being worth USD $1. If the thing is valued in CAN $, after the exchange rate change, the thing will be worth USD $2, but will still be valued CAN $1. What you're talking about is price quotes, not value. Price quotes will very quickly reach the value, since any deviation will be used by the traders to make profits on arbitrage. And algo-traders will make it happen much quicker than you can even notice the arbitrage existence. |
Are REIT worth it and is it a good option to generate passive income for a while? | In financial markets, the gains you can expect to make (whether in the form of dividends or capital gains) correspond to the risks you are bearing. There are a variety of REITs but you can expect to make only as much money in them as you bear risk (meaning you can also lose a lot of money in the ones that earn a lot). In that sense they are just like other financial assets like stocks. If you are generically trying to increase your wealth by bearing risk, you can get a better risk/reward ratio in a fully diversified portfolio including stocks and bonds as well and REITs. "Passive income" means making money by bearing risk. REITs alone, without diversifying into other financial assets, do a poor job of generating income for the amount of risk you bear. So why are REITs not very comparable to buying a house and renting it out? Because in the latter case you are being paid not only for bearing the risk of the house depreciating but also you are being compensated for the work you do as a landlord. Moreover, because the house doesn't trade in a liquid market like REITs do, it is possible to actually get a good deal, as opposed to the fair deal you will get on a REIT. TL;DR: The "passive income" generated by REIT investment is more similar to generic equity/bond investment than it is to an investment in a physical home that you rent out. If what you want is to make money without doing anything besides bear risk, you should invest in a fully diversified portfolio of financial assets (equity and bonds being the primary constituents but REITs potentially being a part as well). |
How do you invest in real estate without using money? | I know this is broad, but this isn't a scam -- it's a workshop/educational thing about teaching people of investing in the real estate market, and how to profit The scam is that the free or cheap class doesn't give you enough info to make money; so they sell you a more advanced and expensive class that gets you almost enough info; but the goal of the 2nd class is to get you to pay for the specialized seminar and coaching sessions that either fail to materialize or are so basic they aren't worth the money. |
How can I buy an OTC stock listed in Nasdaq from India? | According to this page on their website (http://www.kotaksecurities.com/internationaleq/homepage.htm), Kotak Securities is one big-name Indian broker that offers an international equities account to its Indian customers. Presumably, they should be able to answer all your questions. Since this is a competitive market, one can assume that others like ICICI Direct must also be doing so. |
Home loan: loss payable clause in favor of lender for home insurance? | Here's a good rule of thumb. In any situation where you are required to purchase insurance (Auto Liability, Property Mortgage Insurance, etc.) you can safely assume that you aren't the primary beneficiary. You are being required to buy that insurance to protect someone else's investment. |
22-year-old inherited 30k from 529 payout - what is the best way to invest? | First, I applaud you for caring. Most people don't! In fact, I was in that category. You bring up several issues and I'll try to address them separately. (1) Getting a financial planner to talk with you. I had the same experience! My belief is that they don't want to admit that they don't know how things work. I even asked if I could pay them an hourly fee to ask questions and review stocks with them. Most declined. You'll find that very few people actually take the time to get trained to evaluate stocks and the stock market as a whole. (See later Investools.com). After looking, however, I did find people who would spend an hour or two with me when we met once a quarter to review my "portfolio"/investments. I later found training that companies offered. I would attend any free training I could get because they actually wanted to spend time and talk and teach investors. Bottom line is: Talking to their clients is the job of a financial planner. If he (or she) is not willing to take this time, it is in your best interest to find someone who will spend that time. (2) Learning about investing! I'm not affiliated with anyone. I'm a software developer and I do my own trading/investments. The opinions I share are my own. When I was 20 years away from retirement, I started learning about the stock market so that I would know how it worked before I retired so that (a) I could influence a change if one was needed, and (b) so I wouldn't have to blindly accept the advice of the "experts" even when the stock market is crashing. I have used Investools.com, and TDAmeritrade's Think-or-Swim platform. I've learned a tremendous amount from the Investools training. I recommend them. But don't expect to learn how to get rich from them or any training you take. The TDA Think-or-swim platform I highly recommend BECAUSE it has a feature called "Paper Money". It lets you trade using the real market but with play money. I highly recommend ANY platform that you can use to trade IN PAPER money! The think-or-swim platform would allow you to invest $30,000 in paper money (you can have as much as you want) into any stock. This would let you see if you can make more money than your current investment advisor. You could invest $10K in one SPY, $10K in DIA and $10K in IWM (these are symbols for the S&P 500, Dow 30, and Small Cap stocks). This is just an example, I'm not suggesting any investment advise! It's important that you actually do this not just write down on a piece of paper or Excel spreadsheet what you were going to do because it's common to "cheat" and change the dates to meet your needs. I have found it incredibly helpful to understand how the market works by trying to do my own paper and now real money investing. I was and you will be surprised to find that many trades lose money during the initial start part of the trade because it's very difficult to buy at the exact right time. An important part of managing your own investments is learning to trade with rules and not get "emotionally involved" in your trades. (3) Return on investment. You were not happy with $12 return. Low returns are a byproduct of the way most investment firms (financial planners) take (diversification). They diversify to take a "hands off" approach toward investment because that approach has been the only approach that they have found that works relatively well in all market conditions. It's not (necessarily) a bad approach. It avoids large losses in down markets (most riskier approaches lose more than the market). The downside is it also avoids the high returns. If the market goes up 15% the investment might only go up 5%. 30K is enough to give to multiple investment firms a try. I gave two different firms $25K each to see how they would invest. The direction was to accept LOTS of risk (with the potential for large losses or large gains). In a year that the market did very well, one lost money, and one made a small gain. It was a learning experience. I, now, have taken the money back and invest it myself. NOTE: I would be happy with a guy who made me 10-15% year over year (in good times and bad) and didn't talk with me, but I haven't found someone who can do that. :-) NOTE 2: Don't believe what you hear from the news about the stock market being up 5% year to date. Do your own analysis. NOTE 3: Investing in "the market" (S&P 500 for example) is a great way to go if you're just starting. Few investment firms can beat "the market" although many try to do so. I too have found it's easier to do that than other approaches I've learned. So, it might be a good long term approach as well. Best wishes to you in your learning about the market and desires to make money with your money. That is what is all about. |
Employer reported ESPP ordinary income on wrong year's W-2 | You mentioned that the 1099B that reports this sale is for 2014, which means that you got the proceeds in 2014. What I suspect happened was that the employer reported this on the next available paycheck, thus reporting it in the 2015 period. If this ends up being a significant difference for you, I'd argue the employer needs to correct both W2s, since you've actually received the money in 2014. However, if the difference for you is not substantial I'd leave it as is and remember that the employer will not know of your ESPP sales until at least several days later when the report from the broker arrives. If you sell on 12/31, you make it very difficult for the employer to account correctly since the report from the broker arrives in the next year. |
Where are the non floated Groupon shares | Many people have criticized the Groupon IPO model because it doesn't make sense as an investment, unless you are an insider with cheap shares. Basically, you have: |
Is it possible for credit card companies to check credit score in India? | Is it possible for the card issuing banks to check my score without my permission? As far as I understand these things, that is exactly the whole purpose of these sorts of credit-rating institutions. The banks and other financial businesses are their customers. They exist to serve those customers. Their relationship, if any, with a consumer is probably secondary to that. When you apply for credit, you give that business any permission needed. |
Is unrealized gain part of asset? | Stocks, as an asset, represent the sum of the current market value of all of your holdings. If your portfolio is showing unrealized gains and losses, then that net amount is inherently reflected in the current market value of your holdings. That's not to say cost basis is not important. Any closed trades, realized gains or losses, will of course have an impact on your taxable income. So, it couldn't hurt to keep track of your cost basis from a tax standpoint, but understand that the term "asset" refers to the current market values and does not consider base amounts. Taxes do. Perhaps consider making separate cells for cost basis, but also bear in mind that most if not all of the major online discount brokers will provide transferring of cost basis information electronically to the major online tax service providers. |
How can I avoid international wire fees or currency transfer fees? | I faced something similar for travel or work reasons, and as for me I preferred wire transfer over credit card withdrawals because my bank has huge fees. My thoughts so far are: the fee can vary a lot for credit card. As for me, I can expect 5% fees on foreign withdrawals. But I considered changing bank and I think a Gold (or premium) card might be a good idea as well. The idea is you pay a big subscription (100 euros or so) but have no fee. The total of withdrawal fees could easily (if you stay long abroad) reach this amount. There are also banks like HSBC that offer low fees on withdrawals abroad, you can ask them. The problem is that you cannot really withdraw huge amounts to lower the fee (since you carry this cash in the street). for wire transfers the total fee is usually $50 or more (I had a fee from distant bank, a fee for change and a fee in my home bank). But the amount is unlimited (or high enough to be of little matter) and I needed to do this once per year or so. So I guess it could be interesting if you have enough savings to only transfer money every couple of months or so. I think Western Union is also involved this profitable business. I never used it because the fees are pretty high, but maybe it is useful for not too big amounts frequently transfered. Actually, have you considered a loan? It's a very random idea but maybe you can use a loan as a swap and then transfer money when you have enough to reimburse it all. But the question is very interesting, I think the business is pretty huge due to globalization. It is expensive because some people can make a lot of money out of it. |
