Question
stringlengths 14
166
| Answer
stringlengths 3
17k
|
|---|---|
How can I buy and sell the same stock on the same day?
|
Because it takes 3 business days for the actual transfer of stock to occur after you buy or sell to the next owner, your cash is tied up until that happens. This is called the settlement period. Therefore, brokers offer "margin", which is a form of credit, or loan, to allow you to keep trading while the settlement period occurs, and in other situations unrelated to the presented question. To do this you need a "margin account", you currently have a "cash account". The caveat of having a retail margin account (distinct from a professional margin account) is that there is a limited amount of same-day trades you can make if you have less than $25,000 in the account. This is called the Pattern Day Trader (PDT) rule. You don't need $25k to day trade, you will just wish you had it, as it is easy to get your account frozen or downgraded to a cash account. The way around THAT is to have multiple margin accounts at different brokerages. This will greatly increase the number of same day trades you can make. Many brokers that offer a "solution" to PDT to people that don't have 25k to invest, are offering professional trading accounts, which have additional fees for data, which is free for retail trading accounts. This problem has nothing to do with: So be careful of the advice you get on the internet. It is mostly white noise. Feel free to verify
|
what if a former employer contributes to my 401k in the year following my exit?
|
The vast majority of individual taxpayers in the United States operate on a cash basis of accounting. This means that the assignment of deductions or income to tax year is based on the date of the paycheck. So the money in that early January 2016 paycheck has been correctly assigned to the 2016 tax year. This is unfortunate for you because you will receive a W-2 for 2016 showing that you had a retirement account. Knowing exactly how many paychecks there are in a year can be very import to know when trying the reach or avoid some thresholds. Even quitting the previous pay period might not have helped. I have seen some companies payout unused vacation, sick and severance over several paychecks. They didn't give you it all in one lump sum, they did it 80 hours a paycheck until the balance owed to the employee was zero.
|
How can I find the historical stock price for a specific stock on a specific date?
|
I've had luck finding old stock information in the Google scanned newspaper archives. Unfortunately there does not appear to be a way to search exactly by date, but a little browsing /experimenting should get what you want. For instance, here's a source which shows the price to be 36 3/4 (as far as I can read anyway) on that date.
|
Understanding option commission costs
|
From what I see, it is more like .70 per contract, with a $1 minimum (for options that trade over a dime.) IB does not provide any help, at all, so you have to know what you are doing. I use tradeking, which charges about $6 for a contract, but you can call them for help if needed. There looks to be other fees for IB, like when you cancel an order, but that can be offset by other trades. It is one of the reason the Motley Fool Stock Adviser service has recommended IB for an investment.
|
Buying a home with down payment from family as a “loan”
|
Keep in mind that lenders will consider the terms of any loans you have when determining your ability to pay back the mortgage. They'll want to see paperwork, or if you claim it is a gift they will require a letter to that effect from your relative. Obviously, this could effect your ability to qualify for a loan.
|
What actions can I take against a bank for lack of customer service?
|
You can complain to the Financial Ombudsman Service in Australia. I've never used them in particular but generally organizations will respond much faster once you get the ombudsman involved. However, since you say they've now kept their promises, the ombudsman is unlikely to do much more than listen sympathetically.
|
Like a Roth IRA for intellectual property, offshore assignment?
|
One can have a self-directed IRA. This is not like a Schwab, eTrade, etc IRA. It has a special type of custodian that knows how to manage it. I became aware of such an account as a way to purchase a rental property. There were two issues. The type of property I looked at wasn't anything a bank was willing to finance. And the rules regarding self dealing added a potential layer of expense as I technically could not perform the simplest of things for the property. For you, the obstacle looks like self-dealing. Any IRA can only be funded with cash or transfer/conversion from another IRA/401(k). I don't know how you would get the intelligent property into the IRA in the first place. Once you own a patent, or anything else, you can't sell it into the IRA. It's at times like this that member littleadv would suggest this is the time to talk to a pro before you do anything hazardous to your wealth.
|
Working remotely from Canada for a US company. How to get paid?
|
I'm no lawyer and no expert, so take my remarks as entertainment only. Also see this question. If you have a U.S. SSN which is eligible for work, they may be able to pay you on 1099 basis with your SSN as a sole proprietor, unless they have some personal reason for avoiding that. So perhaps try asking about that specifically. HR policies can be weird and tricky, maybe a nudge in the right direction will help. Not What You Asked: regardless, I might recommend you register as an LLC and get an EIN (sort of SSN for companies) for a variety of reasons. It's called a "limited liability" company for a reason. You may also have an easier time reaping various business-related rewards, like writing off expenses. If you do so, consider a state with no income tax like Wyoming. (Or, for convenience sake, WA if you live in BC, or maybe NH if you live in Ontario.. etc.)
|
What US taxes are due for US stock bought via ESPP when I was in USA and sold after I returned to India?
|
From an Indian Tax point of view, you can bring back all the assets acquired during the period you were NRI back to India tax free. Subject to a 7 years period. i.e. all the assets / funds / etc should be brought back to India within 7 years. It would still be treated as There are certain conditions / paperwork. Please consult a CA.
|
How do I determine if sale proceeds from an asset are taxable?
|
Profit = Sale price - Basis Basis = Purchase price - any depreciation taken, including expensing it.
|
Taxes paid in USA for sending money to parents in India
|
I'm not certain about international transfers, but that amount is large enough that it could be subject to gift tax. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes Note that the threshold for this tax is "per person, per person". For example, if you gave your father $12,5k, and gave your mother $12.5k, and your wife gave them each the same amounts, each of those gifts is small enough to be within the $14,000 exclusion and you and your wife would owe no gift tax. If you aren't married, you might want to spread this gift over two years to stay under that threshold.
|
How can I find/compare custodians for my HSA in the United States?
|
The account I have found that works best as a HSA is Alliant Credit Union. They have fee-free HSA (no fees for almost all types of transactions or monthly fees) and a fairly decent online banking website. I've been with them for about 5 years now without trouble. FYI - They are a credit union not a bank so you do have to make a small $10 donation to one of their charities to become "eligible" for opening the account.
|
How do I cash in physical stock certificates? (GM 1989)
|
which means the current total is $548,100. Is that correct? Yep Unfortunately the "current" GM stock is different than the GM stock of 1989. GM went bankrupt in 2011. It's original stock changed to Motors Liquidation Company (MTLQQ) and is essentially worthless today. There was no conversion from the old stock to the new stock. What do I do with these certificates? Can I bring them to my bank, or do I need to open an account with a stock company like Fidelity? See here for some instructions on cashing them in (or at least registering them electronically). I've never dealt with physical stocks, but I presume that a broker is going to charge you something for registering them vs. direct registration, though I have no idea how much that would be. I read somewhere that I only have to pay taxes when I cash out these stocks. But are these rules any different because I inherited the stocks? You will pay capital gains tax on the increase in value from the time your father died to the time you sell the shares. If that time is more than one year (and the stock has gone up in value) you will pay a 15% tax on the total increase. If you have held them less than one year, they will be short-term capital gains which will count as regular income, and you will pay whatever your marginal tax rate is. If you sell the stock at a loss, then you'll be able to deduct some or all of that loss from your income, and may be able to carry forward losses for a few years as well. I did not catch that the stock you mention was GM stock. GM went bankrupt in 2011, so it's likely that the stock you own is worthless. I have edited the first answer appropriately but left the other two since they apply more generally. In your case the best you get is a tax deduction for the loss in value from the date your father died.
|
If there's no volume discount, does buying in bulk still make sense?
|
I agree with Rich Seller. Avoiding a trip to the store is a benefit. Not only do you save the time and hassle, but there's real money saved if a car trip is avoided: I maintain a spreadsheet for all of my car expenses – depreciation, maintenance, insurance, license & registration, gas, etc. Combined with starting & ending odometer readings for the year, I can see exactly what it costs me to drive one kilometre. Granted, some costs are fixed simply by virtue of having the car, but gasoline is a variable cost avoided when a trip is avoided.
|
When do I sell a stock that I hold as a long-term position?
|
The psychology of investing is fascinating. I buy a stock that's out of favor at $10, and sell half at a 400% profit, $50/share. Then another half at $100, figuring you don't ever lose taking a profit. Now my Apple shares are over $500, but I only have 100. The $10 purchase was risky as Apple pre-iPod wasn't a company that was guaranteed to survive. The only intelligent advice I can offer is to look at your holdings frequently, and ask, "would I buy this stock today given its fundamentals and price?" If you wouldn't buy it, you shouldn't hold it. (This is in contrast to the company ratings you see of buy, hold, sell. If I should hold it, but you shouldn't buy it to hold, that makes no sense to me.) Disclaimer - I am old and have decided stock picking is tough. Most of our retirement accounts are indexed to the S&P. Maybe 10% is in individual stocks. The amount my stocks lag the index is less than my friends spend going to Vegas, so I'm happy with the results. Most people would be far better off indexing than picking stocks.
|
What is the median retirement savings in the United States today?
