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What did John Templeton mean when he said that the four most dangerous words in investing are: ‘this time it’s different'? | This refers to the faulty idea that the stock market will behave differently than it has in the past. For example, in the late 1990s, internet stocks rose to ridiculous heights in price, to be followed soon after with the Dot-Com Bubble crash. In the future, it's likely that there will be another such bubble with another hot stock - we just don't know what kind. Saying that "this time it will be different" could mean that you expect this bubble not to burst when, historically, that is never the case. |
Saving $1,000+ per month…what should I do with it? | I like the other answers. But, here's one thing that concerns me that hasn't specifically been addressed yet: You mentioned your student loans are at low rates of interest. Are those rates fixed or variable? If those interest rates are variable, I would not count on rates remaining low indefinitely. If you could imagine those rates going up by say 2% or 4% or more over time, would such rates make you change your mind about the debt and the pace at which you're paying it off? I would suggest that as the economy recovers over the next couple of years, the spectre of inflation will force the Fed to raise interest rates. You don't want to be holding variable-rate debt when rates are rising. For that reason, if your loan rate is variable, I would increase your payment amount so you can eliminate your debt sooner than later. Also – You mention in one of your comments that buying a home is 4+ years away. That's not a long time, so I wouldn't commit the bulk of your savings to investing in the stock market, which can be temperamental over short periods of time. You don't want to be in a large loss position just when it's time to buy your first home. However, it may be worth having some of your skin in the game, so to speak. Personally, I would take a balanced approach: 1/3 debt repayment, 1/3 high interest cash savings, and 1/3 in some broad diversified index funds – and not all in the U.S. Although, I also like the idea of getting some travel in while young, so perhaps 1/4 allocations to the money stuff, and 1/4 towards travel? :-) Good luck. |
Ideal investments for a recent college grad with very high risk tolerance? | I am in a very similar situation as you (software engineer, high disposable income). Maximize your contributions to all tax-advantaged accounts first. From those accounts you can choose to invest in high risk funds. At your age and date-target funds will invest in riskier investments on your behalf; and they'll do it while avoiding the 30%+/- haircut that you'll be paying in taxes anyhow. If, after that, you're looking for bigger risk plays then look into a brokerage account that will let you buy and sell options. These are big risk swingers and they are sophisticated, complicated products which are used by many people who likely understand finance far better than you. You can make money with them but you should consider it akin to gambling. It might be more to your liking to maintain a long position in a stock and then trade options against your long position. Start with trading covered calls, then you could consider buying options (defined limited downside risk). |
Is it unreasonable to double your investment year over year? | Yes, it is unreasonable and unsustainable. We all want returns in excess of 15% but even the best and richest investors do not sustain those kinds of returns. You should not invest more than a fraction of your net worth in individual stocks in any case. You should diversify using index funds or ETFs. |
Options revisited: Gold fever | Your plan already answers your own question in the best possible way: If you want to be able to make the most possible profit from a large downward move in a stock (in this case, a stock that tracks gold), with a limited, defined risk if there is an upward move, the optimal strategy is to buy a put option. There are a few Exchange Traded Funds (ETFs) that track the price of gold. think of them as stocks that behave like gold, essentially. Two good examples that have options are GLD and IAU. (When you talk about gold, you'll hear a lot about futures. Forget them, for now. They do the same essential thing for your purposes, but introduce more complexity than you need.) The way to profit from a downward move without protection against an upward move is by shorting the stock. Shorting stock is like the opposite of buying it. You make the amount of money the stock goes down by, or lose the amount it goes up by. But, since stocks can go up by an infinite amount, your possible loss is unlimited. If you want to profit on a large downward move without an unlimited loss if you're wrong and it goes up, you need something that makes money as the stock drops, but can only lose so much if it goes up. (If you want to be guaranteed to lose nothing, your best investment option is buying US Treasuries, and you're technically still exposed to the risk that US defaults on its debt, although if you're a US resident, you'll likely have bigger problems than your portfolio in that situation.) Buying a put option has the exact asymmetrical exposure you want. You pay a limited premium to buy it, and at expiration you essentially make the full amount that the stock has declined below the strike price, less what you paid for the option. That last part is important - because you pay a premium for the option, if it's down just a little, you might still lose some or all of what you paid for it, which is what you give up in exchange for it limiting your maximum loss. But wait, you might say. When I buy an option, I can lose all of my money, cant I? Yes, you can. Here's the key to understanding the way options limit risk as compared to the corresponding way to get "normal" exposure through getting long, or in your case, short, the stock: If you use the number of options that represent the number of shares you would have bought, you will have much, much less total money at risk. If you spend the same "bag 'o cash" on options as you would have spent on stock, you will have exposure to way more shares, and have the same amount of money at risk as if you bought the stock, but will be much more likely to lose it. The first way limits the total money at risk for a similar level of exposure; the second way gets you exposure to a much larger amount of the stock for the same money, increasing your risk. So the best answer to your described need is already in the question: Buy a put. I'd probably look at GLD to buy it on, simply because it's generally a little more liquid than IAU. And if you're new to options, consider the following: "Paper trade" first. Either just keep track of fake buys and sells on a spreadsheet, or use one of the many online services where you can track investments - they don't know or care if they're real or not. Check out www.888options.com. They are an excellent learning resource that isn't trying to sell you anything - their only reason to exist is to promote options education. If you do put on a trade, don't forget that the most frustrating pitfall with buying options is this: You can be basically right, and still lose some or all of what you invest. This happens two ways, so think about them both before you trade: If the stock goes in the direction you think, but not enough to make back your premium, you can still lose. So you need to make sure you know how far down the stock has to be to make back your premium. At expiration, it's simple: You need it to be below the strike price by more than what you paid for the option. With options, timing is everything. If the stock goes down a ton, or even to zero - free gold! - but only after your option expires, you were essentially right, but lose all your money. So, while you don't want to buy an option that's longer than you need, since the premium is higher, if you're not sure if an expiration is long enough out, it isn't - you need the next one. EDIT to address update: (I'm not sure "not long enough" was the problem here, but...) If the question is just how to ensure there is a limited, defined amount you can lose (even if you want the possible loss to be much less than you can potentially make, the put strategy described already does that - if the stock you use is at $100, and you buy a put with a 100 strike for $5, you can make up to $95. (This occurs if the stock goes to zero, meaning you could buy it for nothing, and sell it for $100, netting $95 after the $5 you paid). But you can only lose $5. So the put strategy covers you. If the goal is to have no real risk of loss, there's no way to have any real gain above what's sometimes called the "risk-free-rate". For simplicity's sake, think of that as what you'd get from US treasuries, as mentioned above. If the goal is to make money whether the stock (or gold) goes either up or down, that's possible, but note that you still have (a fairly high) risk of loss, which occurs if it fails to move either up or down by enough. That strategy, in its most common form, is called a straddle, which basically means you buy a call and a put with the same strike price. Using the same $100 example, you could buy the 100-strike calls for $5, and the 100-strike puts for $5. Now you've spent $10 total, and you make money if the stock is up or down by more than $10 at expiration (over 110, or under 90). But if it's between 90 and 100, you lose money, as one of your options will be worthless, and the other is worth less than the $10 total you paid for them both. |
Paying off mortgage or invest in annuity | There is no formula to answer the question. You have to balance return on investment with risk. There's also the question of whether you have any children or other heirs that you would like to leave money to. The mortgage is presumably a guaranteed thing: you know exactly how much the payments will be for the rest of the loan. I think most annuities have a fixed rate of return, but they terminate when you both die. There are annuities with a variable return, but usually with a guaranteed minimum. So if you got an annuity with a fixed 3.85% return, and you lived exactly 18 more years, then (ignoring tax implications), there'd be no practical difference between the two choices. If you lived longer than 18 years, the annuity would be better. If less, paying off the mortgage would be better. Another option to consider is doing neither, but keeping the money in the 401k or some other investment. This will usually give better than 3.85% return, and the principal will be available to leave to your heirs. The big drawback to this is risk: investments in the stock market and the like usually do better than 3 or 4%, but not always, and sometimes they lose money. Earlier I said "ignoring tax implications". Of course that can be a significant factor. Mortgages get special tax treatment, so the effective interest rate on a mortgage is less than the nominal rate. 401ks also get special tax treatment. So this complicates up calculations trying to compare. I can't give definitive numbers without knowing the returns you might get on an annuity and your tax situation. |
Where or how can I model historical market purchases | Robert Shiller has an on-line page with links to download some historical data that may be what you want here. Center for the Research in Security Prices would be my suggestion for another resource here. |
What determines price fluctuation of groceries | Yes and no. First off, commodity prices reflect the cost of a good about 3 steps back in the retail supply chain; the agreed-upon price for the raw foodstuff between farmers/ranchers and manufacturers. Your grocer may carry bags of whole grain wheat, but that's certainly not all he carries that contains it. Same for corn, rice and other staple grains, as well as for fruits and vegetables, herbs (yes, you can buy basil by the ton on the CME), meats, various sugars, etc. So, a long-term sustained change in prices of a commodity foodstuff will eventually affect the real cost to you to buy things they're made from. However, in the short term, the retail supply chain will generally act as a buffer between these prices and the ones you see on the store shelf. Consumers don't like price increases, especially of necessities like food. When food costs go up, consumers can and will very quickly change their spending habits, buying cheaper options to get their needed calories. That makes manufacturers nervous; consumers not buying their product is a worse scenario than consumers buying their product at a reduced gain or even at a loss. So, manufacturers, and suppliers and retailers, will all absorb as much as they can of the cost of a commodities increase before beginning to pass it on to consumers. On the flip side, while consumers like price drops, they don't notice them as much as price increases. So, the supply chain will also absorb a fall in commodity prices by resisting price reductions in the consumer goods, as long as they can get away with it (which is usually longer than the price reduction actually lasts). The net effect is that processed food prices typically follow the gentle upward climb of long-term inflation, and only rarely do you see drastic price increases or decreases. Where this model breaks down a little bit is in highly perishable foodstuffs, especially seasonal or "wild-managed" foods; fruits and vegetables, seafood, etc. The limited time in which the stuff can be sold makes the process of getting a fish out of the ocean and a fruit off the tree and into your grocery store much more market-driven; the producers, suppliers and grocers are all in constant contact over what's available and how much they can get for what price. The prices therefore are typically a lower markup (unlike highly processed grain-based foods, there's not much added value to be marked up between the apple farmer picking the fruit and the grocer putting it on display), but also much more volatile; if there's a bumper crop of fruit, the farmer has to unload it all or it goes to waste, while similarly if an early freeze decimated the apple crop, the suppliers can't just get some of last year's bumper crop out of storage; they fight with everyone else for what little made it to market. Farmers will sometimes intentionally let excess crop spoil in order to maintain a minimum price for what they sell (the rest can at least be composted and used for fertilizer, saving them some money on maintenance), but there's no silver bullet for a shortage. This is why a lot of these foods, especially seafood, are considered luxury items; they're not stable enough for everyone to get as much as they want whenever they want, unlike staple grains. |