How does start-up equity end up paying off? | In the real world, there are only two times you'll see that 5% become worth anything - ie, something you can exchange for cash - 1) if another company buys them; (2) if they go public. If neither of these things happen, you cannot do anything with the stock or stock options that you own. |
Why would a tender offer be less than the market price? | Rational shareholders wouldn't accept such an offer. The company making the offer is simply trying to get a deal with questionable — though not illegal — tactics. Your answer is actually in the link you provided. Quoting from the fourth paragraph [emphasis is mine]: The SEC has cautioned investors about mini-tender offers, noting that "[s]ome bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price." The SEC's tips for investors regarding mini-tender offers may be found on the SEC's Web site at http://www.sec.gov/investor/pubs/minitend.htm. There's a lot more information at the SEC web page mentioned. One part I'll highlight from the SEC web page mentions another reason for a mini-tender: Investors need to scrutinize mini-tender offers carefully. Some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price. Others make mini-tender offers at a premium – betting that the market price will rise before the offer closes and then extending the offer until it does or improperly canceling if it doesn't. You'll also find a lot more information at Wikipedia - Mini-tender offer. |
Do gift cards expire? Does a gift certificate's value depreciate? How long can I keep them for? | It depends on: In Canada, Ontario, Manitoba, Alberta and Nova Scotia have each enacted legislation to stop gift cards/certificates from expiring. Cards issued before the effective date are still subject to the old rules. The legislation came into effect: There are several common themes: There are still some unusual exemptions such as mall gift cards in Ontario, Manitoba: Ontario is the first jurisdiction in Canada to regulate gift cards. [...] Mall cards (e.g. Eaton Centre gift card) will be covered by the expiry date ban and the new disclosure rules. However, these cards can temporarily maintain their current fee structure while the provincial government examines options on how to best regulate these types of cards. This will allow more time to develop an approach that strikes the right balance for consumers and businesses. For specific details see the appropriate link. |
Buying a house 50/50 | I don't like it using percentages makes no sense. Find out what market value is for rent and pay 1/2 of that to your partner, adjust annually. You partner should be protected from inflation if he is going to invest in real estate. |
Finding stocks following performance of certain investor, like BRK.B for Warren Buffet | Remember that unless you participate in the actual fund that these individuals offer to the public, you will not get the same returns they will. If you instead do something like, look at what Warren Buffet's fund bought/sold yesterday (or even 60 minutes ago), and buy/sell it yourself, you will face 2 obstacles to achieving their returns: 1) The timing difference will mean that the value of the stock purchased by Warren Buffet will be different for your purchase and for his purchase. Because these investors often buy large swathes of stock at once, this may create large variances for 2 reasons: (a) simply buying a large volume of a stock will naturally increase the price, as the lowest sell orders are taken up, and fewer willing sellers remain; and (b) many people (including institutional investors) may be watching what someone like Warren Buffet does, and will want to follow suit, chasing the same pricing problem. 2) You cannot buy multiple stocks as efficiently as a fund can. If Warren Buffet's fund holds, say, 50 stocks, and he trades 1 stock per day [I have absolutely no idea about what diversification exists within his fund], his per-share transaction costs will be quite low, due to share volume. Whereas for you to follow him, you would need 50 transactions upfront, + 1 per day. This may appear to be a small cost, but it could be substantial. Imagine if you wanted to invest 50k using this method - that's $1k for each of 50 companies. A $5 transaction fee would equal 1% of the value of each company invested [$5 to buy, and $5 to sell]. How does that 1% compare to the management fee charged by the actual fund available to you? In short, if you feel that a particular investor has a sound strategy, I suggest that you consider investing with them directly, instead of attempting to recreate their portfolio. |
Stock Certificate In two names | The DOW is just an index, which is simply a group of stocks meeting the criteria for inclusion. In the case of the DOW, it's the 30 US stocks with the largest market capitalization, but other indices include many lesser stocks (such as the S&P500 or the Russell 2000). The fact that Holobeam is no longer a constituent of the DOW30 probably shouldn't be taken in and of itself as a signal to sell the stock. As far as I can tell, HOOB stock is still trading on the Nasdaq exchange. However, it is extremely ill-liquid, which means that there are very few people willing to buy or sell it. Whether or not this would work to your advantage is almost entirely down to luck - it depends whether there is a keen buyer out there at the time you try to sell. |
What should I be aware of as a young investor? | If you are going to the frenzy of individual stock picking, like almost everyone initially, I suggest you to write your plan to paper. Like, I want an orthogonal set of assets and limit single investments to 10%. If with such limitations the percentage of brokerage fees rise to unbearable large, you should not invest that way in the first hand. You may find better to invest in already diversified fund, to skip stupid fees. There are screeners like in morningstar that allow you to see overlapping items in funds but in stocks it becomes trickier and much errorsome. I know you are going to the stock market frenzy, even if you are saying to want to be long-term or contrarian investor, most investors are convex, i.e. they follow their peers, despite it would better to be a concave investor (but as we know it can be hard). If the last part confused you, fire up a spreadsheet and do a balance. It is a very motivating activity, really. You will immediately notice things important to you, not just to providers such as morningstar, but alert it may take some time. And Bogleheads become to your rescue, ready spreadsheets here. |
How to share income after marriage and kids? | This would be my suggestion: I would approach the problem thinking about the loss of monthly income you (as a couple) will be facing due to your wife's change to a part time job and divide that loss between the two of you. This means that if she goes from 2200 to 1100 monthly, you'd be losing 1100 per month. To share this loss, you could repay your wife your part of the loss (550) so both of you are 550 euro down. However, this 550 loss is a bigger burden for your wife than it is for you, so this amount could be adjusted to make up for this inequality. To make calculations simple and avoid developing a complicated model, you could give the 800 euro above your 3k to your wife for as long as she has to work part time. |
Why have candlestick charts overlaps? | Remember that prices refer to discrete events in the market - trades - it is easily possible that the highest price for a trade in the next period is lower than the highest price in the current one as someone in the current period may be willing to pay more in this period than anyone in the next. The ending price of a period is also determined this way; it is the last price that someone was willing to pay in this period not the first price that someone will pay in the next period. Why? because the last price in this period is not in the next period by definition! edit: added something on illiquid stocks Illiquid stocks may have intraday gaps in the sequence of candlesticks where no trading occurred. Below is one such chart for 1pm plc.(OPM.L) a UK based leasing company (thanks to Yahoo finance for this): |
UK: Personal finance book for a twenty-something | I would always recommend the intelligent investor by Benjamin Graham the mentor of warren buffet once you have a basic knowledge ie what is a share bond guilt etc In terms of pure investment the UK is fairly similar the major difference is the simpler tax structure, ISA allowance and the more generous CGT regime. |
If a country can just print money, is global debt between countries real? | The main driver behind countries not printing themselves out of debt is the fact that it will cripple the economy, destroy citizens savings, asset valuations and piss all the countries trade partners off so much that they may stop doing business with them. You will have a few different extremes, look at Zimbabwe as an example of a country that just prints money like no ones business. America is essentially devaluing its currency to compete with China. That annoys the Chinese because their holdings are devalued and as such you then see people moving away from US treasuries into more stable commodities and currencies. |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | You probably bought the stock near the peak because "it's been up a lot lately." That's the easiest way to lose money. You need to go back and do some basic research. The stock appears to have been expensive around 75. Why is that? The stock seems to be in a "comfortable" level around 45. Why is THAT? Maybe it's too expensive around 45 (based on the P/E ratio, or other measures); maybe you should buy more at 45, where it is cheap, even though 75 is too expensive. The key is to study the stock where it is today (45-47). Ask yourself what you would do at TODAY's price, and today's "fundamentals." That will also save you from paying 75 for a stock worth 45, and should save you from paying 45 for a stock if it is only worth 35. |
Is it a bet on price fluctuations and against the house? | The answer depends on the specific instrument to which you are referring. It is possible to make straight bets that are cash-settled and in which the underlying commodity or instrument will never be bought or sold. It is also possible to have such a contract be settled in the underlying (if the cash value is appropriate, then the cash settlement can be used to purchase the underlying directly, if necessary). Physical delivery was predominant until the last few decades. Most traders, as opposed to hedgers or strategics, are going to prefer cash-settled contracts as opposed to physical delivery. It is possible to make trades with a brokerage firm such that the firm pays if the trader wins the bet. The firm will typically find parties on the other side to even out this bet and leave itself neutral as to the outcome (plus a small premium it charges each side for the cost of making the market). The cost charged to one contracting party should be set by the dealer in relation to prices being charged to parties making the opposite, matching bet (in this way, brokers are following market price, while traders are setting it). Financially, options and contracts can be settled for cash or for the underlying, and they can be made directly with the opposite bettor or with a neutral dealer. |