|
Social security and pensions make up a big part of it. You may want to look at the source of the data. If a person, has 5K at Vanguard, 5K at Fidelity and 100K at the bank; Fidelity will report on that person as having only 5K. Vanguard will do the same. The opening pitch of a life insurance salesman sometimes includes the "100 man story". Before retirement age: 26% of people will die, 54% will be broke, 5% will work, 4% will be secure, and 1% will be wealthy. Then they sell you life insurance which is a horrible product for retirement savings. If you further dig into this subject you will find a great disparity between the mean and median retirement savings. That is because many Americans have none, and those that do skew the average upward and have no where near mean or average. Its like this with other things in personal finance. For example those with actual credit card debt have much higher than the average. As those with none, or even no credit cards skew the average downward. In my opinion it is like this because of behavior. If one saved half of the average car payment over their working life in a growth stock mutual fund, they would make it to that 4% category. If they also had a good salary, kept debt to a minimum, and saved a healthy amount they would make it to that 1% category. It was a daily choice that was made many years prior to retirement.
|
Can I write off time I spent working on my business?
|
No, you cannot write off time, period. You should price the time spent into your product. I, occasionally, work on side projects of my own and forgo the possibility of earning direct income for that time. Income not earned is income not taxed, so there's nothing to deduct.
|
Calculate time to reach investment goals given starting balance?
|
Fairly straightforward to match the result from the calculator soup link. There is a formula to calculate n from the future value s (using natural logs) In Excel This was derived as shown To calculate n from the inflation-adjusted future value si requires using a solver since an algebraic formula cannot be formulated. As demonstrated Calculations done using Mathematica 7.
|
UK student loans, early repayment/avoiding further debt
|
I think you're right that from a pure "expected future value" perspective, it makes sense to pay this loan off as quickly as possible (including not taking the next year's loan). The new student loans with the higher interest rates have changed the balance enough that it's no longer automatically better to keep it going as long as possible. The crucial point in your case, which isn't true for many people, is that you will likely have to pay it off eventually anyway and so in terms of net costs over your lifetime you will do best by paying it off quickly. A few points to set against that, that you might want to consider: Not paying it off is a good hedge against your career not going as well as you expect, e.g. if the economy does badly, you have health problems, you take a career break for any reason. If that happens, you would end up not being forced to pay it off, so will end up gaining from not having done so voluntarily. The money you save in that case could be more valuable to you that the money you would lose if your career does go well. Not paying it off will increase your net cash earlier in life when you are more likely to need it, e.g. for a house deposit. Having more free cash could increase your options, making it possible to buy a house earlier in life. Or it could mean you have a higher deposit when you do buy, reducing the interest rate on the entire mortgage balance. The savings from that could end up being more than the 6% interest on the loan even though when you look at the loan in isolation it seems like a very bad rate.
|
Why should we expect stocks to go up in the long term?
|
Stock returns cannot be evaluated on its own. You need to take into account inflation and the return of other investment vehicles. Over the long run, you want to earn more than your peers (ie inflation), or lose less than them. Stock lets you buy into the profits of a company managed by others. So the fundamental question is "do those company managers make better decision than average person?" Of course there are times when they make awful decisions (eg just before dotcom bubble), and sometimes the best decision is to close the business. But overall those people are much better educated, have higher IQ, more resourceful, etc, and so over long time and across all the companies, this is correct and hence the stock market premium.
|
I'm 23 and was given $50k. What should I do?
|
I would advise against "wasting" this rare opportunity on mundane things, like by paying off debts or buying toys - You can always pay those from your wages. Plus, you'll inevitably accumulate new debts over time, so debt repayment is an ongoing concern. This large pile of cash allows you to do things you can't ordinarily do, so use the opportunity to invest. Buy a house, then rent it out. Rent an apartment for yourself. The house rent will pay most (maybe all) of the mortgage, plus the mortgage interest is tax-deductible, so you get a lower tax bill. And houses appreciate over time, so that's an added bonus. When you get married, and start a family, you'll have a house ready for you, partially paid off with other people's money.
|
Good books for learning about tax strategy/planning
|
J.K. Lasser's Your Income Tax is, remarkably, a great read. It's a line by line review of the tax forms, and offers commentary and examples for every scenario. Of course, it's updated every year to reflect new rules and numbers. I actually read it from cover to cover the first year I started working. It's not going to offer convoluted strategies to use, but, you'll understand your tax return well enough to respond to the advice you encounter elsewhere. To mhoran's point - "Don't let the tax tail wag the investing dog." Taxes are important, but should take a back step to earning and investing. Those who didn't sell at the height of the dotcon bubble "to avoid the big tax bill" only saw in hindsight that paying taxes is part of success not failure.
|
Is it a good practice to keep salary account and savings account separate?
|
Personally, I keep two regular checking accounts at different banks. One gets a direct deposit totaling the sum of my regular monthly bills and a prorated provision for longer term regular bills like semi-annual car insurance premiums. I leave a buffer in the account to account for the odd expensive electrical bill or rate increase or whatever. One gets a direct deposit of the rest which I then allocate to savings and spending. It makes sense to me to separate off regular planned expenses (rent/mortgage, utility bills, insurance premiums) from spending money because it lets me put the basics of my life on autopilot. An added benefit is I have a failover checking account in the event something happens to one of them. I don't keep significant amounts of money in either account and don't give transfer access to the savings accounts that store the bulk of my money. I wear a tinfoil hat when it comes to automatic bank transfers and account access... It doesn't make sense to me to keep deposits separate from spending, it makes less sense to me to spend off of a savings account.
|
Effect of company issued options on share price
|
A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1. What country is this related to? I ask because, in the US, most people I know associate a "call" option with the instrument that is equivalent to 100 shares. So 100,000 calls would be 10,000,000 shares, which exceeds the number of shares you're saying the company has. I don't know if that means you pulled the numbers out of thin air, or whether it means you're thinking of a different type of option? Perhaps you meant incentive stock options meant to be given to employees? Each one of those is equivalent to a single share. They just aren't called "call options". In the rest of my answer, I'm going to assume you meant stock options. I assume the fact that these options exist will slow any price increases on the underlying shares due to potential dilution? I don't think the company can just create stock options without creating the underlying shares in the first place. Said another way, a more likely scenario is that company creates 200,000 shares and agrees to float 50% of them while reserving the other 50% as the pool for incentive employee stock. They then choose to give the employees options on the stock in the incentive pool, rather than outright grants of the stock, for various reasons. (One of which is being nice to the employees in regards to taxes since there is no US tax due at grant time if the strike price is the current price of the underlying stock.) An alternative scenario when the company shares are liquidly traded is that the company simply plans to buy back shares from the market in order to give employees their shares when options are exercised. In this case, the company needs the cash on hand, or cash flow to take money from, to buy those shares at current prices. Anyway, in either case, there is no dilution happening WHEN the options get exercised. Any dilution happened before or at the time the options were created. Meaning, the total number of shares in the company was already pre-set at an earlier time. As a result, the fact that the options exist in themselves will not slow price changes on the stock. However, price changes will be impacted by the total float of shares in the company, or the impact to cash flow if the company has to buy shares to redeem its option commitments. This is almost the same thing you're asking about, but it is technically different as to timing. If this is the case, can this be factored into any option pricing models like black-scholes? You're including the effect just by considering the total float of shares and net profits from cash flow when doing your modelling.
|
Why is it not a requirement for companies to pay dividends?
|
You have plenty of good answers, but I want to add something that might help you grow your intuition on stocks. There are a lot of differences between the example I am going to give and how the stock market actually runs, but the basic concepts are the same. Lets say your friend asks you if he can borrow some money to start up a company, in exchange you will have some ownership in this company. You have essentially just bought yourself some stock. Now as your friend starts to grow, he is doing well, but he needs more cash to buy assets in order to grow the company more. He is forced with an option, either give you some of the profits, or buy these assets sooner. You decide you don't really need the money right now, and think he can do a lot better with spending the money to buy stuff. This is essentially the same as a company electing to not pay dividends, but instead invest into the future. You as a stock holder are fine with it since you know the money is going toward investing in the future. Even if you never get paid a dividend, as a company grows, you can then turn around and sell the stock to someone else for more money then you gave originally. Of course you always take the risk of having the company failing and loosing some if not all of your investment, but that is just the risk of the market.
|
I have a horrible 401k plan, with high expenses. Should I stay with it or move my money elsewhere?
|
2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.
|
What should I do with my $10K windfall, given these options?
|
If you need a new roof because your house is full of buckets that fill up every rain :) then that's most likely the item at the top of the list. If you need a new roof because you don't like the color, I'd do something else with it. If you are in the US and the 'education loan' has the same caveats attached as your average student loan, I would eye that one with intent if the roof can soldier on for a few years as is. The simple reason for this is that a student loan would be the one debt that you list that you can never get rid off unless you actually pay it off, no matter what happens (IOW student loans aren't bankruptable). Disregard this if the caveats in the first sentence don't apply...
|
Some questions about investing [duplicate]
|
What is the best form of investment? It only depends on your goals... The perfect amount of money depends also on your particular situation. The first thing you should start getting familiar with is the notion of portfolio and diversification. Managing risk is also fundamental especially with the current market funkiness... Start looking at index based ETFs -Exchange Traded Funds- and Balanced Mutual Funds to begin with. Many discounted online brokerage companies in the USA offer good training and knowledge centers. Some of them will also let you practice with a demo account that let you invest virtual money to make you feel comfortable with the interface and also with investing in general.
|
Does getting a 1099 from another state count as working in another state if I was physically in my home state?
|
This depends on the state law. In case of the State of New York - these are the criteria for sourcing the NY income: As a sole proprietor or partnership, your New York source income includes: Business activities As a nonresident sole proprietor or partnership, you carry on a business, trade, profession, or occupation within New York State if you (or your business): As you can see, the qualification depends on the way you do business, and the amount of business transactions you have in New York. If it is not clear to you - talk to a CPA/EA licensed to practice in the State of New York to give you an advice.