Can I contribute to an IRA from investment income? | Your contributions must come from "compensation". Quoting IRS Publication 590 on IRAs, "Generally, compensation is what you earn from working." So it is unlikely that your stock sale proceeds, if they're your sole source of income, can be used to fund your IRA. If you do have W-2 income, or self employment income, you can use the proceeds of a stock sale to fund an IRA. The IRS doesn't care where the exact dollars that go into the IRA come from, only that you earned (from working) at least as much as you contributed. |
Roth vs. Whole Insurance vs. Cash | Cash/CD's for a house downpayment = Good. Resist the urge to invest this money unless you're not planning on the house for at least 5 years. Roth IRA - Good. Amounts contributed are able to be withdrawn without tax penalties, though you would really need to be in a crisis for this to be a good idea. It's your long-term, retirement money. The earlier you start, the better. Use your 401K at work, if it's offered. Contribute to the Roth as much as you can, as well. Whole life ("Cash value") life insurance: Be careful... Cash-value life insurance (Whole, Universal, Variable Universal) must be watched more closely as you age. Once they reach that "magical" point of being self-sustaining, you cannot relax. The annual cost of insurance is taken from the cash value, which your premium payments replenish. If you stop making premium payments, eventually the cost of insurance (which goes up every year) will erode your cash value down to nothing, at which point more premium must be paid to keep the policy in force. This often happens in your old age, when you can least afford the surprise, and costs are highest. Some advisors get messed up in their priorities when they start depending on the 8-10% commissions they are paid on insurance policies. Since premiums for cash-value policies are far higher than for term policies, you might get some insight into your advisor if they ignore your attempts to consider a term policy. Because of the insurance costs' effects on your cash value, these types of policies are some of the most inefficient and expensive ways to invest. You are better off not investing via a life insurance policy. You don't need life insurance unless someone depends on your financial contribution to their life (spouse and children, for example). Some people just like the peace of mind it brings, and some people want a lump sum to leave as a gift to their loved ones (which is an expensive way to leave a gift). You can have these "feel-good" benefits with a term policy for much less money, if you must have them. Unless you expect to become uninsurable at some point in the future, you should consider using term insurance to meet your life insurance needs until it is no longer needed. |
How Long Can It Take For a Check I Write to Clear on My Account? | According to this Q&A by a Houston law professor: The law, however, is not designed to interfere with an individual's right to stop payment on a valid check because of a dispute with someone. If he didn't deliver as promised, you do not owe the money and have the right to stop payment. Assuming that you had enough money in the bank to cover the check, stopping payment is not a crime. I found several other pages essentially saying the same thing. All the usual disclaimers apply, I am not a lawyer, this is not legal advice, etc. In particular, laws might vary by state. Basically, though, it doesn't seem there's any reason why you can't stop payment on the check just because you feel like it. If you then provide a cashier's check for the payment, your ex-partner will not really have anything to complain about. If you're worried about annoying him by doing this, that's a separate issue, but given the situation you describe, I don't see why you should be. If you feel he is being a pain in the neck, feel free to be a pain in the neck right back and force him to accept the payment in the manner you decide, instead of allowing him to string you along. Note two things: obviously if you have reason to believe the guy will sue you, you should act with caution. Also, I'm not suggesting withdrawing payment completely, only stopping the check and issuing a new payment that you don't have to wait on (e.g., cashier's check). |
Claiming income/deductions on an illegal apartment | A basement unit would typically rent for less than similar space on a higher floor. Taxwise, you should be claiming the income, and expenses via schedule E, as if it were legal. Keep in mind, Al Capone was convicted on tax evasion not his other illegal activities. As long as you treat it as a legitimate business, a rental unit, you will be good with the IRS. The local building department will fine you if they find out. |
Can a company stop paying dividends? | Yes. Companies increase, decrease, start paying and stop paying dividends when they think it appropriate. If a company has been going through some problems and makes a loss, or even a large decrease in profits, they can choose to stop paying dividends until things improve. Many companies did this during the Global Financial Crisis of 2007-08. |
What is the interest rate online brokerages paying out tied to? | The prime rate is the interest rate banks use amongst themselves to lend money to each other only. It is used as the basis (sometimes) for what interest rate banks charge you. The prime rate is based loosely on the Fed rate. There is a committee that meets regularly to set this and other industry interest rates. http://en.wikipedia.org/wiki/Prime_rate I am not 100% positive the following is totally accurate The banks keep our deposits and pay us interest for doing so. They are paying us interest because they take yours, mine and everybody elses deposits as a large lump sum and invest that money. Sometimes as business loans, sometimes as mortgages and sometimes as credit card. The banks have a book of business that will be EXACTLY how much credit they have extended to everybody. But they do not keep that amount of cash in the vaults, only some smaller percentage of that large amount. When I use my credit card and they need to transfer money to amazon.com, if they don't happen to have enough cash that day, they will just borrow from another bank that does, and the interest rate they pay to do so is the prime rate. Since they are paying interest on the money they borrow to pay the debt I charged because they told me my credit was worth so much (...???...) they charge me a little bit more than that. Hence your credit card or mortgage's APR being based on the prime rate. I THINK that is what they do If I am wrong leave a comment and I will update, or the mods can. |
Can gold prices vary between two places or country at the same time? | Most of the gold prices at international markets are USD denominated. Hence the prices would be same in international markets where large players are buying and selling. However this does not mean that the prices to the individuals in local markets is same. The difference is due to multiple things like cost of physical delivery, warehousing, local taxation, conversion of Local currency to USD etc. So in essence the price of Gold is similar to price of Crude Oil. The price of Oil is more or less same on all the markets exchanges, though there is small difference this is because of the cost of delivery/shipment which is borne by the buyer. However the cost of Oil to retail individual varies from country to country. |
When should you use an actively managed mutual fund in a 401k? | By definition, actively managed funds will underperform passive index funds as a whole. Or more specifically: The aggregate performance of all actively managed portfolio of publicly-tradable assets will have equal performance to those of passively managed portfolios. Which taken with premise two: Actively managed funds will charge higher fees than passively managed funds Results in: In general, lower-fee investment vehicles (e.g. passive index investments) with broad enough diversification to the desired risk exposure will outperform higher-fee options But don't take my wonkish approach, from a more practical perspective consider: |
What are the advantages of doing accounting on your personal finances? | Everyone should keep track of what they spend. When you see how much you are spending on each category of expense, you can make good decisions about how much your life is improved by something vs. how much you spend on that thing. Everyone makes better decisions when they are informed by accurate information about those decisions. There's no reason why personal finances are different from any other decision you make in life. This remains true whether you make very little or very much. Some people define rich as being able to live on less money than you earn. |
When are stock trade fees deducted? | As others have said, it depends on the brokerage firm. My broker is Scottrade. With Scottrade the commission is assessed and applied the moment the order is filled. If I buy 100 shares of XYZ at $10 a share then Scottrade will immediately deduct $1007.02 out of my account. They add the commission and fees to the buy transaction. On a sale transaction they subtract the commission and fees from the resulting money. So if I sell 100 shares of XYZ at $11 a share I will get 1,092.98 put into my account, which I can use three business days later. |
Does a larger down payment make an offer stronger? | There is some element of truth to what your realtor said. The seller takes the house off the market after the offer is accepted but the contract is contingent upon, among other things, buyer securing the financing. A lower down payment can mean a higher chance of failing that. The buyer might be going through FHA, VA or other programs that have additional restrictions. If the buyer fails to secure a financing, that's weeks and months lost to the seller. In a seller's market, this can be an important factor in how your bid is perceived by the seller. Sometimes it even helps to disclose your credit score, for the same reason. Of course for your situation you will have to assess whether this is the case. Certainly do not let your realtor push you around to do things you are not comfortable with. Edit: A higher down payment also helps in the situation where the house appraisal does not fare well. As @Dilip Sarwate has pointed out, the particular area you are interested in is probably a seller's market, thus giving sellers more leverage in picking bids. All else equal, if you are the seller with multiple offers coming in at similar price level, would you pick the one with 20% down or 5% down? While it is true that realtors have their own motives to push through a deal as quickly as possible, the sellers can also be in the same boat. One less mortgage payment is not trivial to many. It's a complicated issue, as every party involved have different interests. Again, do your own due diligence, be educated, and make informed decisions. |
Why might it be advisable to keep student debt vs. paying it off quickly? | Congratulations for achieving an important step in the road to financial freedom. Some view extending loan payment of loans that allow the deduction of interest as a good thing. Some view the hit on the credit score by prematurely paying off an installment loan as a bad thing. Determining the order of paying off multiple loans in conjunction with the reality of income, required monthly living expense, and the need to save for emergencies is highly individualized. Keeping an artificial debt seems to make little sense, it is an expensive insurance policy to chase a diminishing tax benefit and boost to a credit score. Keep in mind it is a deduction, not a credit, so how much you save depends on your tax bracket. It might make sense for somebody to extend the loan out for an extra year or two, but you can't just assume that that advice applies in your situation. Personally I paid off my student loan early, as soon as it made sense based on my income, and my situation. I am glad I did, but for others the opposite made more sense. |