Is it possible for the average person to profit on the stock market? | There's a huge difference between "can an anverage person make a profit on the stock market" and "can an average person get rich off the stock market". It is certainly possible for an average person to profit, but of course you are unlikely to profit as much as the big Wall Street guys. An S&P 500 index fund, for instance, would be a pretty good way to profit. People with high-powered tools may make a lot of money picking individual stocks, and may even make some choices that help them when the market is down, but it's difficult to see how they could consistently make money over the long term without the S&P 500 also going up. The same applies, to varying extents, to various other index funds, ETFs, and mutual funds. I agree with littleadv that there is no single "right" thing for everyone to do. My personal take is that index funds are a good bet, and I've seen a lot of people take that view on personal finance blogs, etc. (for whatever that's worth). One advantage of index funds that track major indexes (like the S&P 500) is that because they are and are perceived as macro-indicators of the overall economic situation, at least you're in the same boat as many other people. On one level, that means that if you lose money a lot of other investors are also losing money, and when large numbers of people start losing money, that makes governments take action, etc., to turn things around. On another level, the S&P 500 is a lot of big companies; if it goes down, some of those big companies are losing value, and they will use their big-company resources to gain value, and if they succeed, the index goes up again and you benefit. In other words, index funds (and large mutual funds, ETFs, etc.) make investing less about what day-trading wonks focus on, which is trying to make a "hot choice" for a large gain. They make it more about hitching your wagon to an extremely large star that is powered by all the resources of extremely large companies, so that when those companies increase their value, you gain. The bigger the pool of people whose fortunes rise and fall with your own, the more you become part of an investment portfolio that is (I can't resist saying it) "too big to fail". That isn't to say that the S&P 500 can't lose value from time to time, but rather that if it does go down big and hard and stay there, you probably have bigger problems than losing money in the stock market (e.g., the US economy is collapsing and you should begin stockpiling bullets and canned food). |
Frustrated Landlord | You're worried about your tenant. That just means you're a nice guy, and it's ok to be nice. At the same time, you can't be expected to lose money on the property or charge well below market on the rent. My suggestions: You know what? She'll totally understand. You've been super nice in keeping the rent low for so many years, and she's been a great tenant, too. At a certain point, inflation kicks in and you have to raise the rent. She'll get that. If she can find a cheaper place, that's a win for both of you. Help her move if you want to be extra nice. Then decide if you want to sell the place or raise the rent. Either option is fine. Listen to your wife. That's just general advice. |
What is the smartest thing to do in case of a stock market crash | First, there will always be people who think the market is about to crash. It doesn't really crash very often. When it does crash, they always say they predicted it. Well, even a blind squirrel finds a nut once in a while. You could go short (short selling stocks), which requires a margin account that you have to qualify for (typically you can only short up to half the value of your account, in the US). And if you've maxed out your margin limits and your account continues to drop in value, you risk a margin call, which would force you to cover your shorts, which you may not be able to afford. You could invest in a fund that does the shorting for you. You could also consider actually buying good investments while their prices are low. Since you cannot predict the start, or end, of a "crash" you should consider dollar-cost-averaging until your stocks hit a price you've pre-determined is your "trigger", then purchase larger quantities at the bargain prices. The equity markets have never failed to recover from crashes. Ever. |
How do I go about finding an honest & ethical financial advisor? | If your financial needs aren't complex, and mostly limited to portfolio management, consider looking into the newish thing called robo-advisers (proper term is "Automated investing services"). The difference is that robo-advisers use software to manage portfolios on a large scale, generating big economy of scale and therefore offering a much cheaper services than personal advisor would - and unless your financial needs are extremely complex, the state of the art of scaled up portfolio management is at the point that a human advisor really doesn't give you any value-add (and - as other answers noted - human advisor can easily bring in downsides such as conflict of interest and lack of fiduciary responsibility). disclaimer: I indirectly derive my living from a company which derives a very small part of their income from a robo-adviser, therefore there's a possible small conflict of interest in my answer |
What does it mean when someone says “FTSE closed at xxx today” | It's sort of the sum of stock prices, but bigger companies are weighed more heavily. |
Is there a way I can get bid/ask price data on the NSE in real time? | Quite a few Banks/brokers offer direct terminals to NSE where you can see live prices. |
W8-BEN for an Indian Citizen | For filling out the W8-BEN form, please refer to the instructions in the document named: Instructions for Form W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting |
still have mortgage on old house to be torn down- want to build new house | I could be wrong, but I doubt you're going to be able to roll the current mortgage into a new one. The problem is that the bank is going to require that the new loan is fully collateralized by the new house. So the only way that you can ensure that is if you can construct the house cheaply enough that the difference between the construction cost and the end market value is enough to cover the current loan AND keep the loan-to-value (LTV) low enough that the bank is secured. So say you currently owe $40k on your mortgage, and you want to build a house that will be worth $200k. In order to avoid PMI, you're going to have to have an LTV of 80% or less, which means that you can spend no more than $160k to build the house. If you want to roll the existing loan in, now you have to build for less than $120k, and there's no way that you can build a $200k house for $120k unless you live in an area with very high land value and hire the builders directly (and even then it may not be possible). Otherwise you're going to have to make up the difference in cash. When you tear down a house, you are essentially throwing away the value of the house - when you have a mortgage on the house, you throw away that value plus you still owe the money, which is a difficult hole to climb out of. A better solution might be to try and sell the house as-is, perhaps to someone else who can tear down the house and rebuild with cash. If that is not a viable option (or you don't want to move) then you might consider a home equity loan to renovate parts of the house, provided that they increase the market value enough to justify the cost (e.g. modernize the kitchen, add on a room, remodel bathrooms, etc. So it all depends on what the house is worth today as-is, how much it will cost you to rebuild, and what the value of the new house will be. |
Should I pay off my credit card online immediately or wait for the bill? | It is COMPLETELY no use to pay earlier (during a billing cycle) to better your credit score! Your credit score gets affected ONLY once a month from each creditor, and that happens when they post your monthly statement. Thus, no matter what you do or pay and how many times a month or how many days earlier than your due date, it has NO EFFECT WHATSOEVER on your score. Anything you do will be reflected only after the statement. What you pay in between those two statements is irrelevant. So, as far as credit score goes IT DOESN'T MATTER. However, if you want to save on interest being charged, it is wise to pay as early as possible, so your balance is as low as possible for day-by-day calculation of your interest. |
In a competitive market, why is movie theater popcorn expensive? | You're looking at this too rationally. People can not resist eating junk food, especially when they have to sit for 2-3 hours to watch a movie. It's pure biology, not economics. People don't always act according to economic logic. |
What's the most conservative split of financial assets for my portfolio in today's market? | The safest place to put money is a mixture of cash, local municipal bond funds with average durations under two years and US Treasury bond funds with short durations. Examples of good short term US municipal funds: I'm not an active investor in Australian securities, so I won't recommend anything specific. Because rates are so low right now, you want a short duration (ie. funds where the average bond matures in < 2 years) fund to protect against increased rates. The problem with safety is that you won't make any money. If your goal to grow the value of your investment while minimizing risk, you need to look at equities. The portfolios posted by justkt are a great place to start. |
Understanding differences between S&P500 index-tracking ETFs | Regarding SPY: "One SPDR unit is valued at approximately 1/10 of the value of the S&P 500. Dividends are distributed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust." (source) These are depository receipts, not the actual stocks. Regarding IVV: "The component stocks are weighted according to the total float-adjusted market value of their outstanding shares. The Fund invests in sectors, such as energy, information technology, industrials, financials, consumer staples, healthcare, telecom services, consumer discretionary and materials." (more here) VOO is the Vanguard S&P 500 ETF. The tracking error seems pretty small to me. I went to Google Finance and plotted the percent change for all four on one chart. They lie pretty much on top of one another. The actual dollar value of each one doesn't matter nearly as much as the fact that they move up and down almost in lock-step. There may be a larger difference going farther out, but for three separate financial products, the agreement is still remarkably good. |