|
After Market Price change, how can I get it at that price?
|
You can make a purchase at the after market price by sending an order that gets executed in after market. Often times these are called Extended orders, or EXT. With an EXT limit order it will place the bid on the after market hours order book. If you get filled, then you have the shares. This is the answer.
|
Do Fundamentals Matter Anymore in Stock Markets?
|
All you have to do is ask Warren Buffet that question and you'll have your answer! (grin) He is the very definition of someone who relies on the fundamentals as a major part of his investment decisions. Investors who rely on analysis of fundamentals tend to be more long-term strategic planners than most other investors, who seem more focused on momentum-based thinking. There are some industries which have historically low P/E ratios, such as utilities, but I don't think that implies poor growth prospects. How often does a utility go out of business? I think oftentimes if you really look into the numbers, there are companies reporting higher earnings and earnings growth, but is that top-line growth, or is it the result of cost-cutting and other measures which artificially imply a healthy and growing company? A healthy company is one which shows year-over-year organic growth in revenues and earnings from sales, not one which has to continually make new acquisitions or use accounting tricks to dress up the bottom line. Is it possible to do well by investing in companies with solid fundamentals? Absolutely. You may not realize the same rate of short-term returns as others who use momentum-based trading strategies, but over the long haul I'm willing to bet you'll see a better overall average return than they do.
|
Not paying cash for a house
|
You could use the money to buy a couple of other (smaller) properties. Part of the rent of these properties would be used to cover the mortgage and the rest is income.
|
Why is retirement planning so commonly recommended?
|
I suggest that you think in terms of "financial independence" rather than retirement. You do not need to retire in the stereotypical sense of playing golf and moving to Florida. If you reach a point where your "day job" does not need to pay your bills, you open up more options for what you can do. I am not saying to wait until retirement to do something you love. I am saying that lower salary requirements open up more options.
|
Do governments support their own bonds when their value goes down?
|
who issued stock typically support it when the stock price go down. No, not many company do that as it is uneconomical for them to do so. Money used up in buying back equity is a wasteful use of a firm's capital, unless it is doing a buyback to return money to shareholders. Does the same thing happen with government bonds? Not necessarily again here. Bond trading is very different from equities trading. There are conditions specified in the offer document on when an issuer can recall bonds(to jack up the price of an oversold bond), even government bonds have them. The actions of the government has a bigger ripple effect as compared to a firm. The government can start buying back bonds to increase it's price, but it will stoke inflation because of the increase in the supply of money in the market, which may or mayn't be desirable. Then again people holding the bond would have to incentivized to sell the bond. Even during the Greek fiasco, the Greek government wasn't buying Greek bonds as it had no capital to buy. Printing more euros wasn't an option as no assets to back the newly printed money and the ECB would have stopped them from being accepted. And generally buying back isn't useful, because they have to return the principal(which might run into billions, invested in long term projects by the government and cannot be liquidated immediately) while servicing a bond is cheaper and investing the proceeds from the bond sale is more useful while being invested in long term projects. The government can just roll over the bonds with a new issue and refrain from returning the capital till it is in a position to do so.
|
Will there always be somebody selling/buying in every stock?
|
Many people assume that if the price of something is $10 and they have 1,000 of that thing, they should expect to be able to sell them for something around $10,000. Such an assumption may hold much of the time, but it doesn't always. Worse, the cases where it fails to hold are often those where it would be relied upon most heavily. Such an assumption should thus be considered dangerous. In a liquid market, the quantity of a something that people would be willing to buy at something close to the market price will be large relative to the quantity that people would seek to sell in the short term. If at some moment in time one person in the market was willing to immediately buy 500 shares at $9.98 and another was willing to immediately buy 750 at $9.97, someone seeking to sell 1,000 shares could immediately receive $997.50 for them (selling 500 to the first person and 500 to the second, who would then be ready to buy 250 more from the first person who was willing to sell for $9.97). Such behavior would be in line with what many people's assumptions. In an illiquid market, however, the quantity of something that people would be willing to buy near market price could be surprisingly low. This is more often a problem in the marketplace of things like collectibles than of stocks, but the same thing can happen in the stock market. If there's one potential buyer for a stock who thinks it's overpriced but has potential and would be worth $9.50, but that person only has $950 to spend, and nobody else thinks the stock would be worth more than $0.02/share, then until people sold a total of 100 shares the price would be $9.50, but after that the price would drop instantly to $0.02. There would be no "cushioning" of the fall. If the person with 1,000 shares was first in line, he'd get to sell 100 shares for $950 to the aforementioned seller, but would be unable to get more than $18 for the remaining 900. A major danger with markets is that markets which are perceived as liquid attract people to the buying side, while those which are seen as illiquid repel people. The danger in the latter is obvious (having people flee a seemingly-illiquid market will reduce its liquidity further) but the former is just as bad. Having people flock to a market because of its perceived liquidity will increase its liquidity, but can also create a "false price floor", causing demand to appear much stronger than it actually is. Unless real demand increases to match the false price floor, the people who buy at the higher price will never be able to recoup their investment.
|
For a mortgage down-payment, what percentage is sensible?
|
The typical down-payment was expected to be 20%. The idea being that if one could not save 1/5 of the cost of a house, they were not responsible enough to ensure repayment of the loan. It is hard to say whether this is truly a relevant measure. However, in the absence of other data points, it is pretty decent. It typically requires a fair amount of time to amass that much money and it does demonstrate some restraint. (e.g. it is easily the cost of a decent new car or some other shiny "toy.") Income is not necessarily a good measure, on its own. I am certainly more responsible with my spending when I have less money to spend. (Lately, I have been feeling like my father, scrutinizing every single purchase down to the penny.)
|
If I have no exemptions or deductions, just a simple paycheck, do I HAVE to file taxes?
|
If you took advantage of options like a home buyers plan (HBP) you definitely need to file since you must designate how much of the plan to repay. Your employer does not know about what you do with your money so cannot take this into account for the withheld taxes. If you do not report repayment of the HBP it will be treated as a withdrawal from your RRSP i.e. additional income for that tax year.
|
Is 401k as good as it sounds given the way it is taxed?
|
Before anything, I see that no one mentioned the one thing about 401(k) accounts that's just shy of magic - The matching deposit. In 2015, 42% of companies offered a dollar for dollar match on deposits. Can't beat that. (Note - to respond to Xalorous' comment, the $18K OP deposits can be nearly any percent of his income. The typical match is 'up to' 6% of gross income. If that's the case, the 401(k) deposits are doubled. But say he makes $100K. The $18K deposit will see a $6K match. This adds a layer of complexity to the answer that I preferred to avoid, as I show with no match at all, and no change in tax brackets, the deferral alone shows value to the investor.) On to the main answer - Let's pull out a spreadsheet - We start with $10,000, and assume the 25% bracket. This gives a choice of $10,000 in the 401(k) or $7500 in the taxable account. Next, let 20 years pass, with 10% return each year. The 401(k) sees the full 10% and after 20 years, $67K. The taxable account owner waits to get the 15% cap gain rate and adjusts portfolio, thus seeing an 8.5% return each year and carrying no ongoing gains. After 20 years of 8.5% returns, he has $38K net. The 401(k) owner on withdrawal pays the 25% tax and has $50K, still more than 25% more money that the taxable account. Because transactions within the account were all tax deferred. EDIT - With respect to davmp's comment, I'll offer the other extreme - In his comment, he (rightly) objected that I chose to trade every year, although I did assign the long term 15% cap gain rate, he felt the annual trade was my attempt to game the analysis. Above, I offer his extreme case, a 10% return each year, no trade, no dividend. Just a cap gain at the end. The 401(k) still wins. I also left the tax (on the 401(k)) at withdrawal at 25%, when in fact, much, if not all will be taxed at 15% or lower, which would put the net at $57K or 30% above the taxable account final withdrawal. The next issue I'd bring up is that the 401(k) is taken out at the top (marginal) tax rate, e.g. a single filer with taxable income over $37,650 (in 2016) would save 25% on that 401(k) deduction. Of course if the deduction pulls you under that line, I'd go Roth or taxable. But, withdrawals start at zero. Today, a single retiree has a standard deduction ($4050) and exemption ($6300) for a total $10,350 "zero bracket" with the next $9275 taxed at 10%. This points to needing $500K in pre tax accounts before withdrawals each year would get you past the 10% bracket. (This comes from the suggestion of using 4% as an annual withdrawal rate). Last - the tax discussion has 2 major points in time, deposit and withdrawal, of course. But, the answers here all ignore all the time in between. In between, you see that for any number of reasons, you'll drop from the 25% bracket to 15% that year. That's the time to convert a bit of money to Roth and 'top off' the 15% bracket. It can happen due to job loss, marriage with new spouse either not working or having lower income, new baby, house purchase, etc. Or in-between, a disability put you out of work. That permits you to take money out with no penalty, and little chance of paying even the 25% that you paid going in. This, from personal experience with a family member, funded a 401(k) with 28% money. Then divorced and disabled, able to take the $10K/yr to supplement worker's comp (non taxed) income.
|
Can I do periodic rollovers from my low-perfoming 401k to an IRA?
|
You need to check with your employer. It is called an in-service rollover and it is up to your employer on whether or not it is allowed. There are a lot of articles on it but I would still talk to a professional before making the decision. And there are some new laws in place that put at least some responsibility on your employer to provide a 401k with reasonable options and fees. http://www.latimes.com/business/la-fi-court-edison-401k-fees-20150519-story.html We'll see if it has legs.