How can I escalate a credit dispute when the bureau “confirms” the item? | I was I a similar position as you, and sometimes credit bureaus might be difficult to deal with, especially when high amounts of money are involved. To make the long story short, someone opened a store credit card under my name and made a charge of around 3k. After reporting this to the bureaus, they did not want to remove the account from my credit report citing that the claim was "frivolous". After filing a police report, the police officer gave me the phone number for the fraud department of this store credit card, and after they investigated, they removed the account from my credit. I would suggest to do the following: Communicating with Creditors and Debt Collectors You have the right to: Stop creditors and debt collectors from reporting fraudulent accounts. After you give them a copy of a valid identity theft report, they may not report fraudulent accounts to the credit reporting companies. Get copies of documents related to the theft of your identity, like transaction records or applications for new accounts. Write to the company that has the documents, and include a copy of your identity theft report. You also can tell the company to give the documents to a specific law enforcement agency. Stop a debt collector from contacting you. In most cases, debt collectors must stop contacting you after you send them a letter telling them to stop. Get written information from a debt collector about a debt, including the name of the creditor and the amount you supposedly owe. If a debt collector contacts you about a debt, request this information in writing. I know that you said that the main problem was that your credit account was combined with another. But there might be a chance that identity theft was involved. If this is the case, and you can prove it, then you might have access to more tools to help you. For example, you can file a report with the FTC, and along with a police report, this can be a powerful tool in stopping these charges. Feel free to go to the identitytheft.gov website for more information. |
Calculating pay off for credit card with multiple APRs | The first thing you need to do is look at your terms and conditions of your credit card, or ask your bank, how they will apply the payments. As Dilip notes in his answer, in the US, they will likely apply the minimum payment to the lower rate balance, and then must apply the rest above the minimum to the higher rate balance. In other countries, this will vary by law and custom. Do not assume it will pay off the higher balance, or proportionally, without asking. Let's take the following example. You owe $6000. $5000 is at 13.5% (normal purchase rate) and $1000 is at 22% (cash advance rate). If your bank applies payments to both balances proportionally, then a payment of $600 will reduce your purchase balance by $500 and your cash advance balance by $100. The average APR, then, is simply sum of the product of the APR times balance. So here, (.135*5000 + .225*1000)/6000 = 15%. This is called a weighted average. If the bank applies the payment differently - such as to the lower rate first, or some specified part to the lower rate and the rest to the higher rate - then this will be misleading if you enter it into a calculator, because your average APR will rise over time as you pay off the purchase balance but don't pay off the cash advance balance, or may decrease if the opposite happens. The weighted average is probably reasonably close in the circumstance that you describe, even if you have rules applying the balance differently, so long as they don't 100% pay down the lower rate - so it may be the simplest option for you in terms of rough calculations (where it's not critical to be correct, just close). One approach using the online calculators that might be better, is to treat these like two separate loans/cards. Many calculators exist for multiple balances. Then you can allocate funds differently to the two 'cards'. This would allow you to see how long you will need until you've paid off the higher balance, for example, although it probably won't perfectly match things - unless you find a site that has this specific option available you probably will have to either live with a small error in your calculations or do the math by hand. |
As a total beginner, how do I begin to understand finance & stocks? | Your questions seek answers to specifics, but I feel that you may need more general help. There are two things, I feel, that you need to learn about in the general category of personal finance. Your asking questions about investing, but it is not as important, IMHO, as how you manage your day-to-day operations. For example, you should first learn to budget. In personal finance often times "living on a budget" equates to poor, or low income. That is hardly the case. A budget is a plan on how to spend money. It should be refreshed each and every month and your income should equal your expenses. You might have in your budget a $1200 trip into the city to see a concert, hardly what a low income person should have in theirs. Secondly you need to be deliberate about debt management. For some, they feel that having a car payment and having student loans are a necessary part of life and argue that paying them off is foolish as you can earn more from investments. Others argue for zero debt. I fall in the later. Using and carrying a balance on high interest CCs and having high leases or car payments are just dumb. They are also easy to wander into unless you are deliberate. Third you need to prepare for emergencies. Engineers still get laid off and hurt where they are unable to work. They get sued. Having the proper insurance and sufficient reserves in the bank help prevent debt. Now you can start looking into investments. Start off slow and deliberate with investing. Put some in your company 401K or open some mutual funds on the side. You can read about them and talk with advisers, for free, at Fidelity and Vanguard. Read books from the library. Most of all don't get caught up in too much hype. Things like Forex, options, life insurance, gold/silver, are not investments. They are tools for sales people to make fat commissions off the ignorant. You are fortunate in that Engineers are very likely to retire wealthy. They are part of the second largest demographic of first generation rich. The first is small business owners. To start out I would read Millionaire Next Door and Stop Acting Rich. For a debt free approach to life, check out Financial Peace University (FPU) by Dave Ramsey (video course). His lesson on insurance is excellent. I am an engineer, and my wife a project manager we found FPU life changing and regretted not getting on board sooner. Along these lines we have had some turmoil, recently, that became little more than an inconvenience because we were prepared. |
Is it worth buying real estate just to safely invest money? | Neither you nor others have mentioned the costs of being a homeowner. First, there are monetary costs. If you own a house, you have to pay taxes. They will vary by jurisdiction, but are usually not zero. You also need insurance, which again comes with monthly rates. Then, once in a while, you'll be hit with unpleasant lump sum payments. In 30 years, the mortgage is over and you own the house - but by that time, it will probably need a new roof. That's in the price range of a new car. And over that time, you'll rack up several other repairs which your landlord covers when you rent. Another thing which feels less like an expense emotionally but ends up thinning your wallet is the cosmetic changes you make just because it's your own home. You wouldn't put marble floors in the bathroom if you rent, but you might be tempted to if you live in the house. It might be even worth it from a life satisfaction point of view, but we are talking finance right now, and that's a minus. And then there are the opportunity costs. A house binds you geographically. You may pass up on a nice job offer because your house is too far away, for example. Or you might experience liquidity problems, because a house is difficult to turn into money in a hurry. If you are able to do so, it is usually a much larger sum than you need, and you are paying the costs inherent in that large transaction. These are just examples, you can probably come up with more costs. Then, it is not sure how much money you can get of the house if you change your mind. Say you take this job at the other end of the country, or you become a parent of four and need more space. At the time you decide to sell, the market may have gone down due to the overall state of the economy, or to the house location's popularity, or your own house may have turned undesirable (what if you get a mold infestation which would only go away if you strip it to the concrete and rebuild?) You could let it to renters, but that's a hassle of its own. It takes time to find renters, it may be expensive (income tax, regulations like Energieausweis in Germany), it is risky (if they don't pay, you might not see money even if you sue them). Then there is the problem that prices reflect not some kind of "true" value, but the intersection of supply and demand. And the home market is not as efficient as in a first semester microeconomics textbook. The buyers of private homes deal in small volumes, have little knowledge in the market, pay intermediaries' cuts, and are emotionally attached to the idea of "owning my own house". This drives demand up and creates higher prices than if you had perfectly rational actors on both sides. People pay money for the feeling of being home owners, so those who forego spending on that feeling have more money to invest in something else. Owning something always causes expenses. You have to calculate the savings of having the house vs. the expenses of having it, before you can decide if it is a good deal or not. If you only calculate one side of the equation, you'll be badly mistaken. |
How to find out the amount of preferred stock of Coca Cola Company? | You can find this in the annual report. Preferred value is not the same as common value. |
Tenant wants to pay rent with EFT | I'd consider this offer. Keep in mind, any time you write a check, there's the information he's asking for. If it makes you feel comfortable, use the small balance account, or set up a 4th one you'll use for these incoming deposits only. |
S-Corp partnership startup. How to pay owners with minimal profit? | S-Corp income is passed through to owners and is taxed on their 1040 as ordinary income. If you take a wage (pay FICA) and then take additional distributions these are not subject to FICA. A lot of business owners will buy up supplies/ necessary expenses right before the end of the tax year to lower their tax liability. |
Should I buy a house with a friend? | Sure, form an LLC with an attorney's advice. You need a buyout clause, operating agreement, etc. If you're not married, never buy a home for personal use with someone else. |
What can I take from learning that a company's directors are buying or selling shares? | This could be another reason. "Companies buy their own stock in the market place to reduce the number of shares outstanding, and thus boosts the earnings per share. It also boosts the stock price, which benefits management that has stock options. " Taken from this article. http://www.forbes.com/sites/investor/2014/01/06/the-most-reliable-indicator-of-an-approaching-market-top/ and this article "Why are stock rising?" may help as well. http://www.forbes.com/sites/investor/2013/12/23/why-are-stocks-rising/ |
If a mutual fund did really well last year, then statistically speaking, is it likely going to do bad this year? | This can be answered by looking at the fine print for any prospectus for any stock, bond or mutual fund. It says: "Past performance is not an indicator of future performance.". A mutual fund is a portfolio of common stocks, managed by somebody for a fee. There are many factors that can drive performance of a fund up or down. Here are a few: I'm sure there are many more market influences that I cannot think of that push fund prices up or down. What the fund did last year is not one of them. If it were, making money in the mutual fund market would be as easy as investing in last year's winners and everyone would be doing it. |
Weekly budgets based on (a variable) monthly budget | If you know, approximately, the minimum he would get in a month, his budget should be planned based on this amount. In months where he gets more than this, the excess should be put aside. In really bad months where the income drops below the expected minimum, he can use the money put aside. After a year of putting money aside, he can plan to use and budget this for any other expenses. |
Growth rate plus dividend yieid total? | Avoiding the complexities of tax [dividends likely taxed the year they are received, barring special tax accounts which many countries implement in for example, locked-in retirement type accounts; share growth is likely only taxed when sold / on death / on expatriation / similar], and assuming you reinvest the dividends every year in new shares, then yes, total growth in your account is the same whether that growth is comprised of entirely dividends, entirely share increase, or a mixture of both. It is those caveats (tax + reinvestment) which could change things. |
