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What am I actually buying when trading in CFDs | CFDs (Contracts for Difference) are basically a contract between you and the broker on the difference in price of the underlying between the time you open a position and close a position. You are not actually buying the underlying. With share CFDs, the outcome is a bit like buying the underlying shares on margin. You pay interest for every day you hold the CFDs overnight for long CFDs. However, with short positions, you get paid interest for every day you hold your short position overnight. Most people use CFDs for short term trading, however they can be used for medium to longer term trading just as you would hold a portfolio on margin. What you have to remember is that because you are buying on margin you can lose more than your initial contract amount. A way to manage this risk is by using position sizing and stop loses. With your position sizing, if you wanted to invest $10,000 in a particular share trading at $10 per share, you would then buy 1000 shares or 1000 CFDs in that share. Your initial expense with the CFDs might be only $1000 (at a margin rate of 10%). So instead of increasing your risk by having an initial outlay of $10,000 with the CFDs you limit your risk to the same as you were buying the shares directly. |
Is there a Canadian credit card which shows holds? | It's not so much a credit card, but a financial institution's online platform that either provides this functionality or not. The following Canadian financial institutions show an itemized list of pre-authorized transactions (not an exhaustive list): The following institutions show a total value of pre-authorized transactions: Most other institutions show the available credit (e.g. Chase Financial used by Amazon Rewards), which give an indication of how much you have to spend. By subtracting the current balance and the available balance from the total credit limit, you can get an indication of the total amount of pre-authorized transactions. Example: $1000 - $500 - $400 = $100 is the amount of pre-authorized transactions. From TD's EasyWeb demo (http://tdeasywebdemo.com/v2/#/en/PFS/accounts/activity/chq), it appears that they don't include pre-authorized transactions in the Available Credit. You can verify for yourself by logging in to online banking after you make a purchase and comparing the Available Credit to [Credit Limit - Current Balance]. If it is equal, then they don't include, if it is different (most likely for the value of the transaction), then they do. |
How could strike price for new shares be higher than the market price | This can arise with very thinly traded stocks for large blocks of shares. If the market only has a few thousand dollars available at between 8.37 and 12.5 the price is largely meaningless for people who want to invest in hundreds of thousands/millions of dollars worth, as the quoted price can't get them anywhere near the number of shares they want. How liquid is the stock in question? |
Is it a good idea to teach children that work is linearly related to income? | My family instilled in me early on that hard work was important, and the output of that work was its reward. My grandparents really made in impression with me about telling the truth and being fair (probably after I was busted for lying and cheating about something) -- I remember my grandfather talking about the solem trust associated with shaking hands over something. I remember opening a savings account at school on bank day and being really excited about the interest accruing... but my folks never really allowed us to spend it on toys or other stuff. I didn't really think about money at all until I was probably about 10 or 11, when I started watching "Wall Street Week" on PBS with my dad on Friday night and bombarding him with dozens of questions. Then games like Sim City really got me going... my grandmother was always amazed that I was talking about bonding construction projects. I think that before 10 or so, kids needn't concern themselves with money, but should understand responsibility, the rewards that come from working hard, and the consequences for not doing so. |
does interest payment on loan stay the same if I pay early | The typical case would be - as you expected - that the interest goes down equally dramatically, and you would pay much less interest. Note that that does not remove your obligation to pay the full 1000 every month - even though you could argue that you are 90 months ahead in paying, you still need to deliver 1000 a month, until it is fully paid. Some mortgages are made differently - they do not allow that. Basically, if you pay a large amount at once, it is considered a 'pre-payment' for the next x month. As a result, you are now x months ahead (and could stop paying for that much time), but your interest stays high. The latter type 'protects' the bank against 'losing' the interest income they already planned for. As a balance, those type of mortgages are typically slightly cheaper (because the bank is in a better position). You did not specify a country; in Germany, typically all mortgages are of the second type; but - you can get 1.35% mortgages... In the US, most are the first. You need to check which type you have, best before you pay a large amount. In the latter case, it is better to invest that money and use it to pay off as soon as you reach the threshold; in the first case, any extra payoff is to your advantage. |
Is buying a home a good idea? | Once you paid it off, you don't pay rent anymore. That is the major advantage. Also, you can do any change you want to it. Many people consider it an investment - if you ever sell it, it could be worth more than what you paid (although this is not for sure) |