|
Do I even need credit cards?
|
Credit cards are great. You get free money for 30+ days and a bunch of additional benefits like insurance, extended warranties and reward programs. When vendors don't behave, you dispute the charge with the credit card and they deal with it on your behalf. Just get a fee-free American Express card and pay the balance off each month. There's nothing wrong with using cash either, but I would avoid debit cards like the plague.
|
What is the purpose of the wash sale rule?
|
'Note that "to keep an investor from lowering their tax bill" is not an explanation'. Well, yes it is. In fact it is the only explanation. The rule plainly exists to prevent someone from realizing a loss when their economic situation remains unchanged before/after a sale. Now, you might say 'but I have suffered a loss, even if it is unrealized!' But, would you want to pay tax on unrealized gains? The tax system still caters to reducing the tax impact of investments, particularly capital investments. Part and parcel with the system of taxing gains only when realized, is that you can recognize losses only when realized. Are there other ways to 'artificially' reduce taxable income? Yes. But the goal of a good tax system should be to reduce those opportunities. Whether you agree that it is fair for the government to prevent this tax-saving opportunity, when others exist, is another question. But that is why the rule exists.
|
Should I buy or lease a car given that its not a super luxury car and I only drive 15 miles/d on avg?
|
I have a few recommendations/comments: The trick here is to make it clear to the dealer that you will not be getting a new car from them and their only hope of making some money is to sell you your own car. You need to be prepared to walk away and follow through. DON'T buy a new car from them even if you end up turning it in! They could still come back a day later and offer a deal. Leasing a new car every 3 years is not the best use of money. You have to really, really like that new car feeling every three years and be willing to pay a premium for it. If you're a car nut (like me) and want to spend money on a luxury car, it's far wiser to purchase a slightly used luxury vehicle, keep it for 8+ years, and that way you won't have a car payment half the time!
|
IRR vs. Interest Rates
|
Yes, assuming that your cash flow is constantly of size 5 and initial investment is 100, the following applies: IRR of 5% over 3 years: Value of CashFlows: 4.7619 + 4.5351 + 4.3192 = 13.6162 NPV: 100 - 13.6162 = 86.3838 Continuous compounding: 86.3838 * (1.05^3) = 100
|
401k compound interest vs other compound interest
|
1a. It isn't. Compound interest is compound interest. It works no different within a 401(k). 1b. Yes. 401(k)'s are made up of the same underlying assets that you could invest in with a regular brokerage account.
|
What is the process of getting your first share?
|
I think I understand what you're trying to achieve. You just want to see how it "feels" to own a share, right? To go through the process of buying and holding, and eventually selling, be it at a loss or at a gain. Frankly, my primary advice is: Just do it on paper! Just decide, for whatever reason, which stocks to buy, in what amount, subtract 1% for commissions (I'm intentionally staying on the higher side here), and keep track of the price changes daily. Instead of doing it on mere paper, some brokers offer you a demo account where you can practice your paper trading in the same way you would use a live account. As far as I know, Interactive Brokers and Saxo Bank offer such demo accounts, go look around on their web pages. The problem about doing it for real is that many of the better brokers, such as the two I mentioned, have relatively high minimum funding limits. You need to send a few thousand pounds to your brokerage account before you can even use it. Of course, you don't need to invest it all, but still, the cash has to be there. Especially for some younger and inexperienced investors, this can seduce them to gambling most of their money away. Which is why I would not advise you to actually invest in this way. It will be expensive but if it's just for trying it on one share, use your local principal bank for the trade. Hope this gets you started!
|
What is a checking account and how does it work?
|
A savings account and a checking account (or a "demand" account, or a "transactional" account) have different regulations. For example, fractional reserve requirements are 10% against checking accounts, but 0% against savings accounts. The theory is that savings accounts are sticky, while checking accounts are hot money. So the Fed wants to stop banks from creating accounts that are regulated as savings accounts but have the features of checking accounts. In the past, this was done by forbidding banks to pay interest on checking accounts. They eliminated that rule back in the inflation years, and instead imposed the rule that to qualify as a savings accounts for regulatory purposes, banks must discourage you from using them as transactional accounts. For example, by limiting the number of withdrawals per month that can be made from a savings account. If the Fed gave up on trying to enforce a distinction, I suspect there would soon no longer be a distinction.
|
Should I make partial pre-payments on an actuarial loan?
|
The contract is not very clear. As much as I can understand it will still help if you make part prepayments. In an Rule 78 or Actuarial method, the schedule is drawn up front and the break-up of interest and principal for each month is calculated ahead. At the beginning both the reducing balance method as well as Actuarial method will give the same schedule. However in Actuarial method, if you make part prepayments, they get applied to the future principals, the interest are ignored. However the future interests are not reduced. Example: Say your schedule looks something like this; Monthly Payments say 100; Month | Principal | Interest 1 | 10 | 90 2 | 20 | 80 3 | 30 | 70 4 | 40 | 60 5 | 50 | 50 6 | 60 | 40 7 | 70 | 30 8 | 80 | 20 9 | 90 | 10 So lets say you have made 3 payments of 100, in the 4th month if you make 150 [in addition to 100], it would get applied to the principal of 4th, 5th and 6th month. So essentially you would save interest of 4th, 5th and 5th month. It would also reduce the total payments to 6. i.e. you will only have 7th, 8th, 9th due. The next payment you make of 100 will get applied to row 7. The disadvantage of this method over reducing balance is that the interest calculated for rows 7,8,9 don't change compared to reducing balance. However if you prepay in full, the unearned interest is calculated and returned as per the Actuarial Tables.
|
What are my chances at getting a mortgage with Terrible credit but High income
|
First step, pull a copy of your credit report, and score. You should monitor that score and do what you can to bring it up. Your chances are far better if (a) you first save a sizable downpayment, and (b) go with a local bank that doesn't just write the mortgage and sell it. Better still, go to that local bank and inquire about REO (real estate owned by the bank) property. These are properties they foreclosed on and depending how they are carrying them, you might find decent opportunities. As a matter of logic, a local bank that owns these specific properties (as compared to debt pools where big banks have piles of paper owned fractionally) are more willing to get a new owner in and paying a new loan. Congrats on the new, higher, income. I'd suggest you first build the emergency fund before the downpayment fund. Let us know how it goes.
|
When do I need to return short stock to the lender
|
If the owner of the stock wants it back, they "call" it back. There are no guarantees of how long you can keep it for your short, or the cost involved to hold it. Usually, everyone knows about a particular set-up (e.g. a warrant or convertible bond mispricing) that is attractive for arbitrage. This causes the associated stock to be in high demand thus expensive to borrow for shorting, or impossible to find for any price at all.
|
Why would a tender offer be less than the market price?
|
Rational shareholders wouldn't accept such an offer. The company making the offer is simply trying to get a deal with questionable — though not illegal — tactics. Your answer is actually in the link you provided. Quoting from the fourth paragraph [emphasis is mine]: The SEC has cautioned investors about mini-tender offers, noting that "[s]ome bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price." The SEC's tips for investors regarding mini-tender offers may be found on the SEC's Web site at http://www.sec.gov/investor/pubs/minitend.htm. There's a lot more information at the SEC web page mentioned. One part I'll highlight from the SEC web page mentions another reason for a mini-tender: Investors need to scrutinize mini-tender offers carefully. Some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price. Others make mini-tender offers at a premium – betting that the market price will rise before the offer closes and then extending the offer until it does or improperly canceling if it doesn't. You'll also find a lot more information at Wikipedia - Mini-tender offer.
|
How can foreign investor (residing outside US) invest in US company stocks?
|
(Note: out of my depth here, but in case this helps...) While not a direct answer to your question, I'll point out that in the inverse situation - a U.S. investor who wants to buy individual stocks of companies headquartered outside US - you would buy ADRs, which are $-denominated "wrapper" stocks. They can be listed with one or multiple brokerages. One alternative I'd offer the person in my example would be, "Are you really sure you want to directly buy individual stocks?" One less targeted approach available in the US is to buy ETFs targeted for a given country (or region). Maybe there's something similar there in Asia that would eliminate the (somewhat) higher fees associated with trading foreign stocks.