Why are we taxed on revenue and companies on profit? | I pay taxes on revenue. You do have the ability to deduct expenses, though it's not as comprehensive as what companies can do: These figures apply to everybody, so those that earn more get taxed more on thee additional income in each bracket (meaning the first $100,000 of taxable income is taxed the same for everybody at one rate, the next $100,000 at a different rate, etc.) So you do get to deduct personal expenses and get taxed on "profit" - but since the vast majority of people don't keep detailed records of what they spend, it's much simpler just to use blanket deduction amounts for everyone. Companies have much more detailed systems in place to track and categorize expenses, so it's easier to just tax on net profit. Plus, the corporate tax rate is much higher than the average individual tax rate - would you trade more deductions for a higher tax rate? |
Has anyone compared an in-person Tax Advisor to software like Turbo Tax? | It depends on the person. i will take turbo tax over any mediocre or poor accountant ANY DAY. You get consistent, accurate tax preparation with the software (desktop - not the online version) I was in a housing rental partnership with my brothers and one of them insisted on using his accountant... what a mistake. I have been using turbo tax for 10+ years and have always been happy. It handles my non trivial situation with ease: I am happy with it but have to admit I don't have a good accountant to compare it to. I see no reason to go to an accountant except for planning purposes. Just for tax prep it is more than worth it and more than you will need. |
renter's insurance for causing property damage | You need to get some thing called landlord insurance, tenants only covers his belongings. Any property damage caused deliberately or unknowingly is not covered in this, its upon the owner to get landlord insurance. |
Why might it be advisable to keep student debt vs. paying it off quickly? | I'm no financial advisor, but I do have student loans and I do choose to pay them off as slowly as I can. I will explain my reasoning for doing so. (FWIW, these are all things that pertain to government student loans in the US, not necessarily private student loans, and not necessarily student loans from other countries) So that's my reasoning. $55 per month for the rest of my life adds up to a large amount of money over the course of my life, but the impact month-to-month is essentially nonexistent. That combined with the low interest and the super-low-pressure-sales-tactics means I just literally don't have any incentive to ever pay it all off. Like I said before, I'm just a guy who has student loans, and not even one who is particularly good with money, but as someone who does choose not to pay off my student loans any faster than I have to, this is why. |
Debit cards as bad as credit cards? | It's a real pain in the rear to get cash only from a bank teller (the end result of cutting the card as suggested). There is a self control issue here that, like weight loss, should ultimately be addressed for a psychologically healthy lifestyle. You don't mention a budget here. A budget is one of the first tools necessary for setting spending limits. Categorizing your money into inviolable categories, such as: will force you to look at any purchase in context of your other needs and goals. Note that savings is at the top of the list, supporting the aphorism to, "Pay yourself first." Make realistic allowances for each budget category, then force yourself to stick to this budget by whatever means necessary. Cash in several envelopes labeled with each category can physically reinforce your priorities (the debit card is usually left at home for now). Roll remaining funds from each month over into the next month to cover irregular larger expenses, such as auto repairs. What sort of investing are we talking about? If you are just talking about retirement savings, an automatic deduction of just $50 to a Roth IRA account at a discount brokerage every pay check is a good start. An emergency fund of 6 months expenses is also common financial advice, and can likewise be built from small automatic deductions. In defense of wise use of plastic, a debit card can be a great retroactive budgeting tool because it records all spending for you. It takes a lot more effort to save and enter receipts for cash, and a compulsive spender without a budget is just as likely to run out of money whether or not he uses plastic. You could keep receipts in the envelope you take the cash out of when you're getting started. If you are so addicted to spending that you must cut your debit card to enforce your budget, at least consider this a temporary measure to get yourself under control. When the bank issues you a new card, re-evaluate this decision and the self control measures you've implemented to see if you've grown enough to keep the card. |
Do I even need credit cards? | You don't need credit cards but there are few benefits, if you pay them off right away I assume you do have a debit card, since sometimes (like unattended gas stations or shopping on the web) cash is not accepted. |
In the stock market, why is the “open” price value never the same as previous day's “close”? | It does sometimes open one day the same as it closed the previous day. Take a look at ESCA, it closed October 29th at 4.50, at opened November 1st at 4.50. It's more likely to change prices overnight than it is between two successive ticks during the day, because a lot more time passes, in which news can come out, and in which people can reevaluate the stock. |
Cash out 401k for house downpayment | Does it ever make sense? Yes, but almost never. If you're in a situation where you're invested in something with low rates (think government securities) or cash equivalents, then you do need to think about rate spread as you mention. Does the savings over the life over the mortgage beat out the 35% hit now, plus all the interest you would earn over those 20 years? Have you factored in other considerations such as mortgage interest deduction on taxes? Don't forget you need to think about how rates will change down the line (they can't go much lower, so potentially you'll get better rates in the 401(k) down the line). Don't forget there's also the impact of inflation; again the rates on your savings may go up, but your mortgage is a fixed payment, so with even a low rate of inflation, your payments effectively become "less" over time. If your investments are in something like stocks and bonds, then I would say undoubtedly you would want to keep the money in the 401(k). Time in market and compounding are your best friends over a long time horizon. Also, as mentioned by @JohnFX, the hit of your 35% now is something you will absolutely feel now. Hopefully not, but your life situation could change where you have an emergency and need to drain your savings or you may not see the end of that 20 years. |
Can I rollover an “individual retirement annuity” to an IRA? | You are not allowed to take a retirement account and move it into the beneficiary's name, an inherited IRA is titled as "Deceased Name for the benefit of Beneficiary name". Breaking the correct titling makes the entire account non-retirement and tax is due on the funds that were not yet taxed. If I am mistaken and titling remained correct, RMDs are not avoidable, they are taken based on your Wife's life expectancy from a table in Pub 590, and the divisor is reduced by one each year. Page 86 is "table 1" and provides the divisor to use. For example, at age 50, your wife's divisor is 34.2 (or 2.924%). Each year it decrements by 1, you do not go back to the table each year. It sounds like the seller's recommendation bordered on misconduct, and the firm behind him can be made to release you from this and refund the likely high fees he took from you. Without more details, it's tough to say. I wish you well. The only beneficiary that just takes possession into his/her own account is the surviving spouse. Others have to do what I first described. |
It is worth using a discount stock broker? I heard they might not get the best price on a trade? | They're not negotiating trade rates for you, you set the trade rates in your order. What they might have is a slightly slower system, delivering your orders a second later than the competition would. If that's critical to you then you should look at that, otherwise look at their fees, customer support and research aids because that's where the broker value is. |
Do my kids need to file a tax return? | If the gift was stock that they have owned for years there can be one hitch: The basis of the stock doesn't reset when it is gifted. For example if grandparents have owned stock that is currently worth $10,000 today, but they bought it decades ago when it only cost them $1,000; then if the new owner sells it today they will have a gain of $9,000. The clock to determine short term/long term also doesn't reset; which is good. The basis needs to be determined now so that the gain can be accurately calculated in the future. This information should be stored in a safe place. Gains for dividends are investment income and the rules regarding the kiddie tax need to be followed. |
What is the standard deviation and mean return of oil? | Oil as a commodity or investing in oil companies as a stock? As a commodity, I'd recommend none. The article Commodities – They Have (Almost) No Place in Your Portfolio and The Case Against Commodities explain why commodities are not good investments. |
Can PayPal transfer money automatically from my bank account if I link it in PayPal? | See this help article from Paypal about payment methods for purchases. When you don’t have a PayPal balance or don’t have enough in your PayPal balance, we’ll use your bank account as the default payment method unless you select a different way to pay. So yes, Paypal will automatically deduct from your bank account when you make a purchase, unless you link another payment method and make that your default. |
How can an Indian citizen get exposure to global markets? | It isn't just ETFs, you have normal mutual funds in India which invest internationally. This could be convenient if you don't already have a depository account and a stockbroker. Here's a list of such funds, along with some performance data: Value Research - Equity: International: Long-term Performance. However, you should also be aware that in India, domestic equity and equity fund investing is tax-free in the long-term (longer than one year), but this exemption doesn't apply to international investments. Ref: Invest Around the World. |
LLC Partnership Earned Income vs. Partnership Share | Why would you file four K-1s for each partner? You file one K-1 per partner, on which you report the total of income attributed to that partner. It shouldn't and cannot "vary". There's no variables here, the income you report is the income already earned and attributed to that partner. What's there to vary? How you decide the attribution of income is governed by your operating agreement, the IRS only needs the bottom line. |
Should I Purchase Health Insurance Through My S-Corp | The answer seems to depend on where you live. Perhaps you already found this, but the summary from the IRS is: The insurance laws in some states do not allow a corporation to purchase group health insurance when the corporation only has one employee. Therefore, if the shareholder was the sole corporate employee, the shareholder had to purchase his health insurance in his own name. The IRS issued Notice 2008-1, which ruled that under certain situations the shareholder would be allowed an above-the-line deduction even if the health insurance policy was purchased in the name of the shareholder. Notice 2008-1 provided four examples, including three examples in which the shareholder purchased the health insurance and one in which the S corporation purchased the health insurance. Notice 2008-1 states that if the shareholder purchased the health insurance in his own name and paid for it with his own funds, the shareholder would not be allowed an above-the-line deduction. On the other hand, if the shareholder purchased the health insurance in his own name but the S corporation either directly paid for the health insurance or reimbursed the shareholder for the health insurance and also included the premium payment in the shareholder’s W-2, the shareholder would be allowed an above-the-line deduction. The bottom line is that in order for a shareholder to claim an above-the-line deduction, the health insurance premiums must ultimately be paid by the S corporation and must be reported as taxable compensation in the shareholder’s W-2. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporation-Compensation-and-Medical-Insurance-Issues I understand this to mean that you can only get the deduction in your case (having purchased it in your own name) if your state does not allow your S-Corp to purchase a group health plan because you only have one employee. (I don't know specifically if Illinois fits that description or not.) In addition, there are rules about reporting health insurance premiums for taxes for S-Corp share members that you should also check. Personally, I think that it's complicated enough that advice from a CPA or other tax advisor specific to your situation would be worth the cost. |
Official Bank Check | How? Basically all banks nowadays allow online deposits from a smartphone - you take a picture from the front and back of the check, and submit it, and that's it. You still have the paper check, and it looks pristine, but it is deposited (and the paper is worthless). |