Choosing a vehicle to invest a kid's money on their behalf (college, etc.)? | One other advantage of a 529 versus a simple investment account (like an UGMA/UTMA) is that the treatment for the purposes of financial aid is more advantageous (FinAid.org). Even if it is a custodial account (in which the student is both the owner and beneficiary), it is treated as a parental asset when completing the FAFSA. That means the amount that will be considered available each year towards the Estimated Family Contribution (EFC) will be greatly reduced. To be sure, this does not help with all colleges (often ones that use the CSS/PROFILE in addition to the FAFSA). Some will simply assume that 25% of the 529 will be used each year. |
What is the correct answer for percent change when the start amount is zero dollars $0? | As has been said before, going from nothing to something is an infinite percent increase! It is not 100%. Maybe you had a dollar and now have $101 that is a 10000% increase! Quite remarkable. I often work with symmetrized percent changes like: spc = 100 * (y2-y1)/(0.5 * (y1+y2)) Where I compute the percent with respect to the average. First this is more stable as often measurements can have noise, the average is more reliable. Second advantage is also that this is symmetric. So going from 95 to 105 is a 10 % increase while going from 105 to 95 a 10% decrease. Of course you need to explain what you show. |
Is is possible to take a mortgage using Bitcoin as collateral? | This doesn't make any sense. For the people who ask you this, suggest that they borrow the money to invest with you. They can use their bitcoins as collateral for the loan. That way, they get the same benefit and your company doesn't go out of business if the price of bitcoin drops, even temporarily, because the loan becomes unsecured. If they want to try to use a volatile asset as collateral and have to figure out how to cover when the price drops temporarily, great. But why should they put that risk on your other investors who may not be so crazy? Also, this obviously won't meet the investor's concerns anyway. Say the price of bitcoin goes up but you lose 10% of the money you borrowed. Clearly, your investors can't have an interest that worth as much as they would have if they held bitcoin since you lost 10%. |
How to get started with savings, paying off debt, and retirement? | I agree with the other answers here. You need to pay off your debts first, so that you can take the money you would have been spending on debt payments and make retirement contributions instead. The longer they hang around, the more you pay in interest and the more they are a risk to you. Imagine if you or your spouse were laid off, which is better scenario: having to pay for your necessities plus debts or your necessities alone? Just focus on one goal at a time, and you will do well. And the best way for you and your new spouse is to have the same financial goals and a huge part of that agreeing on a budget each month and being flexible. Don't use it to control your spouse, you each have a vote. I have not used Vangaurd, but have heard good things about them. I would do some research before investing with them or anyone else for that matter. What you want to find when it comes to investing is someone with the heart of a teacher, not a product peddler. If you have someone who is pushing financial products, without explaining (A) how they work, and (B) how they fit your situation, then RUN AWAY and find someone else who will do those two things. |
What are the benefits to underwriters in a secondary offering? | Your impression about banks and bankers is very wrong. Wall street banks can and often do lose in transactions. In fact, banks go bankrupt and/or require massive bailouts to survive because they sometimes lose a ton of money. The business of investment banking often involves bearing risk for customers, which, by definition, means they lose some of the time. Generally the risks they take on individual transactions are not large enough to bring the whole bank down, but sometimes they are. Banking is a job like any other, except that it has more risk than most. Anyway, to your point, how do underwriters make money on shares that fall in value before the sale? On the commission. The issuing company will normally pay the investment bank a percentage of the funds raised in the offering, regardless of the price. Of course, it's possible for the bank to still lose money if their contract stipulates a minimum price and they are not able to meet it. In that case, the bank may lose on that offering, contradicting your preconceived notion. By the way, one other question implicit in your post: Why was the secondary offering considered bad news? If the CEO and other insiders have private information that indicates that the stock is overvalued, then doing a secondary offering at the inflated price will greatly enrich them. Because this happens some times, investors are wary about secondary offerings. This makes companies that would otherwise do a secondary offering shy away from it, even if shares are not overpriced. Therefore if a company is doing a secondary offering, the market is likely to worry that the stock is overvalued even at a reduced price. |
Why don't share prices of a company rise every other Friday when the company buys shares for its own employees? | Let's take an example: IBM has about 430,000 employees worldwide. Assume the average yearly salary is $80K (it's probably less, since a lot of jobs are offshore). If every employee took 10% of their pay as stock, that's $132 million every two weeks. But IBM's market capitalization is about $153 billion, so stock purchases would be less than 0.1% of that. |
Options liquidity and trading positions larger than the daily volume? | You definitely cannot be guaranteed to get the bid or ask if you are selling more than are available/desired at those prices. What prices you do get depends on who is watching that contract and how willing they are to trade with you. This question is not much different from the question of whether you can easily get into or out of a large position in an illiquid small stock easily. You can get out quickly if you are willing to take pennies on the dollar, or you may get a reasonable price if you take a long time to get out of (or into) your position. You can't normally do both. In general taking large positions in illiquid assets is not something people want to do without lining up a buyer/seller beforehand. Instead see if you can achieve your objective with liquid investments. |
Should one invest in smaller valued shares in higher amounts, or higher valued shares in smaller amounts? | Short answer: No, it only matters if you want to use covered calls strategies. The price of a share is not important. Some companies make stock splits from time to time so that the price of their shares is more affordable to small investors. It is a decision of the company's board to keep the price high or low. More important is the capitalization for these shares. If you have lots of money to invest, the best is to divide and invest a fixed pourcentage of your portfolio in each company you choose. The only difference is if you eventually decide to use covered call strategies. To have a buy write on Google will cost you a lot of money and you will only be able to sell 1 option for every 100 shares. Bottom line: the price is not important, capitalization and estimated earnings are. Hope this answers your question. |
Working remotely from Canada for a US company. How to get paid? | I'm no lawyer and no expert, so take my remarks as entertainment only. Also see this question. If you have a U.S. SSN which is eligible for work, they may be able to pay you on 1099 basis with your SSN as a sole proprietor, unless they have some personal reason for avoiding that. So perhaps try asking about that specifically. HR policies can be weird and tricky, maybe a nudge in the right direction will help. Not What You Asked: regardless, I might recommend you register as an LLC and get an EIN (sort of SSN for companies) for a variety of reasons. It's called a "limited liability" company for a reason. You may also have an easier time reaping various business-related rewards, like writing off expenses. If you do so, consider a state with no income tax like Wyoming. (Or, for convenience sake, WA if you live in BC, or maybe NH if you live in Ontario.. etc.) |
Is 6% too high to trade stocks on margin? | Okay so we are assuming that you can sustain 6% or more return on your investments. Personally I would compare that rate to what lines of credit are going for and do what ever is least expensive. Either way your risk is the same. Your net worth is the same. Your assets will be the same. Your liabilities will be the same. Its just a matter of who you owe it to and what the rate is. Don't be afraid of having a second mortgage. If the stocks go down either way you have to sell what's left and pay your debt. Or what I should maybe say is don't be more afraid of a line of credit more than margin in your investment account. |
In a house with shared ownership, if one person moves out and the other assumes mortgage, how do we determine who owns what share in the end? | The answer is "it depends". What does it depend on? If it's a breakup situation, good luck. Whatever you do, get this issue settled as quickly as possible. In the future, don't make significant purchases with people unless you have a written contract or you are married. |
What is a Student Loan and does it allow you to cover a wide range of expenses relating to school? | Student loan is a class of unsecured loan. The characteristics that define a student loan are, primarily, that it is a loan that is intended to be used by someone who is currently a student. Beyond that, though, there are many variations. The different kinds of requirements usually have to do with who is eligible for the loan, and with what the loan is allowed to be used to pay. Some loans have other limitations, such as only being allowed to be directly paid to the institution. Some student loans are federally guaranteed (meaning the Federal Government will repay the bank if you default). Those have a lower interest rate, typically, and often have more stringent requirements, such as only full-time students being eligible, being need-based, and limitations on what the loan's funds can be used for. See studentaid.ed.gov for more information. Many private student loans have quite lax limitations. Some for example have nearly no limitation as to what they can fund; many are allowed to be taken out by part-time students and even non-degree-seeking students in some cases. Private loans usually have somewhat higher rates (as they're entirely unsecured) to go along with the lower restrictions and higher borrowing limits. You'd have to see the specific details of any particular loan to know what it's allowed to pay for, so if you choose this route, know what you plan to use it to pay for before you go looking. |
Can an unmarried couple buy a home together with only one person on the mortgage? | The mortgage and title of the house would be under both your names equally. When I applied for a mortgage with my girlfriend, I was the primary applicant because of my credit score and she was the secondary because of her income (she makes more). When all was said and done, it was explained to us that the mortgage was ours equally and so was the house, and that I didn't hold more ownership than her over either. We were approved quickly and hassle free. This is our first house too. This is in Florida. |