|
What is the meaning of public stock price data from before the official first day of trading? [duplicate]
|
For the case of spinoffs it reflects the market as activities as the specific steps that have to be followed take place. For example the spinoff of Leidos from SAIC in 2013. (I picked this one becasue I knew some of the details) On September 9, 2013, the Board of Directors of SAIC, Inc.(Ticker Symbol (NYSE):SAI) approved the following: The separation of its technical, engineering and enterprise information technology services business through the distribution of shares of SAIC Gemini, Inc. to stockholders. Each stockholder of record of SAIC, Inc. as of September 19, 2013 (Record Date) will receive one (1) share of SAIC Gemini, Inc. common stock for every seven (7) shares of SAIC, Inc. common stock held by such stockholder as of the Record Date. This distribution will be effective after market close on September 27, 2013 (Distribution Date). After the Distribution Date, SAIC Gemini, Inc. will be renamed Science Applications International Corporation (New SAIC). A one (1) for four (4) reverse stock split of the SAIC, Inc. common stock effective as of Distribution Date. After the Distribution Date, SAIC, Inc. will be renamed Leidos Holdings, Inc. (Leidos). Q 11: What are the different trading markets that may occur between Record Date and Distribution Date? A: Beginning two days prior to the Record Date of September 19, 2013 through the Distribution Date on September 27, 2013, there may be three different trading markets available with respect to SAIC, Inc. and the separation. Stock Ticker – SAI (Regular Way Trading with Due Bills): Shares of SAI common stock that trade on the regular-way market will trade with an entitlement to shares of the New SAIC common stock distributed on the Distribution Date. Purchasers in this market are purchasing both the shares of Leidos and New SAIC common stock. Form of Stock Ticker –SAIC (When Issued Trading): Shares of New SAIC common stock may be traded on a “when-issued” basis. These transactions are made conditionally because the security has been authorized, but not yet issued. Purchasers in this market are only purchasing the shares of New SAIC common stock distributed on the Distribution Date. Form of Stock Ticker – LDOS (Ex-Distribution Trading): Shares that trade on the ex-distribution market will trade without an entitlement to shares of New SAIC common stock distributed on the Distribution Date. Purchasers in this market are only purchasing the shares of Leidos common stock. So the stock price for New SAIC starts a few days before the record date of 19 September 2013, while LDOS (new name for the old SAIC) goes back much earlier. But the company didn't split until after the close of business on 27 September 2013. http://investors.saic.com/sites/saic.investorhq.businesswire.com/files/doc_library/file/GeneralStockholder-QuestionsandAnswers.pdf
|
Is there a standard or best practice way to handle money from an expiring UTMA account?
|
I'd first put it in CDs or other short term account. Get through school first, then see where you land. If you have income that allows you to start a Roth IRA, I'd go for that, but keep it safe in case you actually need it back soon. After school, if you don't land a decent job fast, this money might be needed to live on. How long will it last if you take a few months to find work? If you do find a good job, moving, and setting up an apartment has a cost. Once you're there, I'd refer you to the many "getting started" Q&As on this site.
|
Effective Interest Rate from bifurcated interest rate
|
If the APR is an effective rate. If the APR is a nominal rate compounded monthly, first convert it to an effective rate.
|
Should I set a stop loss for long term investments?
|
Stop loss orders are the exact opposite of what you should be doing if you are implementing a long term buy-and-hold strategy. The motivation of a buy-and-hold strategy is that in the long term, the market rises even despite the occasional crash or recession. Setting a stop loss simply increases the probability that you will sell for a low price in a temporary market downturn. Unless you are likely to need near-term liquidity (in which case you're not a long term investor), that makes no sense.
|
Why don't share prices of a company rise every other Friday when the company buys shares for its own employees?
|
Pre-Enron many companies forced the 401K match to be in company shares. That is no longer allowed becasue of changes in the law. Therefore most employees have only a small minority of their retirement savings in company shares. I know the ESOP and 401K aren't the same, but in my company every year the number of participants in the company stock purchase program decreases. The small number of participants and the small portion of their new retirement funds being in company shares would mean this spike in volume would be very small. The ESOP plan for my employer takes money each paycheck, then purchases the shares once a quarter. This delay would allow them to manage the purchases better. I know with a previous employer most ESOP participants only held the shares for the minimum time, thus providing a steady steam of shares being sold.
|
Can I use a different HSA than PayFlex that came with aetna?
|
You can ask your employer for anything that you want. However, most employers, if they are contributing their own money into your HSA, or you are contributing to your own HSA through payroll deduction, only work with one HSA, which is much easier for them to manage. You are free to decline their HSA if you want. However, if they are kicking in free money into your HSA, I don't recommend that you decline it. Just pick the best option you have for investing. As for the money that you are contributing, if you don't want to put your own money into your employer's Aetna HSA, you can open up an HSA with any institution you like. You can even do this and still keep Aetna HSA to take advantage of the employer's contributions. However, your annual limit is still the total of all contributions to all HSA's in your name, whether you make them or your employer makes them. When deciding whether or not to use payroll deduction into the Aetna HSA or to go your own way, keep in mind that payroll deduction skips some payroll taxes.
|
Investment time horizon: When is it acceptable to withdraw money from investments?
|
shouldn't withdraw stock investments for at least 5 years would be better re-phrased as: "don't invest money in stocks if you (really) need it within next few years". The underlying principle is: stocks are one of the higher-risk investment classes out there. While that's exactly what you want over a long time horizon (longer than the ebb and flow of the broader economy); if you know you'll definitely have to withdraw $50k (or any large chunk) of it within just a few years, it's possible that a great long-term vehicle like stocks, could actually rob you of money on a shorter time horizon. So if you want to start a business 2 years from now, you'll probably want to retain some of that $300k initial pile in lower-risk investment vehicles (e.g. bonds, CDs, certain ETFs and mutual funds aimed at "capital preservation", etc). That said, interest rates are so low, that if you're flexible with how much money you'll need to start that business, I'd probably keep as much as you can stomach in diversified stocks (per your original plan).
|
If a employers supposed to calulate drive time pay with your weekly gross pay
|
Reimbursements for business expenses are generally not taxable, but the commute from home to the job and back is not considered business travel and if they're paying for that it is taxable income. I don't think carpooling changes that, but I am not a tax lawyer or accountant. The rest of your questions seem to be company policy issues. There is no "should" here. You aren't required to pick up the other guys, but he isn't required to reimburse those miles (or employ you) so think carefully about your priorities before pushing back. Never invoke what thou canst not banish.
|
What is the rationale behind brokerages establishing tiers/levels for options trading?
|
The different levels are somewhat related to levels of risk. Writing a covered call is pretty low risk, in the sense that if I buy the stock but sell a call, I now have a lower cost for the stock, and however low the stock drops, I'm still slightly better off than the regular stock buyer. Covered call writing is often used to generate premium income from a stock portfolio, and less as a tool for speculation. Buying a call or put is simpler in execution, but the risk of losing the entire amount spent (I actually avoid the word invested here) due to leverage involved isn't just a possibility — it can be pretty likely depending on the strike price. Put writing and uncovered (naked) call writing can entail even higher risk relative to the premium received — consider extreme moves in the underlying to understand the potential losses involved. The more sophisticated trades are presumed to take a bit more experience and tolerance for risk and each broker has its own set of criteria to allow the client to trade at each level.
|
If the co-signer on my car loan dies, can the family take the car from me like they're threatening to?
|
Possession is 9/10 of the law, and any agreement between you and your grandfather is covered under the uniform commercial code covering contracts. As long as your fulfilling your obligation of making payments, the contract stands as originally agreed upon between you and the lender. In short, the car is yours until you miss payments, sell it, or it gets totalled. The fact that your upside down on value to debt isn't that big of a deal as long as you have insurance that is covering what is owed.
|
See list of stock trades for day
|
You can see all the (millions) of trades per day for a US stock only if you purchase that data from the individual exchanges (NYSE, NASDAQ, ARCA, ...), from a commercial market data aggregator (Bloomberg, Axioma, ...), or from the Consolidated Tape Association. In none of that data will you ever find identifying information for the traders. What you are recalling regarding the names of "people from the company" trading company stock is related to SEC regulations stating that people with significant ownership of company stock and/or controlling positions on the company board of directors must publicize (most of) their trades in that stock. That information can usually be found on the company's investor relations website, or through the SEC website.
|
How exactly could we rank or value how “rich” a company brand is?
|
Those rankings in particular that you cite are compiled by Millward Brown and the methodology is explained like this:
|
Does a US LLC need to file taxes if owned by a foreign citizen?
|
There is no such thing as double taxation. If you pay tax in the US, you CAN claim tax credits from India tax authority. For example, if you pay 100 tax in USA and your tax liability in India is 200, then you will only pay 100 (200 India tax liability minus 100 tax credits on foreign tax paid in the USA). This is always true and not depending on any treaty. If there is a treaty, the tax rate in the United States is set on the treaty and you CAN claim that final tax rate based upon that treaty. If you operate an LLC, and the income is NOT derived from United States and you have no ties with the US and that LLC is register to a foreign person (not company but a real human) then you will not have to submit tax return in the US... I advice you to read this: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html
|
How to invest in gold at market value, i.e. without paying a markup?
|
And you have hit the nail on the head of holding gold as an alternative to liquid currency. There is simply no way to reliably buy and sell physical gold at the spot price unless you have millions of dollars. Exhibit A) The stock symbol GLD is an ETF backed by gold. Its shares are redeemable for gold if you have more than 100,000 shares then you can be assisted by an "Authorized Participant". Read the fund's details. Less than 100,000 shares? no physical gold for you. With GLD's share price being $155.55 this would mean you need to have over 15 million dollars, and be financially solvent enough to be willing to exchange the liquidity of shares and dollars for illiquid gold, that you wouldn't be able to sell at a fair price in smaller denominations. The ETF trades at a different price than the gold spot market, so you technically are dealing with a spread here too. Exhibit B) The futures market. Accepting delivery of a gold futures contract also requires that you get 1000 units of the underlying asset. This means 1000 gold bars which are currently $1,610.70 each. This means you would need $1,610,700 that you would be comfortable with exchanging for gold bars, which: In contrast, securitized gold (gold in an ETF, for instance) can be hedged very easily, and one can sell covered calls to negate transaction fees, hedge, and collect dividends from the fund. quickly recuperating any "spread tax" that you encounter from opening the position. Also, leverage: no bank would grant you a loan to buy 4 to 20 times more gold than you can actually afford, but in the stock market 4 - 20 times your account value on margin is possible and in the futures market 20 times is pretty normal ("initial margin and maintenance margin"), effectively bringing your access to the spot market for physical gold more so within reach. caveat emptor.