Diagnostic Questions to Determine if Renter intends to pay | Firstly, how far behind on rent are they? Have you sent them notices in writing about late rent, and if so how many have you had to send? How often do they say they are going to do things (like pay overdue rent) and they never do? To tell you the truth IMHO, if they are starting to be regularly late in rent payments and they don't do things they say they are going to do - then it is time to evict them. In NSW Australia, if the tenant is more than 2 weeks late in rent, and prior to them reaching 2 weeks late you have called them asking for late rent and sent notices, you can evict the tenants. If the tenants do not leave you can apply to the Tribunal to get them out and ask for outstanding money to be paid to you. However, if it does get to this stage, the tenants may be pissed off so may do some damage to the property in retaliation. Then you have to go back to the Tribunal to get the Tenant's Bond (Security Deposit) and any other funds to repair any damages done to your place. The longer you leave it the worse it will get. We had some tenants similar to this which we finally got out earlier this year. They would say they would pay rent due by the end of the week and no money would come by the end of the week. We took them to Tribunal and got them out, and we got the Bond plus unpaid rent and other money for damages and leaving the place dirty (over and above the Bond) awarded to us - just under $4K. The tenants said they couldn't pay and so went on a payment plan to pay about $135 every 2 weeks. They didn't pay any of the payments, so then we went to the local court to get a sheriff to go to their new place and take their property. The must have gotten scared from this because they approached the local court and agreed to pay $60 per week. We have currently received about 10 payments so it will be a long time before we get all our money back. As I said the longer you leave it the worse it can get. You should also look at improving your criteria for selecting new tenants. I have given an answer to this question How to choose a good tenant as a private landlord? Hopefully it can give you some ideas of what to ask for when searching for your next tenant. Update due update in Question Six weeks behind in rent is quite a bit to be behind. If the landlord had been asking the tenant to pay the late rent during this period and the tenant had been giving excuses why the rent was late and saying they would pay it by a certain time but never did - it is a big sign that they will tell you lies. If this is the first time they have been late in paying rent and now they are back up to date with the rent, you might want to give them one more chance. If this is a pattern that happens regularly it is better to get them out, as it will happen again, you will get in an argument with them and then they might stop paying rent altogether. You can usually gain a better perspective of the tenants from their action rather than their words - that is why ascertaining their past rental history is so important when finding a new tenant. |
How is an ETF's NAV determined? | An ETF manager will only allow certain financial organisations to create and redeem ETF shares. These are called Authorised Participants (APs). The APs have the resources to bundled up packages of shares that they already own and hold in order to match the ETFs requirements. In the case of the EDEN ETF, this portfolio is the MSCI Denmark Index. Only APs transact business directly with the ETF manager. When ETF shares need to be created, the AP will bundle up the portfolio of shares and deliver them to the ETF manager. In return, the ETF manager will deliver to the AP the corresponding number of shares in the ETF. Note that no cash changes hands here. (These ETF shares are now available for trading in the market via the AP. Note that investors do not transact business directly with the ETF manager.) Similarly, when ETF shares need to be redeemed, the AP will deliver the ETF shares to the ETF manager. In return, the ETF manager will deliver to the AP the corresponding portfolio of shares. Again, no cash changes hands here. Normally, with an established and liquid ETF, investors like you and me will transact small purchases and sales of ETF shares with other small investors in the market. In the event that an AP needs to transact business with an investor, they will do so by either buying or selling the ETF shares. In the event that they have insufficient ETF shares to meet demand, they will bundle up a portfolio deliver them to the ETF provider in return for ETF shares, thus enabling them to meet demand. In the event that a lot of investors are selling and the AP ends up holding an excessive amount of ETF shares, they will deliver unwanted shares to the ETF manager in exchange for a portfolio of the underlying shares. According to this scheme, large liquidations of ETF holdings should not effect the share prices of the underlying portfolio. This is because the underlying shares are not sold in the market, rather they are simply returned to the AP in exchange for the ETF shares (Recall that no cash is changing hands in this type of transaction). The corresponding trail of dividends and distributions to ETF share holders follows the same scheme. |
Should I invest in real estate to rent, real estate to live in, or just stocks and bonds to earn 10-15%? | To be completely honest, I think that a target of 10-15% is very high and if there were an easy way to attain it, everyone would do it. If you want to have such a high return, you'll always have the risk of losing the same amount of money. Option 1 I personally think that you can make the highest return if you invest in real estate, and actively manage your property(s). If you do this well with short term rental and/or Airbnb I think you can make healthy returns BUT it will cost a lot of time and effort which may diminish its appeal. Think about talking to your estate agent to find renters, or always ensuring your AirBnB place is in good nick so you get a high rating and keep getting good customers. If you're looking for "passive" income, I don't think this is a good choice. Also make sure you take note of karancan's point of costs. No matter what you plan for, your costs will always