How to stress test an investment plan? | Here are a few things I've already done, and others reading this for their own use may want to try. It is very easy to find a pattern in any set of data. It is difficult to find a pattern that holds true in different data pulled from the same population. Using similar logic, don't look for a pattern in the data from the entire population. If you do, you won't have anything to test it against. If you don't have anything to test it against, it is difficult to tell the difference between a pattern that has a cause (and will likely continue) and a pattern that comes from random noise (which has no reason to continue). If you lose money in bad years, that's okay. Just make sure that the gains in good years are collectively greater than the losses in bad years. If you put $10 in and lose 50%, you then need a 100% gain just to get back up to $10. A Black Swan event (popularized by Nassim Taleb, if memory serves) is something that is unpredictable but will almost certainly happen at some point. For example, a significant natural disaster will almost certainly impact the United States (or any other large country) in the next year or two. However, at the moment we have very little idea what that disaster will be or where it will hit. By the same token, there will be Black Swan events in the financial market. I do not know what they will be or when they will happen, but I do know that they will happen. When building a system, make sure that it can survive those Black Swan events (stay above the death line, for any fellow Jim Collins fans). Recreate your work from scratch. Going through your work again will make you reevaluate your initial assumptions in the context of the final system. If you can recreate it with a different medium (i.e. paper and pen instead of a computer), this will also help you catch mistakes. |
What do the terms par value, purchase price, call price, call date, and coupon rate mean in the context of bonds? | Bonds are valued based on all of this, using the concept of the "time value of money". Simply stated, money now is worth more than money later, because of what you can do with money between now and later. Case in point: let's say the par value of a bond is $100, and will mature 10 years from this date (these are common terms for most bonds, though the U.S. Treasury has a variety of bonds with varying par values and maturation periods), with a 0% coupon rate (nothing's paid out prior to maturity). If the company or government issuing the bonds needs one million dollars, and the people buying the bonds are expecting a 5% rate of return on their investment, then each bond would only sell for about $62, and the bond issuer would have to sell a par value of $1.62 million in bonds to get its $1m now. These numbers are based on equations that calculate the "future value" of an investment made now, and conversely the "present value" of a future return. Back to that time value of money concept, money now (that you're paying to buy the bond) is worth more than money later (that you'll get back at maturity), so you will expect to be returned more than you invested to account for this time difference. The percentage of rate of return is known as the "yield" or the "discount rate" depending on what you're calculating, what else you take into consideration when defining the rate (like inflation), and whom you talk to. Now, that $1.62m in par value may be hard for the bond issuer to swallow. The issuer is effectively paying interest on interest over the lifetime of the bond. Instead, many issuers choose to issue "coupon bonds", which have a "coupon rate" determining the amount of a "coupon payment". This can be equated pretty closely with you making interest-only payments on a credit card balance; each period in which interest is compounded, you pay the amount of interest that has accrued, to avoid this compounding effect. From an accounting standpoint, the coupon rate lowers the amount of real monies paid; the same $1m in bonds, maturing in 10 years with a 5% expected rate of return, but with a 5% coupon rate, now only requires payments totalling $1.5m, and that half-million in interest is paid $50k at a time annually (or $25k semi-annually). But, from a finance standpoint, because the payments made in the first few years are worth more than the payments made closer to and at maturity, the present value of all these coupon payments (plus the maturity payout) is higher than if the full payout happened at maturity, and so the future value of the total investment is higher. Coupon rates on bonds thus allow a bond issuer to plan a bond package in less complicated terms. If you as a small business need $1m for a project, which you will repay in 10 years, and during that time you are willing to tolerate a 5% interest rate on the outstanding money, then that's exactly how you issue the bonds; $1 million worth, to mature in 10 years and a 5% coupon rate. Now, whether the market is willing to accept that rate is up to the market. Right now, they'd be over the moon with that rate, and would be willing to buy the bonds for more than their face value, because the present value would then match the yield they're willing to accept (as in any market system, you as the seller will sell to the highest bidder to get the best price available). If however, they think you are a bad bet, they'll want an even higher rate of return, and so the present value of all coupon and maturity payments will be less than the par value, and so will the purchase price. |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | I'm guessing that you've reached the value limit of a payment that can be made without linking your account to a bank account. While you want privacy, PayPal wants to not be a money launderer. You may need to seek an alternative way to pay for this if you're trying to be private about it. |
Would it make sense to buy a rental property as an LLC and not in my own name? | Consider that there are some low-probability, high-impact risk factors involved with property management. For example, an old house has lead paint and may have illegal modifications, unknown to you, that pose some hazard. All of your "pros" are logical, and the cons are relatively minor. Just consult an attorney to look for potential landmines. |
First job: Renting vs get my parents to buy me a house | No one has considered the tax write off at the end of the year? Will the house be in the parent's name or his, and can one of them take a write off for taxes and interest at the end of each year? On a small salary this may mean he has no tax liability for the four years, and can possibly make up the extra buying costs.... also, look at the comps in the area for the past five years and see if home values have increased and turnover rate for the area will tell you if people are buying in that area... |
Is 6% too high to trade stocks on margin? | 6% isn't "too high" in terms of market rates at the moment, however it's a very subjective question whether it's too high for you. The real question to determine is if paying 6%, can you make more than 6% return (to cover the costs plus your profit)? As for a rule of thumb, there's none I know of, however your best bet is to take the time to model it in Excel (not difficult). It's different for each portfolio or investment. Something with a high standard deviation of returns is already high risk, adding margin to it only makes it worse. So, long story short is that, "it depends". |
Should I close unused credit cards before applying for another? | If you're looking for cause-effect, applying for another card won't matter at all if you're not paying any interest, or not looking to get another installment loan for which the rate you get depends on your credit rating. If you are looking to get another installment loan, then having more credit at your disposal might hurt a small amount. I wouldn't want to cancel your oldest card. The GEMB card looks like a good candidate if you want to cancel because you're not using it, and it's a relatively new card. |
understand taxes when geting money from a project built long time ago plus my full time job | You need to register as self-employed with HMRC (it is perfectly fine to be self-employed and employed by an employer at the same time, in exactly your kind of situation). Then, when the income arrives you will need to declare it on your yearly tax return. HMRC information about registering for self-employment and declaring the income is here: https://www.gov.uk/working-for-yourself/overview There's a few extra hoops if your clients are outside the UK; the detail depends on whether they are in the EU or not. More details about this are here: https://www.gov.uk/online-and-distance-selling-for-businesses/selling-overseas . |
Is forward P/E calculated using current price(if yes, how useful is it)? | P/E can use various estimates in its calculation as one could speculate about future P/E rations and thus could determine a future valuation if one is prepared to say that the P/E should be X for a company. Course it is worth noting that if a company isn't generating positive earnings this can be a less than useful tool, e.g. Amazon in the 1990s lost money every quarter and thus would have had a N/A for a P/E. PEG would use P/E and earnings growth as a way to see if a stock is overvalued based on projected growth. If a company has a high P/E but has a high earnings growth rate then that may prove to be worth it. By using the growth rate, one can get a better idea of the context to that figure. Another way to gain context on P/E would be to look at industry averages that would often be found on Yahoo! Finance and other sites. |
If there's no volume discount, does buying in bulk still make sense? | There is a trade-off. It can be worthwhile because you save those extra trips. (On the other hand, don't you need to go shopping all the time for perishable items anyway?) On the other hand, having those items on stock implies inventory costs (the space they take up might be limited, the money they represent is sleeping and cannot be put to other usage, some of them might break...). This trade-off gives you the economic order quantity. Your stock levels over time based on that would look like a saw-blade. In addition, you might want to keep a safety stock for emergencies (if you use them faster than expected, if there is a supply shortage...). |
Buy tires and keep car for 12-36 months, or replace car now? | New tires will increase the resale value of the car; while not by the full cost of the tires, it will not be entirely a sunk cost. You'd need to factor that in and find out how much the new tires increase the resale value of the car to determine how much they would truly cost you. However, I suspect they would cost you less than a $25,000 car a year early would. That new car would cost some amount over time - it sounds like you buy a new car every 8 years or so? So it would cost you $25/8 = $3.3k/year. That would, then, be the overall cost of the new car a year early - $3.3k (as it would mean one less year out of your old car, so assuming it was also $25k/8 year or similar, that year becomes lost and thus a cost). |
Sales Tax Licence/Permit - When is it required and how can I make a use of it as a non-US resident selling in USA? | Sales tax permits come from the state in which your business is operating. You need a business license first for them to issue you one. US sales taxes are collected by the business and remitted to the government, you need the permit in order to do this. A bigger question is whether it's legal for you to engage in business in the first place. What is your visa status? |