|
Using property to achieve financial independence
|
Be very careful about buying property because it has been going up quickly in recent years. There are some fundamental factors that limit the amount real-estate can appreciate over time. In a nutshell, the general real-estate market growth is supported by the entry-level property market. That is, when values are appreciating, people can sell and use the capital gains to buy more valuable property. This drives up the prices in higher value properties whose owners can use that to purchase more expensive properties and so on and so forth. At some point in a rising market, the entry-level properties start to become hard for entry-level buyers to afford. The machine of rising prices throughout the market starts grinding to a halt. This price-level can be calculated by looking at average incomes in an area. At some percentage of income, people cannot buy into the market without crazy loans and if those become popular, watch out because things can get really ugly. If you want an example, just look back to the US in 2007-2009 and the nearly apocalyptic financial crisis that ensued. As with most investing, you want to buy low and sell high. Buying into a hot market is generally not very profitable. Buying when the market is abnormally low tends to be a more effective strategy.
|
How can I buy shares of oil? I'm told it's done through ETFs. How's that related to oil prices per barrel?
|
While we're not supposed to make direct recommendations, and I am in no way advising anything, USO an ETF that buys light sweet crude oil futures with the intention of mirroring the price movements of oil.
|
Joint account that requires all signatures of all owners to withdraw money?
|
Savings accounts have lower fees. If you don't anticipate doing many transactions per month, e.g. three or fewer withdrawals, then I would suggest a savings account rather than a checking account. A joint account that requires both account holder signatures to make withdrawals will probably require both account holders' signature endorsements, in order to make deposits. For example, if you are issued a tax refund by the U.S. Treasury, or any check that is payable to both parties, you will only be able to deposit that check in a joint account that has both persons as signatories. There can be complications due to multi-party account ownership if cashing versus depositing a joint check and account tax ID number. When you open the account, you will need to specify what your wishes are, regarding whether both parties or either party can make deposits and withdrawals. Also, at least one party will need to be present, with appropriate identification (probably tax ID or Social Security number), when opening the account. If the account has three or more owners, you might be required to open a business or commercial account, rather than a consumer account. This would be due to the extra expense of administering an account with more than two signatories. After the questioner specified interest North Carolina in the comments, I found that the North Carolina general banking statutes have specific rules for joint accounts: Any two or more persons may establish a deposit account... The deposit account and any balance shall be as joint tenants... Unless the persons establishing the account have agreed with the bank that withdrawals require more than one signature, payment by the bank to, or on the order of (either person on) the account satisfys the bank's obligation I looked for different banks in North Carolina. I found joint account terms similar to this in PDF file format, everywhere, Joint Account: If an item is drawn so that it is unclear whether one payee’s endorsement or two is required, only one endorsement will be required and the Bank shall not be liable for any loss incurred by the maker as a result of there being only one endorsement. also Joint accounts are owned by you individually or jointly with others. All of the funds in a joint account may be used to repay the debts of any co-owner, whether they are owed individually, by a co-owner, jointly with other co-owners, or jointly with other persons or entities having no interest in your account. You will need to tell the bank specifically what permissions you want for your joint account, as it is between you and your bank, in North Carolina.
|
What makes a Company's Stock prices go up or down?
|
There are many things that can make a company's share price go up or down. Generally, over the long term, the more consistently profitable a company is the more its share price will go up. However, there are times when a company may not be making any profits yet but its share price still goes up. This can be due to forecasts that the company will start making profits in the near future. Sometimes a company may report increased profits from the previous year but makes less than what the market was expecting it to make. This can cause its share price to fall, as the market is disappointed in the results. In the shorter term greed, fear and speculation can make a company's share price move irrationally. When you think the share price should be going up it suddenly falls, and Vis-versa. When interest rates are low, companies with higher dividend yields (compared to bank account interest rates) become high in demand and their shares generally go up in price. As the share price goes up the dividend yield will be reduced unless the company continues to increase the dividend it distributes to shareholders. When interest rates start to rise these companies become less favourable as they are seen as higher risk comparable to similar returns from having one's money in the safety of the bank. This can cause the share prices to fall. These are just some of the reasons that make a company's share price move up or down. As humans are an irrational bunch often ruled by emotions, sometimes the reasons share prices move in a particular direction can be quite confusing, but that is the nature of the financial markets.
|
Where can I find a Third Party Administrator for a self-directed solo 401K?
|
You setup a self-directed solo 401k by paying a one time fee for a company to setup a trust, name you the sole trustee, and file it with the IRS. None of these companies offer TPA because it opens them up to profit leaching liability. After you have your trust setup, you can open a brokerage account or several with any of the big names you want (Vanguard, Fidelity, Ameritrade, etc), or just use the money to flip houses, do P2P lending, whatever, the world is your investment oyster. If the company has recurring fees you need to ask what is going on because if they aren't offering TPA services, then what the heck could they be charging you for? I did see one company, I think it was IRA Financial Group, that had the option of having a CPA do TPA for you for a recurring fee, but I would pass on that. The IRS administration requirements are typically just the 5500-EZ that you have to file as a hard copy by July 31 if your investments are worth more than $250k, on December 31. Yes, you have to get the actual form from the IRS, write on it with a pen and mail it to them every year, barbaric. You can either have your accountant do it or do it yourself. If you're below $250k just google solo 401k rule change two or three times a year and don't try to launder money. If anything, the rules will loosen with time, I don't imagine the Republican Congress cracking down on small business owners any time soon.
|
Where can I invest my retirement savings money, where it is safer than stocks?
|
Does your employer provide a matching contribution to your 401k? If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income). It's free money, take advantage of it. Next up, max out your Roth IRA. The limit is $5000 currently a year. After maxing your Roth, revisit your 401k. You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it. The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young. This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile. Bond funds are the usual choice. They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds. Rather, it is a gradual transition over time. As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds. Start to look at fixed-income and money market funds.
|
How to double-entry bookkeep money incoming from sold items
|
If you were a business, all your assets would have a dollar value, so when you sold them you'd decrease the amount of assets by that amount and increase in cash, and if there was a profit on the sale it would go in as income, if there was loss it would count as a cost (or a loss)... so if there was a profit it would increase Equity, a loss then it would decrease Equity. Since it's not really worthwhile doing a estimated cost for everything that you have, I'd just report it as income like you are doing and let the amount of equity increase proportionately. So, implicitly you always had roughly that amount of equity, but some of it was in the form of assets, and now you're liquidating those assets so the amount shows up in GnuCash. When you buy new things you might sell later, you could consider adding them as assets to keep track of this explicitly (but even then you have problems-- the price of things changes with time and you might not want to keep up with those price changes, it's a lot of extra work for a family budget) -- for stuff you already have it's better to treat things as you are doing and just treat the money as income-- it's easier and doesn't really change anything-- you always had that in equity, some of it was just off the books and now you are bringing it into the books.
|
How to share income after marriage and kids?
|
I started this off as a comment to Joe's answer, but it got rather messy in that form so I'll just post it as a separate answer instead. I suggest that you read Joe's answer first. I believe you are overthinking this. First, you really should be discussing the matter with your girlfriend. We can provide suggestions, but only the two of you can decide what feels right for the two of you. Strangers on the Internet can never have as complete a picture of your financial situations, your plans, and your personalities, as the two of you together. That said, here's a starting point that I would use as input to such a discussion: As you can see, a common theme to all of this is transparency and communication. There is a reason for this: a marriage without proper communication can never work out well in the long term. I don't know about Germany specifically, but disagreements about money tends to be a major reason in couples splitting up. By setting your lives up for transparency in money matters from the beginning, you significantly reduce the risk of this happening to you. Scott Hanselman discusses a very similar way of doing things, but phrases it differently, in Relationship Hacks: An Allowance System for Adults.
|
Freelancing and getting taxes taken out up front instead of end of year?
|
It seems that you think you are freelancing, and they think you are an employee. What's bad for you, the tax office will also think you are an employee if they withhold tax for you. Alternatively, they think you are stupid, and they keep the money, but are actually not paying it to the tax office at all, in which case you will have a bad surprise when you do your tax returns. First, I'd ask them for proof that they are indeed paying these taxes into some account related to you. I'd then ask a tax adviser for some serious advice. If they are acting out of incompetence and not out of malice, then you should be mostly fine, but your work there will count as employment. Heaven knows why they treat you as an employee. Check your contract with them; whether it is between you and them or your company and them. It maybe that they never hired a contractor and believe that they have to pay employment tax. They don't. If your company sends them a bill, then they need to pay that bill, 100% of it, and that's it. Taxes are fully your business and your responsibility. As "quid" said, if they say they are withholding tax, then at the very least there must be a paystub that proves they have actually been paying these taxes. If they withhold taxes, and there is no paystub, then this looks like a criminal attempt to cheat you. If they have actually paid taxes properly into your account, then they are merely creating a mess that can hopefully be fixed. But it is probably complicated enough that you need a tax advisor, even if you had none before, since instead of paying to your company, they paid some money to the company, and some to you personally.
|
Opening a bank account with cash: How should bills be presented?
|
Banks have electronic money counters so the order really doesn't matter. When I make a cash deposit that's large, I usually just put it in an envelope and hand it over.
|
Are there cons to paying monthly bills with a rewards card and then paying it off monthly?