be higher than you think. Think about water damage, a tenant that breaks things/doesn't take care of stuff etc. Option 2 I think taking a loan is unnecessarily risky if you're in good financial shape (as it seems), unless you're gonna buy a house with a mortgage and live in it. Option 3 I think your best option is to buy bonds and shares. You can follow karancan's 100 minus your age rule, which seems very reasonable (personally I invest all my money in shares because that's how my father brought me up, but it's really a matter of taste. Both can be risky though bonds are usually safer). I think I should note that you cannot expect a return of 10% or more because, as everyone always says, if there were a way to guarantee it, everyone would do it. You say you don't have any idea how this works so I'd go to my bank and ask them. You probably have access to private banking so that should mean someone will be able to sit you down and talk you through. Also look at other banks that have better rates and/or pretend you're leaving your bank to negotiate a better deal. If I were you I'd invest in blue chips (big international companies listed on the main indeces (DAX, FTSE 100, Dow Jones)), or (passively managed) mutual funds/ETFs that track these indeces. Just remember to diversify by country and industry a bit. Note: i would not buy the vehicles/plans that my bank (no matter what they promise, and they promise a lot) suggest because if you do that then the bank always takes a cut off your money. TlDr, dont expect to make 10-15% on a passive investment and do what a lot of others do: shares and bonds. Also make sure you get a lot of peoples opinions :) |
Harmony Gold Mining Company is listed on the NYSE and JSE at different prices? | The quotes on JSE are for 100 share lots. The quotes on NYSE are for single shares. That still leaves some price difference, but much less than you calculated. (EDIT: Equivalently, the price is quoted in 1/100th of a Rand. The Reuter's listing makes this explicit since the price is listed as ZAc rather than ZAR. http://www.reuters.com/finance/stocks/overview?symbol=HARJ.J) As noted in the other answer currently up, NYSE is quoting American Depositary Receipts (ADRs) for this company, which is not directly its stock. The ADR in this case, if you check the prospectus, is currently 1 share of the ADR = 1 share of the stock on its home market. A US institution (in this case it looks like BNY Mellon) is holding shares of stock to back each ADR. Arbitrage is possible and does happen. It's not perfect though, because there are a variety of other cost and risk factors that need to be considered. There's a good review here: Report by JP Morgan Some summary points: |
When will the U.K. convert to the Euro as an official currency? | Not anytime soon, I suspect, but not necessarily for financial reasons. I found this interesting, including the link to the five tests, but I think that this topic is only partially judged through financial eyes, there's a lot of political issues around this with national identity/immigration issues already in the spot light as well as political aspirations. If there will be a call in the near future to join the Euro, how would that reflect on the financial industry in the UK from a PR perspective? and on the political leadership and how it managed the financial crisis? I believe that it is in the interest of all the people in the high positions to show the country getting back on track rather than making ground shaking moves. But what do I know....:-) |
What do “cake and underwear” stocks refer to? | There are some euphemisms that are better known than others. A category of stocks that's suitable for "widows and orphans" would be stocks that are low beta, and perhaps high dividend. Safe (being relative) enough to put a window's money into. The term "cake and underwear" appears to me to be a Buffetism. And I'd interpret it to mean,"not tech, not stocks that are either high growth or cyclic, but stocks that make things that have steady demand and that most consumers use." Google the phrase, only Buffet comes up. |
Typical discount for cash purchase on $1+ million homes? | First, I assume you understand that 'Cash Offer' doesn't mean you really show up with cash (in a duffel bag...), but is an expression that designates that you don't need a mortgage approval, but have the money in your accounts. The advantages for the seller are With both cases depending on the seller's situation, there can't be a generic answer, and the 'discount' will be all over the place between zero and several percent. |
Are individual allowed to use accrual based accounting for federal income tax? | Yes. But once you chose the method (on your first tax return), you cannot change it without the IRS approval. Similarly the fiscal year. For individuals, I can't think of any reason why would accrual basis be better than cash, or why would an individual use a fiscal year other than the calendar year. |
High expense ratio funds - are they worth it? | The 10 year comparison between your fund and the S&P 500 - I'd say more, but not sure it's needed. |
How do I set up Quickbooks for a small property rental company that holds its properties in separate LLC's? | You need one "company file" for each company that you want to track through QuickBooks. Looks like, in your case, that is at least the PM and the PH (as you labeled them in your question). The companies that just hold property and pay utilities might be simple enough that you don't need the full power of QB, in which case you might just track their finances on a spread sheet. Subsidiary companies will probably appear as "assets" of some sort on the books of the parent company. This set-up probably does limit liability at some level, but it's going to create a lot of overhead for your that incurs some expense either in your time or in actual fees paid. You should really consider whether the limitations on liability balance against those costs. (Think ahead to what you're going to do when you have to file taxes on this network of companies, whether you need separate insurance policies for each instead of getting one policy covering multiple properties, etc.) |