Frustrated Landlord | If you're losing money or breaking even, you own a bad investment. The problem you have is that you are emotionally invested in your tenant. That isn't a bad thing in general but it's costing you money and, unless interest rates fall enough to justify a refi or property taxes go down in your area, that's kind of unlikely to change. Option #1 - Tell your wife that you are willing to accept a loss up to a certain level because of your long term relationship with your tenant. In a perfect world, the two of you would then discuss what the "magic number" would be where you got out and come to a compromise. For example, if you are comfortable losing up to $3,000 per year and she is unhappy with any loss, you may agree on selling the house when your losses climb to $1,500. In a less perfect world, it would cause an argument as she has already told you what she wants you to do. Option #2 - Raise the rent to the break even point. From what you've said, this will likely result in the loss of your tenant but you could then rent to someone else for significantly more. Option #3 - Sell the house. It's an investment property which means it's supposed to make money for you. It can do that very quickly by way of a sale and then it's no longer your problem. Option #4 - Sell the house to your tenant. You bought it for $50,000 and it's currently worth $150,000 (roughly). The problem you face is that property taxes have gone up and caused your mortgage to increase past your tenants ability to pay. My guess is, after 15 years, your payoff is somewhere in the high $20's to mid 30's assuming you got a 30 year loan and haven't refinanced. If you sell to her for say $75,000 (or even up to $90,000) you will still make a profit (wife is happy), she will get a mortgage she can afford and be able to stay in the house (you and the tenant are happy). Added bonus is that her property taxes would be lower (assuming a different rate for investment property in your area). I would discuss this at length with your wife as well before making such an offer. Option #5 - Get a property management company. As mentioned above, they will keep a percentage but will remove your emotions from the equation altogether and turn the situation into a winner. I don't know if your wife is right in saying you don't have the stomach for this, but I do think your heart is getting in the way in this particular situation. I get the feeling that if your tenant was 25 years old and had only been renting from you since last October, you would have no problem raising the rent to market levels at every renewal. |
What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund? | Annual property tax and home insurance come to mind as things that are easily forgotten, but surely the biggest true, "I didn't see that coming," is a major car repair. There are a number of things that can go wrong with a car with little warning and end up costing a thousand dollars or more. Since most people are dependent upon their car for getting to work, doing anything but fixing or replacing the car is not an option. If you fix it, that's an out of pocket expense that most aren't prepared for. If the car has some age, you might be inclined to replace it, but doing so in a rush costs a lot more than taking your time in such a decision. |
Can my employer limit my maximum 401k contribution amount (below the IRS limit)? | YMMV, but I don't accept non-answers like that from HR. Sometimes you need to escalate. Usually when I get this sort of thing, I go to my boss and he asks them the question in writing and they give him a better answer. (HR in most companies seem to be far more willing to give information to managers than employees.) Once we both had to go to our VP to get HR to properly listen to and answer the question. Policies like this which may have negative consequences (your manager could lose a good employee over this depending on how to close to retirement you are and how much you need to continue making that larger contribution) that are challenged by senior managment have a better chance of being resolved than when non-managment employees bring up the issue. Of course I havea boss I know will stand up for me and that could make a difference in how you appraoch the problem. |
Can someone explain a stock's “bid” vs. “ask” price relative to “current” price? | Both prices are quotes on a single share of stock. The bid price is what buyers are willing to pay for it. The ask price is what sellers are willing to take for it. If you are selling a stock, you are going to get the bid price, if you are buying a stock you are going to get the ask price. The difference (or "spread") goes to the broker/specialist that handles the transaction. |
Should I cash out my Roth IRA to pay my mother's property tax debt, to avoid foreclosure on her home? | First, I'm really sorry to hear about your mother. My wife was recently diagnosed with Stage 4 cancer, so I know that there is a possibility that your mind is in "survival" mode, trying to preserve as much as you can in the way of things that you can effect (that's how I've been feeling recently). Having a loved one with cancer is really tough because there is absolutely, positively nothing tangible that you can do to change the fact that they have cancer. You will have to ask yourself some questions: How important is it that your mom can stay in her house? Moving could add some unneeded stress. How may years have you been contributing to your 401k? If you have 30 years left, you could have enough time to recover some of your losses from reducing the amount of money you have given up for your mom. Will your mom be able to pay you back for paying the taxes over time, or would this be a 'gift'? Have her doctors told her that she "... has N months left..."? What is the next step after you are able to pay her taxes and save the house? Someone close to me recently told me that "There is no point in trying to save for someone for the future, if you can't sustain them until they get to that future. What will happen to your mom if she loses her house? Will it make it easier or harder for her to recover if she can stay? To paraphrase someone famous, "you can't take a loan out for your retirement, but you could take a loan out for this event." At any rate, good luck. My thoughts are with you and your mother. |
How is money actually made from the buying or selling of options? | Not all call options that have value at expiration, exercise by purchasing the security (or attempting to, with funds in your account). On ETNs, they often (always?) settle in cash. As an example of an option I'm currently looking at, AVSPY, it settles in cash (please confirm by reading the documentation on this set of options at http://www.nasdaqomxtrader.com/Micro.aspx?id=Alpha, but it is an example of this). There's nothing it can settle into (as you can't purchase the AVSPY index, only options on it). You may quickly look (wikipedia) at the difference between "American Style" options and "European Style" options, for more understanding here. Interestingly I just spoke to my broker about this subject for a trade execution. Before I go into that, let me also quickly refer to Joe's answer: what you buy, you can sell. That's one of the jobs of a market maker, to provide liquidity in a market. So, when you buy a stock, you can sell it. When you buy an option, you can sell it. That's at any time before expiration (although how close you do it before the closing bell on expiration Friday/Saturday is your discretion). When a market maker lists an option price, they list a bid and an ask. If you are willing to sell at the bid price, they need to purchase it (generally speaking). That's why they put a spread between the bid and ask price, but that's another topic not related to your question -- just note the point of them buying at the bid price, and selling at the ask price -- that's what they're saying they'll do. Now, one major difference with options vs. stocks is that options are contracts. So, therefore, we can note just as easily that YOU can sell the option on something (particularly if you own either the underlying, or an option deeper in the money). If you own the underlying instrument/stock, and you sell a CALL option on it, this is a strategy typically referred to as a covered call, considered a "risk reduction" strategy. You forfeit (potential) gains on the upside, for money you receive in selling the option. The point of this discussion is, is simply: what one buys one can sell; what one sells one can buy -- that's how a "market" is supposed to work. And also, not to think that making money in options is buying first, then selling. It may be selling, and either buying back or ideally that option expiring worthless. -- Now, a final example. Let's say you buy a deep in the money call on a stock trading at $150, and you own the $100 calls. At expiration, these have a value of $50. But let's say, you don't have any money in your account, to take ownership of the underlying security (you have to come up with the additional $100 per share you are missing). In that case, need to call your broker and see how they handle it, and it will depend on the type of account you have (e.g. margin or not, IRA, etc). Generally speaking though, the "margin department" makes these decisions, and they look through folks that have options on things that have value, and are expiring, and whether they have the funds in their account to absorb the security they are going to need to own. Exchange-wise, options that have value at expiration, are exercised. But what if the person who has the option, doesn't have the funds to own the whole stock? Well, ideally on Monday they'll buy all the shares with the options you have at the current price, and immediately liquidate the amount you can't afford to own, but they don't have to. I'm mentioning this detail so that it helps you see what's going or needs to go on with exchanges and brokerages and individuals, so you have a broader picture. |
Gift card fraud: To whom to report? How to recover funds? Is the party which issued me the card liable? | Citibank just sent me a $100 check. Here's how I got it: |
How to exercise options when you they're worth more money than you have? [duplicate] | The fact that the option is deep in the money will be reflected in the market price of the option so you can just sell it at a profit. If there's a (n almost) guaranteed profit to be had, however, you can always find someone who will lend you the money to cover the exercise... they'll charge you interest, however! |
The difference between Islamic Banks and Western Banks | To answer your first part, its not an opposition to profit. It's an opposition to usury - the practice of charging excessive interest on loans. There are extensive passages in the Qur'an condemning the practice, and in many cases "excessive interest" is any interest. To the second part of the question, these may well be more risky investments. But if you're trying to build a strong and thriving community financial spirit, one might expect there to be significant social pressures to use the loaned money responsibly. Additionally, while it removes some of the penalty for failure, it doesn't remove the rewards for success. The incentive is still there to succeed. It's merely the penalty for failure is no longer financial ruination. It may also temper the incentive for banks to give money to riskier borrowers, but rather to prudently invest in ventures with an acceptable amount of risk. The question as to whether or not this is a "house of cards" likely depends on the questioner. Whether or not this is also true for the western banking system likely remains to be seen, but it hasn't exactly been doing a sterling job of convincing me it isn't true for the past decade. |