|
Some accounts, such as my electric, and payments to the tax collector charge a significant enough fee that is counter productive to use a rewards card. One example of this is Alligent Air. They give you a $6 discount if you pay with a debit card which was about 5% of the ticket price. Anytime you borrow money, even as well intentioned and thought out as you plan to do so, you are increasing risk. By managing it carefully you can certainly mitigate it. The question becomes, does that time spent in management worth the $600/year? I did the costco amex deal for about 12 years earning about $300-$400 per year and only once getting hit with a late/finance charge. Despite the success, I opted to end this for a few different reasons. First off people using credit tend to spend more. Secondly, I felt it was not worth my time in management. Thirdly, I did not want the risk. Despite the boasts of many, the reality is that few people actually pay off their card each month. By your post, it seems to me that you will be one of the rare few. However, if you are expending 5K per month, your income must be above the US national average. Is $600 really worth it? Perhaps budgeting for Christmas would be a better option.
|
What are the important differences between mutual funds and Exchange Traded Funds (ETFs)?
|
The main difference between an ETF and a Mutual Fund is Management. An ETF will track a specific index with NO manager input. A Mutual Fund has a manager that is trying to choose securities for its fund based on the mandate of the fund. Liquidity ETFs trade like a stock, so you can buy at 10am and sell at 11 if you wish. Mutual Funds (most) are valued at the end of each business day, so no intraday trading. Also ETFs are similar to stocks in that you need a buyer/seller for the ETF that you want/have. Whereas a mutual fund's units are sold back to itself. I do not know of many if any liquity issues with an ETF, but you could be stuck holding it if you can not find a buyer (usually the market maker). Mutual Funds can be closed to trading, however it is rare. Tax treatment Both come down to the underlying holdings in the fund or ETF. However, more often in Mutual Funds you could be stuck paying someone else's taxes, not true with an ETF. For example, you buy an Equity Mutual Fund 5 years ago, you sell the fund yourself today for little to no gain. I buy the fund a month ago and the fund manager sells a bunch of the stocks they bought for it 10 years ago for a hefty gain. I have a tax liability, you do not even though it is possible that neither of us have any gains in our pocket. It can even go one step further and 6 months from now I could be down money on paper and still have a tax liability. Expenses A Mutual Fund has an MER or Management Expense Ratio, you pay it no matter what. If the fund has a positive return of 12.5% in any given year and it has an MER of 2.5%, then you are up 10%. However if the fund loses 7.5% with the same MER, you are down 10%. An ETF has a much smaller management fee (typically 0.10-0.95%) but you will have trading costs associated with any trades. Risks involved in these as well as any investment are many and likely too long to go into here. However in general, if you have a Canadian Stock ETF it will have similar risks to a Canadian Equity Mutual Fund. I hope this helps.
|
Should a high-school student invest their (relative meager) savings?
|
Between 1 and 2 G is actually pretty decent for a High School Student. Your best bet in my opinion is to wait the next (small) stock market crash, and then invest in an index fund. A fund that tracks the SP500 or the Russel 2000 would be a good choice. By stock market crash, I'm talking about a 20% to 30% drop from the highest point. The stock market is at an all time high, but nobody knows if it's going to keep going. I would avoid penny stocks, at least until you can read their annual report and understand most of what they're claiming, especially the cash flow statement. From the few that I've looked at, penny stock companies just keep issuing stock to raise money for their money loosing operations. I'd also avoid individual stocks for now. You can setup a practice account somewhere online, and try trading. Your classmates probably brag about how much they've made, but they won't tell you how much they lost. You are not misusing your money by "not doing anything with it". Your classmates are gambling with it, they might as well go to a casino. Echoing what others have said, investing in yourself is your best option at this point. Try to get into the best school that you can. Anything that gives you an edge over other people in terms of experience or education is good. So try to get some leadership and team experience. , and some online classes in a field that interests you.
|
Recourse with Credit Card company after victimized by fraud?
|
Concealing parts of a document in order to obtain a signature is illegal. The company committed signature forgery because they effectively modified the document after you signed it (i.e. unfolded the parts that were previously folded). I suggest that you go to your local police department to file a report, citing "signature forgery". Once you have the police report, call your bank's fraud department (not the general billing dispute line) and cite the police report right away, specifically calling out "signature forgery". I would be surprised if you don't get a favorable outcome.
|
Need a loan to buy property in India. What are my options?
|
There are P2P lending sites like prosper.com and lendingclub.com (both have 35K limit) where you can take out a personal loan. Don't expect the rate to be nowhere close to a secured loan like a mortgage or a car loan.
|
Direct access to the currency exchange market
|
Is my observation that the currency exchange market is indirect correct? Is there a particular reason for this? Why isn't currency traded like stocks? I guess yes. In Stocks its pretty simple where the stock is held with a depository. Hence listing matching is simple and the exchange of money is via local clearing. Currency markets are more global and there is no one place where trades happen. There are multiple places where it happens and is loosely called Fx market place. Building a matching engine is also complex and confusing. If we go with your example of currency pair, matches would be difficult. Say; If we were to say all transactions happen in USD say, and list every currency as item to be purchased or sold. I could put a trade Sell Trade for Quantity 100 Stock Code EUR at Price 1.13 [Price in USD]. So there has to be a buy at a price and we can match. Similarly we would have Stock Code for GBP, AUD, JPY, etc. Since not every thing would be USD based, say I need to convert GBP to EUR, I would have to have a different set of Base currency say GBP. So here the quantity would All currencies except GBP which would be price. Even then we have issues, someone using USD as base currency has quoted for Stock GBP. While someone else using GBP has quoted for Stock USD. Plus moving money internationally is expensive and doing this for small trades removes the advantages. The kind of guarantees required are difficult to achieve without established correspondence bank relationships. One heavily traded currency pair, the exchange for funds happens via CLS Bank.
|
Are stories of turning a few thousands into millions by trading stocks real?
|
I made upwards of 3M from 200K by trading stocks, which I made from a business that I invested 20K in. HOWEVER, DO NOT use trading stocks as a source of income, you're gambling with your precious cash. There are safer alternatives.
|
Payroll taxes on exercised stock options
|
The trickiest thing is the federal tax. It's typical to withhold 25% federal on this type of event. If your federal marginal rate was already towards the top of that bracket, you'll owe the missing 3% as you enter the 28% bracket. Nothing awful, just be aware.
|
Why does Yahoo Finance and Google Finance not match historical prices?
|
I work on a buy-side firm, so I know how these small data issues can drive us crazy. Hope my answer below can help you: Reason for price difference: 1. Vendor and data source Basically, data providers such as Google and Yahoo redistribute EOD data by aggregating data from their vendors. Although the raw data is taken from the same exchanges, different vendors tend to collect them through different trading platforms. For example, Yahoo, is getting stock data from Hemscott (which was acquired by Morningstar), which is not the most accurate source of EOD stocks. Google gets data from Deutsche Börse. To make the process more complicated, each vendor can choose to get EOD data from another EOD data provider or the exchange itself, or they can produce their own open, high, low, close and volume from the actual trade tick-data, and these data may come from any exchanges. 2. Price Adjustment For equities data, the re-distributor usually adjusts the raw data by applying certain customized procedures. This includes adjustment for corporate actions, such as dividends and splits. For futures data, rolling is required, and back-ward and for-warding rolling can be chosen. Different adjustment methods can lead to different price display. 3. Extended trading hours Along with the growth of electronic trading, many market tends to trade during extended hours, such as pre-open and post-close trading periods. Futures and FX markets even trade around the clock. This leads to another freedom in price reporting: whether to include the price movement during the extended trading hours. Conclusion To cross-verify the true price, we should always check the price from the Exchange where the asset is actually traded. Given the convenience of getting EOD data nowadays, this task should be easy to achieve. In fact, for professional traders and investors alike, they will never reply price on free providers such as Yahoo and Google, they will most likely choose Bloomberg, Reuters, etc. However, for personal use, Yahoo and Google should both be good choices, and the difference is small enough to ignore.
|
Virtual Terminal WITHOUT merchant account?
|
You would need to setup a company (even if it's just a sole proprietorship, in the US) to be able to apply for a true merchant account. And thus have a terminal; either real or virtual in your home or business. However, many services such as paypal allow you to accept credit cards (both online and with a card reader) and when the customer is billed it appears as paypal + your account name. So you essentially have the benefits of a merchant account, without having to set one up.
|
How to know if I can have NOL (U.S. tax)?
|
Individuals most definitely can have NOL. This is covered in the IRS publication 536. What is the difference between NOL and capital loss? NOL is Net Operating Loss. I.e.: a situation where your (allowable) expenses and deductions exceed your gross income. Basically it means that you have negative income for that year, for tax purposes. Capital loss occurs when the total amount of your capital gains reported on Schedule D is negative. What are their relations then? Not all expenses and deductions that you usually put on your tax return are allowed for NOL calculation. For example, capital loss is not allowed. I.e.: if you earned $2000 and you lost in stocks $3000 - you do not get a $1K NOL. Capital losses are excluded from NOL calculation and in this scenario you still have non-negative income for NOL purposes even though it is offset in full by capital loss deduction and your "taxable income" line is negative. The $1K that was not allowed - gets carried forward to the next year using the Capital Loss Carryover Worksheet in the instructions to Schedule D. You calculate your NOL using form 1045 schedule A. You can use the form 1045 to apply the NOL to prior 2 years, or you can elect to apply it only to future years (up to 20 years). In what cases, capital loss can be NOL? Never.
|
What happens to my savings if my country defaults or restructures its debt?