How are bonds affected by the Federal Funds Rate? | I'll answer your question, but first a comment about your intended strategy. Buying government bonds in a retirement account is probably not a good idea. Government bonds (generally) are tax advantaged themselves, so they offer a lower interest rate than other types of bonds. At no tax or reduced tax, many people will accept the lower interest rate because their effective return may be similar or better depending, for example, on their own marginal tax rate. In a tax-advantaged retirement account, however, you'll be getting the lower interest without any additional benefit because that account itself is already tax-advantaged. (Buying bonds generally may be a good idea or not - I won't comment on that - but choose a different category of bonds.) For the general question about the relationship between the Fed rate and the bond rate, they are positively correlated. There's not direct causal relationship in the sense that the Fed is not setting the bond rate directly, but other interest bearing investment options are tied to the Fed rate and many of those interest-bearing options compete for the same investor dollars as the bonds that you're reviewing. That's at a whole market level. Individual bonds, however, may not be so tightly coupled since the creditworthiness of the issuing entity matters a lot too, so it could be that "bond rates" generally are going up but some specific bonds are going down based on something happening with the issuer, just like the stock market might be generally going up even as specific stocks are dropping. Also keep in mind that many bonds trade as securities on a secondary market much like stocks. So I've talked about the bond rate. The price of the bonds themselves on the secondary market generally move opposite to the rate. The reason is that, for example, if you buy a bond at less than face value, you're getting an effective interest rate that's higher because you get the same sized incremental payments of interest but put less money into the investment. And vice versa. |
Consequences of buying/selling a large number of shares for a low volume stock? | I've alway thought that it was strange, but the "price" that gets quoted on a stock exchange is just the price of the last transaction. The irony of this definition of price is that there may not actually be any more shares available on the market at that price. It's also strange to me that the price isn't adjusted at all for the size of the transaction. A transaction of just 1 share will post a new price even if just seconds earlier 100,000 shares traded for a different price. (Ok, unrealistic example, but you get my point.) I've always believed this is an odd way to describe the price. Anyway, my diatribe here is supposed to illustrate the point that the fluctuations you see in price don't really reflect changing valuations by the stock-owning public. Each post in the exchange maintains a book of orders, with unmatched buy orders on one side and unmatched sell orders on the other side. If you go to your broker and tell him, "fill my order for 50,000 shares at market price", then the broker won't fill you 50,000 shares at .20. Instead, he'll buy the 50 @ .22, then 80 @ .23, then 100 @ .30, etc. Because your order is so large compared to the unmatched orders, your market order will get matched a bunch of the unmatched orders on the sell side, and each match will notch the posted price up a bit. If instead you asked the broker, "open a limit order to buy 50000 shares at .20", then the exchange will add your order to the book: In this case, your order likely won't get filled at all, since nobody at the moment wants to sell at .20 and historically speaking it's unlikely that such a seller will suddenly appear. Filling large orders is actually a common problem for institutional investors: http://www.businessweek.com/magazine/content/05_16/b3929113_mz020.htm http://www.cis.upenn.edu/~mkearns/papers/vwap.pdf (Written by a professor I had in school!) |
Stability of a Broker: What if your broker goes bankrupt? Could you lose equity in your account? | Look at the link to the SIPC. I don't know exactly what you mean by "runs out of funds," but the SIPC will replace shares of stock stolen from your account, and up to $100,000 in cash. The real risk is when a shady brokers sells you shares in a stock that becomes worthless, that's when "buyer beware" kicks in. No help there. |
Will paying off my car early hinder my ability to build credit? | 12% is ridiculously high and routine for loans with no credit history, esp. from the dealer. I don't think though paying off would hurt your credit - you've already got installment loan on your report, and you have history of payments, so it shouldn't matter how long the history is (warning: this is kind of guesswork compiled from personal experience and stuff read on the net, since officially how credit score calculated is Top Secret). If you have the loan and credit card with good payments, only thing you need to build credit is time (and, of course, keeping everything nicely paid). Of course, if you could find a loan with lower rate somewhere it's be great to refinance but with low credit you would probably not get the best rates from anywhere, unfortunately. |
Something looks off about Mitsubishi financial data | All but certainly, Mitsubishi is selling so cheaply because of the fuel scandal. It has been providing false fuel efficiency data for decades. As a result, it may face significant penalties and may have lost the trust of consumers, who will now be less likely to purchase a Mitsubishi vehicle. Nissan is taking a controlling stake in Mitsubishi. This is important news for the company, too. The stock price reflects the consensus of investors on how significant these issues are. It's quite possible the stock will recover over the next few years, in which case it's a bargain at the moment. On the other hand, it's quite possible the company will never recover. |
Risk and reward of a synthetic option position | You sold a call, and have a risk if the stock rises. You bought a put and gain when the stock drops. You, sir, have a synthetic short position. It's Case 3 from your linked example: Suppose you own Long Stock and the company is going to report earnings but you’re going on vacation. How can you hedge your position without selling your stock? You can short the stock synthetically with options! Short Stock = Short Call + Long Put They conclude with the net zero remark, because the premise was an existing long position. A long plus this synthetic short results in a neutral set of positions (and the author's ability to go on vacation not concerned about any movement in the stock.) |
Does wash sale apply if I buy stock on 2 two different dates and sell it later | Is wash rule applicable for this? No - because you made a gain on the sale. You paid $13,500 for the stock and sold it for $14,250. The wash rule prevents you from claiming a loss if you buy the same stock again within 30 days. You have no loss to claim, so the rule does not apply. |
Nominal value of shares | They are 2 different class of shares belonging to the same company. Class A shares [par value of 0.01] have 100 voting rights per share. Class B shares [par value of 0.0002] have one voting rights. Both are listed separately with different ISN and trade at slightly different values. The Class A at higher value than Class B which looks right as it has more voting power. |
Creating S-Corp: Should I Name My Wife as a Director/Shareholder? | There are many aspects to consider in deciding what sort of company you want to form. Instead of an S-corporation, you should determine whether it would be better to form a Limited Liability Company (LLC), Limited Partnership (LP) or even a professional company (PC). Littleadv is correct: There is minimal benefit in forming an S-corp with you and your wife as the shareholders, if you will be the only contributor-worker. There are costs associated with an S-corporation, or any corporation, that might outweigh benefits from more favorable tax treatment, or personal protection from liability: Filing fees and disclosure rules vary from state to state. For example, my father was a cardiologist who had no employees, other than my grandmother (she worked for free), in a state with income taxes (NM). He was advised that a PC was best in New Mexico, while an S-Corp was better in Florida (there are no personal income taxes in Florida). The only way to know what to do requires that you consult an accountant, a good one, for guidance. |
Why does the biotechnology industry have such a high PE ratio? | If you look at the biotech breakdown, you'll find a lot of NAs when it comes to P/E since there are many young biotech companies that have yet to make a profit. Thus, there may be something to be said for how is the entire industry stat computed. Biotechnology can include pharmaceutical companies that can have big profits due to patents on drugs. As an example, look at Shire PLC which has a P/E of 1243 which is pretty high with a Market Capitalization of over a billion dollars, so this isn't a small company. I wonder what dot-com companies would have looked like in 1998/1999 that could well be similar as some industries will have bubbles you do realize, right? The reason for pointing out the Market Capitalization is that this a way to measure the size of a company, as this is merely the sum of all the stock of the company. There could be small companies that have low market capitalizations that could have high P/Es as they are relatively young and could be believed to have enough hype that there is a great deal of confidence in the stock. For example, Amazon.com was public for years before turning a profit. In being without profits, there is no P/E and thus it is worth understanding the limitations of a P/E as the computation just takes the previous year's earnings for a company divided by the current stock price. If the expected growth rate is high enough this can be a way to justify a high P/E for a stock. The question you asked about an industry having this is the derivation from a set of stocks. If most of the stocks are high enough, then whatever mean or median one wants to use as the "industry average" will come from that. |
Is it accurate to say that if I was to trade something, my probability of success can't be worse than random? | One key piece missing from your theory is the bid/ask spread. If you buy a stock for $10, you usually can't immediately turn around and sell it for $10. You can only sell it for whatever someone is willing to pay for it. So virtually any random investment (stocks, bonds, forex, whatever) immediately loses a small amount of value, and over the long run you will almost certainly lose money if you buy/sell at random. |
What is the best way to save money from inflation and currency devaluation? | Generally speaking, so-called "hard assets" (namely gold or foreign currency), durable goods, or property that produces income is valuable in a situation where a nation's money supply is threatened. Gold is the universal hard asset. If you have access to a decent market, you can buy gold as bullion, coins and jewelry. Small amounts are valuable and easy to conceal. The problem with gold is that it is often marked up alot... I'm not sure how practical it is in a poor developing nation. A substitute would be a "harder" currency. The best choice depends on where you live. Candidates would be the US Dollar, Euro, Australian Dollar, Yen, etc. The right choice depends on you, the law in your jurisdiction, your means and other factors. |
Are index-tracking ETF popular in Japan? | The Japanese stock market offers a wide selection of popular ETFs tracking the various indices and sub-indices of the Tokyo Stock Exchange. See this page from the Japan Exchange Group site for a detailed listing of the ETFs being offered on the Tokyo exchange. As you have suggested, one would expect that Japanese investors would be reluctant to track the local market indices because of the relatively poor performance of the Japanese markets over the last couple of decades. However, this does not appear to be the case. In fact, there seems to be a heavy bias towards Tokyo indices as measured by the NAV/Market Cap of listed ETFs. The main Tokyo indices - the broad TOPIX and the large cap Nikkei - dominate investor choice. The big five ETFs tracking the Nikkei 225 have a total net asset value of 8.5Trillion Yen (72Billion USD), while the big four ETFs tracking the TOPIX have a total net asset value of 8.0Trillion Yen (68Billion USD). Compare this to the small net asset values of those Tokyo listed ETFs tracking the S&P500 or the EURO STOXX 50. For example, the largest S&P500 tracker is the Nikko Asset Management S&P500 ETF with net asset value of just 67Million USD and almost zero liquidity. If I remember my stereotypes correctly, it is the Japanese housewife that controls the household budget and investment decisions, and the Japanese housewife is famously conservative and patriotic with their investment choices. Japanese government bonds have yielded next to nothing for as long as I can remember, yet they remain the first choice amongst housewives. The 1.3% yield on a Nikkei 225 ETF looks positively generous by comparison and so will carry some temptations. |