What is the process of getting your first share? | I actually use a service called etorro, there are social trading and normal trading. It allows me to put money into the service, follow other people or just pick my own shares to buy and sell with a load other features. It does cost a small amount to extract money but the app is really good, the website is well designed and I've made a bit of money being 23, and in the It industry with no financial training ever it seems like a good way to start. |
Why ever use a market order? | I don't think you're missing anything. Many modern trading systems actually warn you when trying to enter a market order, asking if you are sure that you wouldn't prefer to set a limit. I fully agree with you that it is usually just better to define a limit even 20% higher than just doing a market trade. Let me give you some examples when you still might prefer to use a market order instead of a limit: But even in those two examples a (wide) limit order might just be the safer thing to do. So, what it really comes down to is speed: A market order has no other criterias to be defined, is thus entered faster and saves you a few seconds that might be crucial. |
How Technical Analysts react to non-market hours effects | You can't. Even as a technical trader you should know what events are coming up and be prepared. You can't prepare for everything but you should know when the earnings dates are. You should also pay attention to the market in general. Stocks also have personalities and you should get to know that personality. Most important thing in trading is deciding when to get out before buying and stick to it when it goes against you. It is also one of the hardest things to do. |
Avoiding sin stock: does it make a difference? | Yes, it does matter. You are right that lower demand for a stock will drive its price down. Lower stock prices can hurt the company. Take a look at Fixee's answer to this question: a declining share price will make it hard to secure credit, attract further investors, build partnerships, etc. Also, employees are often holding options or in a stock purchase plan, so a declining share price can severely dampen morale. In an extreme case, if share prices plummet too far, the company can be pressured to reverse-split the shares, and (eventually) take the company private. This recently happened to Playboy. If you do not want to support a company, for whatever reason, then it is wise to avoid their stock. |
Is it really possible to get rich in only a few years by investing? | 10 year US Treasury bonds are currently yielding 3.46%. If you're offered an investment that looks better than that, you should ask yourself why big investors are putting their money in US Treasuries instead of what you've been offered. And obviously at 3.46% per year, you're not going to get rich quick -- it will take you over twenty years to double your money, and that's without allowing for inflation. |
How to find historical stock price for a de-listed or defunct company? | http://www.euroinvestor.com/exchanges/nasdaq/macromedia-inc/41408/history will work as DumbCoder states, but didn't contain LEHMQ (Lehman Brother's holding company). You can use Yahoo for companies that have declared bankruptcy, such as Lehman Brothers: http://finance.yahoo.com/q/hp?s=LEHMQ&a=08&b=01&c=2008&d=08&e=30&f=2008&g=d but you have to know the symbol of the holding company. |
When is Cash Value Life Insurance a good or bad idea? | Buy term and invest the difference is certainly the standard recommendation, and for good reason. When you start looking at some sample numbers the "buy term and invest the difference" strategy starts to look very good. Here are the rates I found (27 yr old in Texas with good health, non-smoker, etc): $200k term life: $21/month $200k whole life: $177/month If you were to invest the difference in a retirement account for 40 years, assuming a 7% rate of return (many retirement planning estimates use 10%) you would have $411,859 at the end of that period. (If you use 10% that figure jumps to over $994k.) Needless to say, $400k in a retirement account is better than a $200k death benefit. Especially since you can't get the death benefit AND the cash value. Certainly one big difficulty is making sure you invest that difference. The best way to handle that is to set up a direct deposit that goes straight from your paycheck to the retirement account before it even touches your bank account. The next best thing would be an automatic transfer from your bank account. You may wonder 'What if I can no longer afford to invest that money?' First off, take a second and third look at your finances before you start eating into that. But if financial crisis comes and you truly can't afford to fund your own life insurance / retirement account then perhaps it will be a good thing you're not locked into a life insurance policy that forces you to pay those premiums. That extra freedom is another benefit of the "buy term and invest the difference" strategy. It is great that you are asking this question now while you are young. Because it is much easier to put this strategy into play now while you are young. As far as using a cash value policy to help diversify your portfolio: I am no expert in how to allocate long term investments after maxing out my IRA and 401k. (My IRA maxes out at $5k/year, another $5k for my wife's, another $16.5k for my 401k.) Before I maxed that out I would have my house paid for and kid's education saved for. And by then it would make sense to pay a financial adviser to help you manage all those investments. They would be the one to ask about using a cash value policy similar to @lux lux's description. I believe you should NEVER PUT YOUR MONEY INTO SOMETHING YOU DON'T UNDERSTAND. Cash value policies are complex and I don't fully understand them. I should add that of course my calculations are subject to the standard disclaimer that those investment returns aren't guaranteed. As with any financial decision you must be willing to accept some level of risk and the question is not whether to accept risk, but how much is acceptable. That's why I used 7% in my calculation instead of just 10%. I wanted to demonstrate that you could still beat out whole life if you wanted to reduce your risk and/or if the stock market performs poorly. |
Adjusting a value for inflation each month using rolling 12-monthly inflation figures | The actual increase in the cost of living for one month over the previous month cannot be calculated from the annualized increase in cost over the entire previous year. Consider the hypothetical case of a very stable economy, where prices stay constant for decades. Nevertheless, the authorities issue monthly statements, reporting that the change in the cost of living, for the last month, year over year, is 0.00%. Then they go back to sleep for another month. Then, something happens, say in August, 2001. It causes a permanent large increase in the cost of many parts of the cost of living components. So, in September, the authorities announce that the cost of living for the end of August, 2001, compared to August a year ago, was up 10%. Great consternation results. Politicians pontificate, unions agitate on behalf of their members, etc... The economy returns to its customary behavior, except for that one-time permanent increase from August, 2001. So for the next eleven months, each month, the authorities compare the previous months prices to the prices from exactly a year ago, and announce that inflation, year over year, is still 10%. Finally, we reach September, 2002. The authorities look at prices for the end of August, 2002, and compare them to the prices from the end of August, 2001 (post "event"). Wonder of wonders, the inflation rate is back to 0.00%!! Absolutely nothing happened in August 2002, yet the rate of inflation dropped from 10% to 0%. |
Can I invest in gold through Vanguard (Or another instrument that should perform well in financial crisis)? | The difficulty with investing in mining and gold company stocks is that they are subject to the same market forces as any other stocks, although they may whether those forces better in a crisis than other stocks do because they are related to gold, which has always been a "flight to safety" move for investors. Some investors buy physical gold, although you don't have to take actual delivery of the metal itself. You can leave it with the broker-dealer you buy it from, much the way you don't have your broker send you stock certificates. That way, if you leave the gold with the broker-dealer (someone reputable, of course, like APMEX or Monex) then you can sell it quickly if you choose, just like when you want to sell a stock. If you take delivery of a security (share certificate) or commodity (gold, oil, etc.) then before you can sell it, you have to return it to broker, which takes time. The decision has much to do with your investing objectives and willingness to absorb risk. The reason people choose mutual funds is because their money gets spread around a basket of stocks, so if one company in the fund takes a hit it doesn't wipe out their entire investment. If you buy gold, you run the risk (low, in my opinion) of seeing big losses if, for some reason, gold prices plummet. You're "all in" on one thing, which can be risky. It's a judgment call on your part, but that's my two cents' worth. |
What are the ins/outs of writing-off part of one's rent for working at home? | Tax regulations vary from country to country - some permitting more deductions, some less - but here are a few guidelines. As regards the home-office: As regards the deductions: Think of it like this: in order to have space for a home-office you needed a bigger home. That leads to increased rates, heating, insurance and so on. Many tax regulators recognise that these are genuine expenses. The alternative is to rent a separate office and incur greater expenses, leading to increased deductions and less overall tax paid (which won't finance the deficit). The usual test for deductions is: was the expense legitimately incurred in the pursuit of revenue? The flexibility permitted will vary by tax authority but you can frequently deduct more than you expected. |
What effect would sovereign default of a European country have on personal debt or a mortgage? | Patrick, This article points out three likely effects (direct and indirect) sovereign default can have on the individual: http://tutor2u.net/blog/index.php/economics/comments/the-sovereign-default-option-is-costly/ This looks at how a default may not look like a default - even if it is. But again, how defaults can impact the man in the street: http://online.wsj.com/article/SB10001424052748703323704574602030789251824.html The fascinating Argentine default is described in a blow-by-blow format here, including brief references to things like unemployment and personal savings: http://theinflationist.com/sovereign-default/argentine-sovereign-default-2002-argentina-financial-crisis Remember, though. Not all defaults are the same. And a modern-European country's default may look very different to what has occurred elsewhere. |
Is there a candlestick pattern that guarantees any kind of future profit? | John Person has a pattern called the High Close Doji that is probably the most reliable signal in the world of candle patterns. I would check out Candle Stick and Pivot Point Trade Triggers. It all I use in trading stocks + forex. |