|
I am going to add in an opinion here from the Wall Street Journal that I read this morning in What's at Stake in the Greek Vote, in light of current events and elections in Greece. The article claims that if the election results make it sound like a break from the Euro is imminent then ... we will see a full-fledged bank run. Greek banks would collapse ... The market exchange-rate would likely be two or three drachmas to the euro, which would double or triple the Greek price of imported goods within a few days. Prices of assets, including real-estate assets, would crumble. Those who moved their deposits abroad would be able to buy these assets cheaply, leading to a significant, regressive redistribution of Greek wealth. In short, you'd lose two-thirds of your savings unless you were storing them somewhere safe from the conversion. The article also predicts difficulty importing goods (other nations will demand to be paid in euro, not drachma) leading to disruption of trade and various supply shortages. I will note that the predictions here seem to be in opposition to some other advice here which suggests that real estate will be an effective hedge.
|
I'm 18. How to build good monthly income at my 20's?
|
It looks like you need a lot more education on the subject. I suggest you pick up a book on investing and portfolio management to get a first idea. Dividend yields are currently way below 5% on blue chips. Unlike coupons from fixed income instruments (which, in the same risk category, pay a lot less), dividend yields are not guaranteed and neither is the invested principal amount. In either case, your calculation is far away from reality. Sure, there are investments (such as the mentioned direct investments in companies or housings in emerging economies) that can potentially earn you two digit percentage returns. Just remember: risk always goes both ways. A higher earning potential means higher loss potential. Also, a direct investment is a lot less liquid than an investment on a publicly quoted high turnover market place. If you suddenly need money, you really don't want to be pressed to sell real estate in an emerging market (keyword: bid ask spread). My advice: the money that you can set aside for the long term (10 years plus), invest it in stock ETFs, globally. Everything else should be invested in bond funds or even deposits, depending on when you will need the access. As others have pointed out, consider getting professional advice.
|
Oil Price forcasting
|
The Oil futures are exactly that. They are people forecasting the price of oil at a point of time in the future where they are willing to buy oil at that price. That said, Do you have evidence of a correlation of Price of oil to the shares of oil stocks? Oil companies that are good investments are generally good investments regardless of the cost of oil. If you did not know about oil futures then you might be best served by consulting an investment professional for some guidance.
|
Which credit card is friendliest to merchants?
|
From experience, Mastercard and Visa charge vendors about the same (around 2%-5%) while American Express and Diners Club are astonishingly expensive (6%-10%) and you'll find that few small retailers are very comfortable accepting these. The variation comes from the volume of trade that vendors provide. A big retailer will negotiate a very low rate while smaller businesses will be hit with higher charges.
|
At what interest rate should debt be used as a tool?
|
I don't really see it as worth it at any level because of the risk. If you take $10,000,000 using the ratios you gave making 2% return. That is a profit of $200,000. Definitely not worth it, but lets go to 20% profit that is $2,000,000. To me the risk involved at beint 10 million in debt isn't worth it to make $2,000,000 quickly it would be pretty easy doing something wrong to wipe out everything.
|
How common are stock/scrip dividends (as opposed to cash dividends) in US equity markets?
|
Check out the NASDAQ and NYSE websites(the exchange in which the stock is listed) for detailed information. Most of the websites which collate dividend payments generally have cash payments history only e.g. Dividata. And because a company has given stock dividends in the past doesn't guarantee such in the future, I believe you already know that.
|
How expensive is it to keep minimal cash at a brokerage?
|
You're trying to mitigate the risk of having your investments wiped out by fraud committed by your broker by using margin loans to buy stock secured by other, non-cash assets in your account. The solution that you are proposing does not make any sense at all. You mitigate a very low probability/high impact risk by doing something that comes with a high probability/medium impact risk. In addition to interest costs, holding stocks on margin subjects you to the very real risk of being forced to sell assets at inopportune times to meet margin calls. Given the volatility that the markets are experiencing in 2011, there is a high risk that some irrational decision in Greece could wipe you out. If I were worried about this, I would: If you have enough money that SIPC protection limits are an issue, you desperately need a financial adviser. Do not implement any strategy involving margin loans until you talk to a qualified adviser.
|
How do credit card payments work? What ensures the retailer charges the right amount?
|
When you give your credit card number and authorize a merchant to charge your credit card, the merchant then gives the information to their merchant processor which in turns bills the bank that issued the card (it's a little more complex and it all happens instantly unless the merchant is using the very old fasion imprinting gizmos). It is possible for a merchant to attempt to charge you more than you authorized but if they do they risk a fine ($25-$50 for a chargeback) from their processor, the legitimate portion of the charge as well as increasing the processing fees charged by their processor or even the possibility of loosing their merchant account entirely and being permanently blacklisted by Visa/Mastercard. In short no legitimate business is going to intentionally over charge your credit card. There really isn't significant risk in using a reputable online retailer's order forms. There is the possibility that their database could be compromised but that risk is lower than the risk of having an employee steal your credit number when you give it to them in person. Besides in the US at least the most you can legally be held liable for is $50 assuming you notice the discrepancy within 60 days of statement the charge appears on and most banks limit liability to $0. Over the years I have had a number of different credit card numbers stolen and used fraudulently and I have never had to pay any fraudulent charges.
|
Should I have a higher credit limit on my credit card?
|
There is no "golden rule" on how high of a credit limit an individual should have. There are 22 year olds that have $100,000 credit limits and 40 year olds that have $1000. The most important thing is to not over spend and pay your balance(s) in full every month. Seeing as you are doing that now, there is no downside to getting an increase.
|
Short term cutting losses in a long term investment
|
What might make more sense is to 'capture' your losses. Sell out the funds you have, move into something else that is different enough that the IRS won't consider it a wash sale, and you can then use those losses to offset gains (you can even carry them forward) You would still be in the market, just having made a sort of 'sideways move'. A month or two later (once you are clear of wash sale rules) you could shift back to your original choices. (this answer presumes you are in the US, or somewhere that lets you use losses to offset gains)
|
Payroll reimbursments
|
Not correct. First - when you say they don't tax the reimbursement, they are classifying it in a way that makes it taxable to you (just not withholding tax at that time). In effect, they are under-withholding, if these reimbursement are high enough, you'll have not just a tax bill, but penalties for not paying enough all year. My reimbursements do not produce any kind of pay stub, they are a direct deposit, and are not added to my income, not as they occur, nor at year end on W2. Have you asked them why they handle it this way? It's wrong, and it's costing you.
|
What U.S. banks offer two-factor authentication (such as password & token) for online banking?
|
StasM, It's taken a while but many banks offer tokens - although they tend to limit the accounts for which they will be issued. All of the following issue tokens, but there are many more: CitiBank JP Morgan Union Bank Wells Fargo Callaway Bank Wachovia Bank of North Dakota The River Bank of Wisconsin Metcalf Bank, Kansas Stonebridge Bank In 2005 federal regulators stipulated that banks needed to get better with security for online banking customers, but they did not endorse a particular technology. Tokens (aka fobs) were endorsed. The news was negatively received by the banks because putting more steps in the way of a customer drives the customer away. See this 2005 report for more info: http://www.usatoday.com/tech/news/computersecurity/2005-11-02-cybercrime-prevention_x.htm My guess is a tipping point was reached since then, where customers became savvy of the risks, and that the "extra steps" became less an issue than the "extra security".
|
What am I actually buying when trading in CFDs
|
The product itself is a derivative as it derives its value from another stock or commodity. It's similar to a US option, which offers (in the case of a 'call') the right, but not the obligation to buy a stock at a predetermined price before a certain date. But, unlike the US option, instead of buying the stock, the contract is only closed out in cash. I've made the analogy to betting, so I believe it to be a fair comparison. I hope this question is theoretical. You should never buy a financial instrument with no clue how it works.
|
Why are real-term bond yields systematically declining, and what does it mean for investors?
|
On a longer time scale, the plot thickens: It almost looks random. A large drop in real rates in the mid-70s, a massive spike in the early 80s, followed by a slow multi-decade decline. The chaos doesn't seem to be due to interest rates. They steadily climbed and steadily fell: All that's left is inflation: First, real rates should be expected to pay a moderate rate, so nominal rates will usually be higher than inflation. However, interest rates are very stable over long time periods while inflation is not. Economists call this type of phenomenon "sticky pricing", where the price, interest rates in this case, do not change much despite the realities surrounding them. But the story is a little more complicated. In the early 1970s, Nixon had an election to win and tried to lessen the impacts of recession by increasing gov't spending, not raising taxes, and financing through the central bank, causing inflation. The strategy failed, but he was reelected anyways. This set the precedent for the hyperinflation of the 1970s that ended abruptly by Reagan at the beginning of his first term in the early 1980s. Again, interest rates remained sticky, so real rates spiked. Now, the world is not growing, almost stagnating. Demand for equity is somewhat above average, but because corporate income is decelerating, and the developed world's population is aging, demand for investment income is skyrocketing. As demand rises, so does the price, which for an investor is a form of inverse of the interest rate. Future demand is probably best answered by forecasters, and the monetarist over and undertones still dominating the Federal Reserve show that they have finally learned after 100 years that inflation is best kept "low and stable": But what happens if growth in the US suddenly spikes, inflation rises, and the Federal Reserve must sell all of the long term assets it has bet so heavily on quickly while interest rates rise? Inflation may not be intended, but it is not impossible.
|
End of preview. Expand
in Data Studio
README.md exists but content is empty.
- Downloads last month
- 6