How do I find a good mutual fund to invest 5K in with a moderately high amount of risk? | The "Money 70" is a fine list: http://money.cnn.com/magazines/moneymag/bestfunds/index.html Money magazine is usually more reasonable than the other ones (SmartMoney, Kiplinger's, etc. are in my opinion sillier). If you want a lot of depth, the Morningstar Analyst Picks are useful but you have to pay for a membership which is probably not worth it for now: http://www.morningstar.com/Cover/Funds.aspx (side note: Morningstar star ratings are not useful, I'd ignore those. analyst picks are pretty useful.) Vanguard is a can't-go-too-wrong suggestion. They don't have any house funds that are "bad," while for example Fidelity has some good ones mixed with a bunch that aren't so much. Of course, some funds at Vanguard may be inappropriate for your situation. (Vanguard also sells third-party funds, I'm talking about their own branded funds.) If getting started with 5K I think you'd want to go with an all-in-one fund like a target date retirement fund or a balanced fund. Such a fund also handles rebalancing for you. There's a Vanguard target date fund and balanced fund (Wellington) in the Money 70 list. fwiw, I think it's more important to ask how much risk you need to take, rather than how much you are willing to take. I wrote this down at more length here: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ First pick your desired asset allocation, then pick your fund after that to match. Good luck. |
Renting or Buying an House | When you sell a house around between 7-10% of the sales price will go to various fees. Mostly to the agents, but also to county fees, city fees, deed tax, and possibly covering closing costs for the buyers. So if you sell a $400k house for the same price you buy, just in fees, you're out $40k. Mortgages are structured so that the frontend is very interest heavy, while at the end you're mostly paying towards principal. So for the first two years you will pay down very little of the principal. Figure around $2500 for the mortgage, and without running the numbers I bet you would pay an average for the first two years of around $1800/month in interest. $43,200. Mortgage interest is tax deductible, so you'll get some of that back. That's also $16,800 in equity you'll have on the house, so you'll get that back out when you sell. Rough numbers, I would be you lose around $50k buying the house and selling for the same price two years later. That doesn't take into account having to do any maintenance. And it assumes you can sell quickly when you want to. Renting is not throwing away money. You don't lose any money. You get a place to live in exchange. You don't build equity, sure, but you don't need to worry about maintenance and other related issues. When you're looking to be somewhere short term renting is generally the best idea. |
Multiple hard inquiry for a single loan from car dealer? | (I'm a bit surprised that nobody talked about the impact of multiple inquiries on a loan, since OP is concerned with credit building. Probably an answer as opposed to a comment is justified.) Yes. In fact when you shop for auto loan you are expected to have your credit score/report be pulled by different banks, credit unions, and/or the financing arm of the car manufacturer or the dealership, so that you can hopefully get the best rate possible. This is especially true if the dealer is requesting quotes on rates on your behalf, as they would probably use a batch process to send out applications to multiple financial institutions all at once. Yes, and a bit unusual - CALVERT TOYO (your dealer) pulled your report twice on the same day. Presumably they are not getting any new information on the second pull. Maybe a fat finger? Regardless, you should not worry about this too much (to be explained below). I would say "don't bother". The idea behind hard inquiries lowering credit score is that lenders see the number of hard inquiries as your desire for credit. Too high a number is often viewed as either "desperate for credit" or "unable to qualify for credit". But as explained above, it is very common for a person to request quotes for multiple financial institutions and thus to have multiple hard inquiries in a short period of time when shopping for loans. To account for that, the credit bureau's model would usually combine hard inquiries for a same type of loan (auto, mortgage, etc.) within 30 days. Hence a person sending quote request to 3 banks won't be rated higher for credit than if he were to request quotes from 5 banks. Therefore in your case your credit profile is not going to be different if you had been pulled just once. my credit score goes down for 15 points I'm assuming you are talking about the credit score provided by Credit Karma. The score CK provided is FAKO. The score lenders care about is FICO. They are well correlated but still different. Google these two terms and you should be able to figure out the difference quickly. You can also refer to my answer to a different question here: Equifax credit score discrepancy in 1 month, why? |
Are COBRA premiums deductible when self-employed? | COBRA premiums are not deductible on 1040 line 29; to qualify, the IRS says the insurance plan must be in your name (COBRA is in your former employer's name). H&R Block confirms this. |
How to pick a state to form an LLC in? | Generally, you pick the State which you're located at, because you'll have to register your LLC there in any case. In your case that would be either Colorado or Oklahoma - register as domestic in one, as foreign in the other. If your concern is anything other than mere convenience/costs - then you need to talk to a lawyer, however most State LLC laws are fairly alike (and modeled after the "Uniform Limited Liability Company Act". Keep in mind that most of the sites talking about "forming LLC out of state" are either sales sites or targeted to foreigners attempting to form a US company. All the cr@p you hear about forming in Delaware/Nevada/Wyoming - is useless and worthless for someone who's a resident of any of the US States. If you're a US resident - you will always have to register in the State you're located at and do the work at, so if you register elsewhere - you just need to register again in your home State. In your case you already span across States, so you'll have to register in two States as it is - why add the costs of registering in a third one? |
Good book-keeping software? | You can try manager.io. It has a desktop, cloud and server edition that should fit your needs. |
Does borrowing from my 401(k) make sense in my specific circumstance? | You're getting great wisdom and options. Establishing your actionable path will require the details that only you know, such as how much is actually in each paycheck (and how much tax is withheld), how much do you spend each month (and yearly expenses too), how much spending can you actually cut or replace, how comfortable are you with considering (or not considering) unexpected/emergency spending. You mentioned you were cash-poor, but only you know what your current account balances are, which will affect your actions and priorities. Btw, interestingly, your "increase 401k contributions by 2% each year" will need to end before hitting the $18K contribution limit. I took some time and added the details you posted into a cash-flow program to see your scenario over the next few years. There isn't a "401k loan" activity in this program yet, so I build the scenario from other simple activities. You seem financially minded enough to continue modeling on your own. I'm posting the more difficult one for you (borrow from 401k), but you'll have to input your actual balances, paycheck and spending. My spending assumptions must be low, and I entered $70K as "take-home," so the model looks like you've got lots of cash. If you choose to play with it, then consider modeling some other scenarios from the advice in the other posts. Here's the "Borrow $6500 from 401k" scenario model at Whatll.Be: https://whatll.be/d1x1ndp26i/2 To me, it's all about trying the scenarios and see which one seems to work with all of the details. The trick is knowing what scenarios to try, and how to model them. Full disclosure: I needed to do similar planning, so I wrote Whatll.Be and I now share it with other people. It's in beta, so I'm testing it with scenarios like yours. (Notice most of the extra activity occurs on 2018-Jan-01) |
Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? | To expand on what @fishinear and some others are saying: The only way to look at it is that the parents have invested, because the parents get a % of the property in the end, rather than the original loan amount plus interest. It is investment; it is not a loan of any kind. One way to understand this is to imagine that after 20 years, the property triples in value (or halves in value). The parents participate as if they had invested in 75% ownership of the property and the OP as if 25% ownership of the property. Note that with a loan, there is a (potentially changing) outstanding loan balance, that could be paid to end the loan (to pay off the loan), and there is an agreed upon an interest rate that is computed on the outstanding balance — none of those apply to this situation; further with a loan there is no % of the property: though the property may be used to secure the loan, that isn't ownership. Basically, since the situation bears none of the qualities of a loan, and yet does bear the qualities of investment, the parents have bought a % ownership of the property. The parents have invested in 75% of the real estate, and the OP is renting that 75% from them for: The total rent the OP is paying the parents for their 75% of the property is then (at least) $1012.50/mo, A rental rate of $1012.50/mo for 75% of the property equates to a rental price of $1350/mo for the whole property. This arrangement is only fair to both parties when the fair-market rental value of the whole property is $1350/mo; it is unfair to the OP when the fair-market rental value of property is less, and unfair to the parents when the fair-market rental value of property is more. Of course, the fair-market rental value of the property is variable over time, so the overall fairness would need to understand rental values over time. I feel like this isn't actually a loan if I can never build more equity in the condo. Am I missing something? No, it isn't a loan. You and your parents are co-investing in real estate. Further, you are renting their portion of the investment from them. For comparison, with a loan you have 100% ownership in the property from the start, so you, the owner, would see all the upside/downside as the property valuation changes over time whether the loan is paid off or not. The borrower owes the loan balance (and interest) not some % of the property. A loan may be secured by the property (using a lien) but that is quite different from ownership. Typically, a loan has a payment schedule setup to reduce the loan balance (steadily) over time so that you eventually pay it off. With a loan you gain equity % — the amount you own outright, free & clear — in two ways, (1) by gradually paying off the loan over time so the unencumbered portion of the property grows, and (2) if the valuation of the property increases over time that gain in equity % is yours (not the lenders). However note that the legal ownership is all 100% yours from the start. Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? You can evaluate whether you are being ripped off by comparing the $1350/mo rate to the potential rental rate for the property over time (which will be a range or curve, and there are real estate websites (like zillow.com or redfin.com, others) to help estimate what fair-market rent might be). Are there similar deals like this...? A straight-forward loan would have the borrower with 100% legal ownership from the start, just that the property secures the loan. Whereas with co-investment there is a division of ownership % that is fixed from the start. It is unusual to have both investment and loan at the same time where they are setup for gradual change between them. (Investment and loan can certainly be done together but would usually be done as completely separate contracts, one loan, one investment with no adjustment between the two over time.) To do both investment and loan would be unusual but certainly be possible, I would imagine; however that is not the case here as being described. I am not familiar with contracts that do both so as to take over the equity/ownership/investment over time while also reducing loan balance. Perhaps some forms of rent-to-own work that way, something to look into — still, usually rent-to-own means that until the renter owns it 100%, the landlord owns 100%, rather than a gradual % transfer over time (gradual transfer would imply co-ownership for a long time, something that most landlords would be reluctant to do). Transfer of any particular % of real estate ownership typically requires filing documents with the county and may incur fees. I am not aware of counties that allow gradual % transfer with one single filing. Still, the courts may honor a contract that does such gradual transfer outside of county filings. If so, what should I do? Explain the situation to your parents, and, in particular, however far out of balance the rental rate may be. Decide for yourself if you want to rent vs. buy, and where (that property or some other). If your parents are fair people, they should be open to negotiation. If not, you might need a lawyer. I suspect that a lawyer would be able to find several issues with which to challenge the contract. The other terms are important as well, namely gross vs. net proceeds (as others point out) because selling a property costs a % to real estate agents and possibly some taxes as well. And as the others have pointed out, if the property ultimately looses value, that could be factored in as well. It is immaterial to judging the fairness of this particular situation whether getting a bank loan would be preferable to renting 75% from the parents. Further, loan interest rates don't factor into the fairness of this rental situation (but of course interest rates do factor into identifying the better of various methods of investment and methods of securing a place to live, e.g. rent vs. buy). Contributed by @Scott: If your parents view this as an investment arrangement as described, then you need to clarify with them if the payments being made to them are considered a "buy out" of their share. This would allow you to gain the equity you seek from the arrangement. @Scott: Terms would have to be (or have been) declared to that effect; this would involve specifying some schedule and/or rates. It would have to be negotiated; this it is not something that could go assumed or unstated. -- Erik |