Is the “Bank on Yourself” a legitimate investment strategy, or a scam? | Technically, this doesn't seem like a scam, but I don't think the system is beneficial. They use a lot of half-truths to convince you that their product is right for you. Some of the arguments presented and my thoughts. Don't buy term and invest the rest because you can't predict how much you'll earn from the "rest" Also Don't invest in a 401k because you can't predict how much you'll earn They are correct that you won't know exactly how much you'll have due to stock market, but that doesn't mean the stock market is a bad place to put your money. Investing in a 401k is risky because of the harsh 401k withdrawal rules Yes, 401ks have withdrawal rules (can't typically start before 59.5, must start by 70.5) but those rules don't hamper my investing style in any way. Most Term Life Insurance policies don't pay out They are correct again, but their conclusions are wrong. Yes, most people don't die while you have a term insurance policy which is why Term life insurance is relatively cheap. But they aren't arguing you don't need insurance, just that you need their insurance which is "better" You need the Guaranteed growth they offer The chart used to illustrate their guaranteed growth includes non-guaranteed dividends. They invest $10,000 per year for 36 years and end up with $1,000,000. That's a 5% return! I use 10% for my estimate of stock market performance, but let's say it's only 8%. The same $10,000 per year results in over $2 Million dollars. Using 10.5% (average return of the S&P 500 over it's lifetime) the result is a staggering $3.7 MILLION. So if I'm looking at $3.7M vs. $1M, It costs me $2.7 Million dollars to give me the same coverage as my term life policy. That's one expensive Term Life Insurance policy. My personal favorite: Blindly following the advice of Wall Street and financial “gurus” such as Dave Ramsey and Suze Orman got you where you are. Are you happy with the state of your finances? Do you still believe their fairytale, “Buy Term (insurance) and Invest the Difference”? Yes, I sure do believe that fairytale and I'm prospering quite well thank you. :) While I don't think this is a scam, it's outrageously expensive and not a good financial choice. |
Strategies for putting away money for a child's future (college, etc.)? | (Congratulations on the little one on the way.) I'd recommend saving outside of tax-advantaged accounts. Pay your taxes and be done with them. I'd recommend putting your old-age fund first before shelling out a lot of money for college. I'd recommend not shelling out a lot of money for college. Ideally, none. There are ways today to get a four-year degree for $15,000. Not $15,000 per year. $15,000 total. Check here. (This isn't an affiliate link.) They can pay for this themselves! I'd recommend making sure you hold the hammer. Don't let them party on your nickel. I'd recommend teaching your kids to "fish" as soon as possible. Help them start a business. They could be millionaires by the time they're teenagers. Then they can make their own money. You won't have to give them a dime. |
Why can't house prices be out of tune with salaries | They can't keep rising with respect to people's income because eventually you run out of buyers. If there's roughly one house for every five people, then you'd better make sure that the price you set to sell your house is affordable to people in the upper fifth of income scales, or else you are mathematically guaranteed not to have any customers. Now, it's true that the price of particular houses can get much higher, but they tended to be higher in the first place. Housing isn't exactly an efficient market, but for the most part you have to pay for the house that you get, or else someone else will outbid you. An individual area might, temporarily, buck these trends because it suddenly becomes popular and there are a lot of extra buyers putting money on the table. In the long run, someone is going to build for those buyers, even if it means moving up the chain from enormous rural lots to suburban single-family homes to low-density garden apartments to residential towers. |
What effect will the financial reform bill have on everyday Americans? | The Wall Street Journal says in its "For Consumers" section of its infographic: There's also some new agencies (including a "consumer watchdog agency"), and some new rules the SEC can implement, and it lets state pass more laws affecting national banks, but it doesn't look like there's much in particular that it does for consumers right away. Source - http://online.wsj.com/article/SB10001424052748704569204575329211031691230.html |
For very high-net worth individuals, does it make sense to not have insurance? | The general answer to this is "yes". When you're dealing with single-digit millionaires, the answer is that their insurance habits and needs are basically the same as everyone else. When you get into the double digit and triple digit millionaires, or people worth billions, they have additional options, but those basically boil down to using "self-insurance" rather than paying a company for an insurance policy. The following is based on both what I've read and a fair deal of personal experience working for or with various stripes of millionaire, and even one billionaire. Addressing the types of insurance you mention: This is generally used to provide survivors with a replacement for income you can no longer provide when dead, in addition to paying for costs associated with dying (funeral, hospital/hospice bills, etc). Even millionaires and billionaires have this, yes, but the higher your net worth, the less value it has. If you're worth 9 or 10 figures, you probably already have trust funds set up for your family members, so an extra payout from an insurance policy is probably going to represent a small fraction of the wealth you're leaving your survivors, and as has been noted, insurance makes a profit, so the expectation by the insurance company is that they'll make more money on the policy than they'll have to pay out on death. That being said, the members of the 9+ figure club I've worked for all had multi-million dollar life insurance policies on them, which were paid for or heavily subsidized by the companies they owned or worked for. I doubt they would have held those policies if they had to pay the full cost, but when it's free or cheap, why not? Absolutely. As health insurance in America is an untaxed employment benefit, owing to regulations from World War II, all the wealthy folks I've had contact with got outrageously good plans as part of the companies they work for or owned. Having said that, even their trust fund beneficiaries held health insurance, because this type of insurance (in America, at least) is actually not really insurance, it's more of a pre-payment plan for medical expenses, and as such, it provides broader access to health care than you'd get from simply having enough money to pay for whatever treatments you need. If you walk into a hospital as a millionaire and state that you'll definitely be able to pay for your open-heart surgery with cash, you'll get a very different response than if you walk in with your insurance card and your "diamond-level" coverage. So, in this case, it's not as much as about the monetary benefits (although this is a type of "insurance" that's generally free or heavily discounted to the individual, so that's a factor) as it is about easier access to health care. Although this is required by law, it's one of the common forms of insurance that the very wealthy can, and often do handle differently than the rest of us. Most (if not all) US states have a provision to allow motorists to self-insure themselves, which amount to putting up a bond to cover claims against them. Basically, you deposit the minimum amount the state determines is required for auto insurance with the responsible state organization, get a certificate of self-insurance and you're good to go. All the high wealth individuals I know when this route, for two reasons - first of all, they didn't have to deal with insurance companies (or pay sky-high rates on account of all the speeding tickets they picked up) and secondly, they made their deposit with government bonds they had in their portfolios anyway, and they could still collect the interest on their self-insurance deposits. Of course, this meant that if they wrecked or dinged up their Maserati or Bentley or whatever, they'd be out of pocket to repair or replace it... but I guess if you can afford one $200,000 car, you can afford to buy a second one if you wreck it, or get by riding one of your other luxury automobiles instead. Since someone else mentioned kidnapping insurance, I'll point out here that what Robert DeNiro did in Casino when he put a couple million dollars into a safety deposit box for his wife to use if he was kidnapped or needed to pay off a government official is essentially the same thing as "self-insurance". Putting money away somewhere for unexpected events in lieu of buying an insurance policy against them. In real life, the very wealthy will often do this with US treasuries, government bonds and other interest-bearing, safe investments. They make a little money, diversify their portfolios and at the same time, self-insure against a potential big loss. This is another insurance area where even the very wealthy are remarkably similar to the rest of us, in that they all generally have it, yes, although the reason is a little different. For normal folks, the home they own is generally the largest part of their net worth, or at least a very substantial fraction, for those older folks with retirement savings that exceed the value of their homes. So for us, we have home owners insurance to prevent a catastrophic event from wiping out the lion's share of our net worth. If you're an ultra-wealthy individual who can afford an 8 figure home, that's not really the case (at least with the ones I've dealt with, who made their fortunes in business and are good managing their wealth and diversifying their assets - could be different for sports stars or the entertainment industry), and these people generally own multiple homes anyway, so it's not as big a deal if they lose one. However, no one actually buys a multi-million dollar home by writing a multi-million dollar check. They get a mortgage, just like the rest of us. And to get a mortgage, insurance on the property is a requirement. So yes, even the ultra wealthy generally have insurance on their home(s). There is an element of not wanting to shell out another 20 million if the place burns down, or someone breaks in and steals your valuables, but the bigger part of the reason is that it's required to get a mortgage in the first place, which is generally done for financial reasons - interest on your mortgage is a tax deduction, and you don't want to sink millions of dollars all at once into buying a property that's not going to appreciate in value, when you can get a mortgage and invest those millions of dollars to make more money instead. |
What is good growth? | There isn't a single hard and fast return to expect. Securities, like all things in a free market, compete for your money. As the Fed sets the tone for the market with their overnight Fed funds rate, you might want to use a multiple of the 'benchmark' 10-year T-note yeald. So let's suppose that a good multiple is four. The current yeald on the 10-year T-note is hovering around two. That would give a target yeald of eight. http://stockcharts.com/h-sc/ui?s=%24UST10Y&p=W&b=5&g=0&id=p47115669808 |
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