Have plenty of cash flow but bad credit | Set up a meeting with the bank that handles your business checking account. Go there in person and bring your business statements: profit and loss, balance sheet, and a spreadsheet showing your historical cash flow. The goal is to get your banker to understand your business and your needs and also for you to be on a first-name basis with your banker for an ongoing business relationship. Tell them you want to establish credit and you want a credit card account with $x as the limit. Your banker might be able to help push your application through even with your credit history. Even if you can't get the limit you want, you'll be on your way and can meet again with your banker in 6 or 12 months. Once your credit is re-established you'll be able to shop around and apply for other rewards cards. One day you might want a line of credit or a business loan. Establishing a relationship with your banker ahead of time will make that process easier if and when the time comes. Continue to meet with him or her at least annually, and bring updated financial statements each time. If nothing else, this process will help you analyze your business, so the process itself is useful even if nothing comes of it immediately. |
A friend wants to use my account for a wire transfer. Is this a scam or is it legitimate? | I know people who work in the gulf and most contracts are of the 14 days on/ 14 days (or so) off flavor. I've never heard of someone being onboard a ship or platform for a year. I bet this is a scam. |
Is gold subject to inflation? [duplicate] | Gold is a risky and volatile investment. If you want an investment that's inflation-proof, you should buy index-linked government bonds in the currency that you plan to be spending the money in, assuming that government controls its own currency and has a good credit rating. |
Looking to buy a house in 1-2 years. Does starting a Roth IRA now make sense? | With a Roth IRA, you can withdraw the contributions at any time without penalty as long as you don't withdraw the earnings/interest. There are some circumstances where you can withdraw the earnings such as disability (and maybe first home). Also, the Roth IRA doesn't need to go through your employer and I wouldn't do it through your employer. I have mine setup through Fidelity though I'm not sure if they have any guaranteed 3% return unless it was a CD. All of mine is in stocks. Your wife could also setup a Roth IRA so over 2 years, you could contribute $20,000. If I was you, I would just max out any 403-b matches (which you surely are at 25% of gross income) and then save my down payment money in a normal money market/savings account. You are doing good contributing almost 25% to the 403-b. There are also some income limitations on Roth IRAs. I believe for a married couple, it is $160k. |
A debt collector will not allow me to pay a debt, what steps should I take? | This may not apply in your particular situation, but I think it's important to mention: When a debt collector doesn't act like a debt collector, it may be because they aren't actually a debt collector. It's certainly strange that someone called you to collect money from you, and when you asked for a simple document, they not only got off the phone quickly but they also told you the debt would be cancelled. That just doesn't make sense: Why would they cancel the debt? Why wouldn't they send you the document? My initial impression is that you were possibly being scammed. The scam can take on many forms: Whenever you are called by a debt collector (or someone pretending to be one), it's a good idea to verify their identity first. More info here. |
What prices are compared to decide a security is over-valued, fairly valued or under-valued? | I was wondering how "future cash flows of the asset" are predicted? Are they also predicted using fundamental and/or technical analysis? There are a many ways to forecast the future cash flows of assets. For example, for companies: It seems like calculating expected/required rate using CAPM does not belong to either fundamental or technical analysis, does it? I would qualify the CAPM as quantitative analysis because it's mathematics and statistics. It's not really fundamental since its does not relies on economical data (except the prices). And as for technical analysis, the term is often used as a synonym for graphical analysis or chartism, but quantitative analysis can also be referred as technical analysis. the present value of future cash flows [...] (called intrinsic price/value, if I am correct?) Yes you are correct. I wonder when deciding whether an asset is over/fair/under-valued, ususally what kind of price is compared to what other kind of price? If it's only to compare with the price, usually, the Net asset value (which is the book value), the Discount Cash flows (the intrinsic value) and the price of comparable companies and the CAPM are used in comparison to current market price of the asset that you are studying. Why is it in the quote to compare the first two kinds of prices, instead of comparing the current real price on the markets to any of the other three kinds? Actually the last line of the quote says that the comparison is done on the observed price which is the market price (the other prices can't really be observed). But, think that the part: an asset is correctly priced when its estimated price is the same as the present value of future cash flows of the asset means that, since the CAPM gives you an expected rate of return, by using this rate to compute the present value of future cash flows of the asset, you should have the same predicted price. I wrote this post explaining some valuation strategies. Maybe you can find some more information by reading it. |
What is the difference between speculating and investing? | In my opinion the difference is semantic. A professional, or someone wanting to present an air of competence, is more likely to talk about investing in shares, as the word investment carries with it connotations of effort, energy and a worthwhile result. Whereas, the word speculation implies the hope of gain but with the risk of loss. |
How can I invest my $100? | There are websites out there that let people apply for micro-loans, and let other people fund those loans, and get a percent of the interest back as the loans are paid off. I have heard of people with spare cash "investing" in these sites. However, I don't think there is a guarantee of return of your money, and I have heard mixed reviews by people, so I will not link to any such sites here. |
Home Renovations are expensive.. Should I only pay cash for them? | It depends on your situation. If your floor is broken, fix it. If you don't have $1,000 on hand, spend appropriately. It seems silly to be doing ROI calculations on the potential impact on resale value. It's sillier to blow money frivolously, whether you do so with cash or credit. I'm assuming that if you have a broken linoleum floor that the kitchen isn't new, so it doesn't make sense to install your "dream tile" into the kitchen. Skip the imported travertine or wood and buy some nice linoleum and hire a handyman to put it in or install it yourself. You can probably do this for $500-700. If you have longer term plans for the kitchen, get them on paper and figure out what exactly you want to do and when you'll be able to do it. |
Are there any disadvantages of Progress Draw Mortgage? | Presumably, the inverse of the advantages? You are guaranteed the interest rate that is written on your mortgage commitment as long as the first draw happens before the rate hold expiry date (typically 120 days from application date). In most cases, it takes at least 6 months or more to build a home from the ground up. That means that you are taking a chance at what the interest rates and qualifying criteria will be several months down the road. You can normally only lock in 120 days prior to possession with a 'Completion Mortgage'. Lenders are constantly changing their guidelines and rates are predicted to increase over the coming months. That means you are much better to obtain draw mortgage financing to avoid any of these uncertainties. You will know that you have your financing in place right away before construction even starts. This is a huge peace of mind so you can relax and get ready for the big move. So thus, if interest rates are lower 6 months or a year from now, that'd be the disadvantage -- a longer lock-in period. |
How to properly do background check for future tenant in my own house? | I am a realtor. For our rental business, we use a service that offers a background check. It costs us about $25, and it is passed along in the form of an application fee. I suggest you contact a local real estate agent who you know does rentals. Have a conversation about what you are doing, and see if they will help process the application for you, for a fee of course. If you are truly concerned about your safety (The text you wrote can either read as true concern or sarcasm. Maybe we are really in a wild country?) It's worth even a couple hundred bucks to screen out a potential bad roommate. |
How should I prepare for the next financial crisis? | In the 2008 housing crash, cash was king. Cash can make your mortgage payment, buy groceries, utilities, etc. Great deals on bank owned properties were available for those with cash. Getting a mortgage in 2008-2011 was tough. If you are worried about stock market crashing, then diversification is key. Don't have all your investments in one mutual fund or sector. Gold and precious metals have a place in one's portfolio, say 5-10 percent as an insurance policy. The days of using a Gold Double Eagle to pay the property taxes are largely gone, although Utah does allow it. The biggest lesson I took from the crash is you cant have too much cash saved. Build up the rainy day fund. |
Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? | No, if you are trading options to profit solely off the option and not own the underlying, you should trade it away because it costs more to exercise: |
How come the government can value a home more than was paid for the house? | From my perspective I suspect that if the government use the paid price, people will start to buy at very low nominal prices in order to pay less taxes, and will repay the seller by other means. |
Strategies to guarantee arrival time for transfers between banks | Transfers are defined to arrive on a specific number of business days, nearly always one business day (if you submit it before the cutoff time). The exact number of days depends on the receiver bank, but when you try to create a transfer, it will tell you when it will arrive, before you send it out. |
Is Volvo a public company? | There are two different companies named "Volvo." The publicly-traded company with ticker symbol VOLV-B is called Volvo Group, or AB Volvo. They primarily build trucks, buses, and construction equipment. The company that makes the Volvo branded cars is called Volvo Cars. It is a privately-held company currently owned by the Chinese Geely Holding Group. It was all one company until 1999, when AB Volvo sold off its car brand to Ford. Because of the history, the two companies share the same logo. |
Is gold subject to inflation? [duplicate] | Gold isn't constant in value. If you look at the high price of $800 in January of 1980 and the low of $291 in 2001, you lost a lot of purchasing power, especially since money in 2001 was worth less than in 1980. People claim gold is a stable store of value but it isn't. |
Pay or not pay charged-off accounts for mortgage qualification | Your post has some assumptions that are not, or may not be true. For one the assumption is that you have to wait 7 years after you settle your debts to buy a home. That is not the case. For some people (me included) settling an charged off debt was part of my mortgage application process. It was a small debt that a doctor's office claimed I owed, but I didn't. The mortgage company told me, settling the debt was "the cost of doing business". Settling your debts can be looked as favorable. Option 1, in my opinion is akin to stealing. You borrowed the money and you are seeking to game the system by not paying your debts. Would you want someone to do that to you? IIRC the debt can be sold to another company, and the time period is refreshed and can stay on your credit report for beyond the 7 years. I could be wrong, but I feel like there is a way for potential lenders to see unresolved accounts well beyond specified time periods. After all, the lenders are the credit reporting agencies customers and they seek to provide the most accurate view of a potential lender. With 20K of unresolved CC debt they should point that out to their customers. Option 2: Do you have 20K? I'd still seek to settle, you do not have to wait 7 years. Your home may not appreciate in 2 years. In my own case my home has appricated very little in the 11 years that I have owned it. Many people have learned the hard way that homes do not necessarily increase in value. It is very possible that you may have a net loss in equity in two years. Repairs or improvements can evaporate the small amount of equity that is achieved over two years with a 30 year mortgage. I would hope that you pause a bit at the fact that you defaulted on 20K in debt. That is a lot of money. Although it is a lot, it is a small amount in comparison to the cost and maintenance of a home. Are you prepared to handle such a responsibility? What has changed in your personality since the 20K default? The tone of your posts suggests you are headed for the same sort of calamity. This is far more than a numbers game it is behavioral. |
Bond ETFs vs actual bonds | As keshlam said, an ETF holds various assets, but the level of diversification depends on the individual ETF. A bond ETF can focus on short term bonds, long term bonds, domestic bonds, foreign bonds, government bonds, corporate bonds, low risk, high risk, or a mixture of any of those. Vanguard Total International Bond ETF (BNDX) for instance tries to be geographically diverse. |
What option-related strategies are better suited to increasing return potential? | I've traded covered calls now and then. This is a recent trade. Bought 1000 shares of RSH (Radio Shack) and sold 10 calls. So, I own the stock at a cost of $6.05, but have to let it go for $7.50. There's a 50c dividend in November, so the call buyer will call it away even if the stock trades below the strike. So, I'm expecting this is a 10 month trade for a 24% return. This is one strategy where options clearly take down the risk (of course, I did not say 'remove', just lessens). The stock can be 10% lower a year out, and I'm still ahead by 8% plus the dividend if it's not canceled. Note - it's a rare case for a one year trade to return 20% or more at a flat stock price. More common is 10-12%. (I hope this example is acceptable as an example of this type of trade. If not, I can edit to "XYZ corp" to remove the stock name. (So if anyone comments, please do not repeat name in case I need to remove) |
How often do typical investors really lose money? | Trading is NOT zero-sum game, it is negative sum actually. In fact all people's money is getting swept by commissions and fees. If you don't have The Plan (which includes minimizing commission losses), you win some (not a lot), then you get big positions, then market crashes, then all your money is gone. You will start noticing that commissions are real, only when you get market crash. Prey that you get heavy losses (-10% of portfolio) before some (giant) market crash. Getting good lesson by small price is better then high price (-30..50%). Piece of advice. There is small exchanges that do NOT charge you for operations, taking only market spread ($0.01) as commission. They do so because they do not have big population and they trade mostly by using automatic market-makers (which means there is no way to buy 10% of Apple there). |
What taxes are assessed on distributions of an inherited IRA? | You've been taking the RMDs. Each year the RMD is calculated by taking the prior 12/31 balance and dividing by the divisor, calculated when you inherited, and dropping by 1 each year. Some great trades and your account balance goes up. That's great, but of course it sends the next RMD higher. I'd understand how marginal rates work and use the withdrawal to "top off" your current bracket. This will help slow the growth and runaway RMD increases. |
Is dividend included in EPS | No, dividends are not included in earnings. Companies with no earnings sometimes choose to pay dividends. Paying the dividend does not decrease earnings. It does of course decrease cash and shows up on the balance sheet. Many companies choose to keep the dividend at a fixed rate even while the business goes through cycles of increased and decreased earnings. |
Travel expenses for an out-of-state rental | While the question is very localized, I'll answer about the general principle. My main question is with how far away it is (over 1000 miles), how do I quantify the travel expenses? Generally, "necessary and ordinary" expenses are deductible. This is true for business and also true for rentals. But what is necessary and what is ordinary? Is it ordinary that a landlord will manage the property 1000 miles away by himself on a daily basis? Is it ordinary for people to drive 1000 miles every week? I'd say "no" to both. I'd say it would be cheaper for you to hire a local property manager, thus the travel expense would not be necessary. I would say it would be cheaper to fly (although I don't know if its true to the specific situation of the OP, but as I said - its too localized to deal with) rather than drive from Texas to Colorado. If the OP thinks that driving a thousand miles is indeed ordinary and necessary he'll have to justify it to the IRS examiner, as I'm sure it will be examined. 2 trips to the property a year will be a nearly 100% write-off (2000 miles, hotels, etc). From what I understood (and that is what I've been told by my CPA), IRS generally allows 1 (one) trip per year per property. If there's an exceptional situation - be prepared to justify it. Also, keep all the receipts (like gas, hotel, etc.... If you claim mileage but in reality you took a flight - you'll get hit hard by the IRS when audited). Also while I'm up there am I allowed to mix business with pleasure? You cannot deduct personal ("pleasure") expenses, at all. If the trip is mainly business, but you go out at the evening instead of staying at the hotel - that's fine. But if the trip is "business" trip where you spend a couple of hours at your property and then go around having fun for two days - the whole trip may be disallowed. If there's a reasonable portion dedicated to your business/rental, and the rest is pleasure - you'll have to split some of the costs and only deduct the portion attributed to the business activities. You'll have to analyze your specific situation, and see where it falls. Don't stretch the limits too much, it will cost you more on the long run after all the audits and penalties. Can I also write off all travel involved in the purchase of the property? Although, again, the "necessary and ordinary" justification of such a trip is arguable, lets assume it is necessary and ordinary and generally justified. It is reasonable to expect you to go and see the property with your own eyes before the closing (IMHO, of course, I'm not an authority). Such an expense can be either business or investment expense. If its a business expense - its deductible on schedule C. If its an investment expense (if you do buy the property), its added to the cost of the property (capitalized). I'm not a tax adviser or a tax professional, and this is not a tax advice. This answer was not written or intended to be used, and cannot be used, for the purpose of avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code. You should seek a professional consultation with a CPA/Attorney(tax) licensed in your State(s) or a Federally licensed Enrolled Agent (EA). |
What's the best way to make money from a market correction? | If you are sure you are right, you should sell stock short. Then, after the market drop occurs, close out your position and buy stock, selling it once the stock has risen to the level you expect. Be warned, though. Short selling has a lot of risk. If you are wrong, you could quite easily lose all $80,000 or even substantially more. Consider, for example, this story of a person who had $37,000 and ended up losing all of that and still owing over $100,000. If you mistime your investment, you could quite easily lose your entire investment and end up hundreds of thousands of dollars in debt. |
If accepting more than $10K in cash for a used boat, should I worry about counterfeiting? | I'd not do business under these terms. A bill of sale needs a signature, right? Your signature is your word, and your word is your bond. I wouldn't participate in such a fraud, nor would I accept this sum of cash, who knows its origins? |
Why is the number of issued shares less than the number of outstanding shares | I have been asking myself a similar question about the financial statements of Weyerhaeuser. In response to Dheer's comment, whilst treasury shares are treated as a negative, it is issued shares less treasury shares (the negative) which gives the outstanding shares. So the original query remains unanswered. I've searched several sources and all state that outstanding shares will never be greater than issued shares. I've realized that the shares referred to are those authorized followed by those issued and outstanding (current year and prior year respectively) i.e. the shares that are both issued and outstanding as they must be issued in order to be outstanding This is supported in the example of Weyerhaeuser as there was a large increase in shares during Q1 2016 as a result of their merger with Plum Creek. Shares issued and outstanding are 510 million and 759 million respectively. |
What approaches are there for pricing a small business? | I don't have any experience in this, but this is my academic understanding of business pricing. The LOWEST amount a seller would accept is the liquidation value. For a B&B, what would the value of the land, the house, the furnishings, accounts payable, etc. be if it had to be sold today, minus any liabilities. The amount the seller would like to pay for is going to be a multiple of its annual earnings. One example of this is the discounted cash flow analysis. You determine the EBITDA, the earnings a company generated, before interest, depreciation, taxation and amortization. Once you have this amount, you can project it out in perpetuity, or you use an industry multiplier. Perpetuity: You project this value out in perpituity, discounted by the going interest rate. In other words, if you project the business will earn $100,000/year, the business should grow at a 5% rate, and the going interest rate is 8%. Using a growing perpetuity formula, one value of a business would be: 100,000 / (.08 - .03) = $2,000,000. This is a very high number, and the seller would love to get it. It's more common to do a multiple of the EBIDTA. You can do some research into the valuation of the particular industry to figure out the EBIDTA multiplier for the industry. For example, this article suggests that the 2011 EBITDA multiplier for hospitality industries is 13.8. (It's valuing large hotel chains, but it's a start). So the value of this B&B would be around $1,380,000. Here is an online SME valuation tool to help with the EBIDTA multiple based valuation. Also, from my research, it looks like many small business use Seller Discretionary Earnings (SDE) instead of EBITDA. I don't know much about it, but it seems to serve a similar purpose as EBITDA. A potential buyer should request the financial statements of the business for the last few years to determine the value of the business, and then can negotiate with the owner a price. You would probably want to enlist a broker to help you with the transaction. |
Put idle savings to use while keeping them liquid | I would suggest a high interest checking account if you qualify, or if you don't, an Investor's Deposit Account (IDA). |
What to bear in mind when considering a rental home as an investment? | Here would be the big two you don't mention: Time - How much of your own time are you prepared to commit to this? Are you going to find tenants, handle calls if something breaks down, and other possible miscellaneous issues that may arise with the property? Are you prepared to spend money on possible renovations and other maintenance on the property that may occur from time to time? Financial costs - You don't mention anything about insurance or taxes, as in property taxes since most municipalities need funds that would come from the owner of the home, that would be a couple of other costs to note in having real estate holdings as if something big happens are you expecting a government bailout automatically? If you chose to use a property management company for dealing with most issues then be aware of how much cash flow could be impacted here. Are you prepared to have an account to properly do the books for your company that will hold the property or would you be doing this as an individual without any corporate structure? Do you have lease agreements printed up or would you need someone to provide these for you? |
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