Buying a home without a Real Estate Agent - Who should I get to do the paperwork? | Whether or not you use a real estate agent, at some stage most people use a lawyer to do the actual buying and selling and set up the agreements. If you've never dealt with a lawyer directly before it's probably because your agent has acted as a front-person for the lawyer. If you go to a lawyer and tell them what you want to do they will sort it out, and should tell you in advance how much it will cost. You and your friend will probably need one each. |
Long(100%)-Short(-100%) investment explanation | There is no difference. When dealing with short positions, talking about percentages become very tricky since they no longer add up to 100%. What does the 50% in your example mean? Unless there's some base amount (like total amount of the portfolio, then the percentages are meaningless. What matters when dealing with long and short positions is the net total - meaning if you are long 100 shares on one stock trade and short 50 shares on another, then you are net long 50 shares. |
Stocks and Bankruptcy | When they entered Bankruptcy they changed their stock symbol from AAMR to AAMRQ. The Q tells investors that the company i in Bankruptcy. This i what the SEC says about the Q: "Q" Added To Stock Ticker Symbol When a company is involved in bankruptcy proceedings, the letter "Q" is added to the end of the company's stock ticker symbol. In most cases, when a company emerges from bankruptcy, the reorganization plan will cancel the existing equity stock and the old shares will be worthless. Given that risk, before purchasing stock in a bankrupt company, investors should read the company's proposed plan of reorganization. For more information about the impact of bankruptcy proceedings on securities, please read our online publication, Corporate Bankruptcy. The risks are they never recover, or that the old shares have nothing to do with new company. Many investors don't understand this. Recently some uninformed investors(?) tried to get a jump on the Twitter IPO by purchasing share of what they thought was Twitter but was instead the bankrupt company Tweeter Home Entertainment. Shares of Tweeter Home Entertainment, a Boston-based consumer electronics chain that filed for bankruptcy in 2007, soared Friday in a case of mistaken identity on Wall Street. Apparently, some investors confused Tweeter, which trades under the symbol TWTRQ, with Twitter and piled into the penny stock. Tweeter, which trades over the counter, opened at 2 cents a share and jumped as much as 15 cents — or 1,800 percent — before regulators halted trading. Almost 15 million shares had changed hands at that point, while the average daily volume is closer to 150,000. Sometimes it does happen that the new company does give some value to the old investors, but more often then not the old investors are completely wiped out. |
How can I invest my $100? | You could also start a business. I ran a project called the Thousand Rand Challenge a few years ago in South Africa where we supported people in starting a business for about $100 each. Some of them were surprisingly profitable. You can find a few ideas at the wiki site. |
What's the benefit of opening a Certificate of Deposit (CD) Account? | Others have pointed out why one typically chooses a CD: to lock in an interest rate that's higher than most other savings accounts (at the expense of having quick access to your money). While most savings accounts have practically 0% return, there are high yield savings accounts out there with little to no strings that offer ~1% APY. I've personally not found CDs to be compelling when viewed against those, especially for something like an emergency fund where I'd rather just know it's available without having to think about penalties and such. Some people ladder CDs so that they're always no more than a month or so away from having access to some of the money, but for the return I've decided I prefer to just avoid the hassle. For 2.25%, which I haven't really seen, I might consider it, but in any case, you're better served by paying more to your loans. |
Why do banks insist on allowing transactions without sufficient funds? | The laws about this changed in 2010 with the new Overdraft Protection Law HR 1261. § 140B. (c) Consumer consent opt-In.—A depository institution may charge overdraft coverage fees with respect to the use of an automatic teller machine or point of sale transaction only if the consumer has consented in writing, in electronic form, or in such other form as is permitted under regulations of the Bureau. Now when you sign up for a bank account you have to opt in to overdraft coverage (the bank transfers funds from other accounts to cover overdrafts), or overdraft protection (the bank simply bounces NSF checks). I'm pretty sure you could always set this option on your account, but banks were defaulting everyone's account that didn't think to ask such that overdrafts got paid and incurred fees. The law now prohibits them from using that as the default option. |
Why so much noise about USA's credit rating being lowered? | Pension- and many "low-risk" investment funds may only invest in AAA-rated stocks and bonds. While the S&P rating alone doesn't imply that such funds must immediately disinvest in US bonds (Fitch and Moody's are holding), it does create the risk that the other rating agencies will follow suite and also lower the US rating. As the largest issuer of bonds, controller of the world's reserve currency, and with many emerging markets placing almost all their current account surpluses in US bonds, this risk change has implications everywhere. Some companies will already start disinvestment while some investors will start demanding higher interest returns in order to buy US bonds. It isn't yet a stampede, but the gates are now open. That said, S&P is simply reflecting the opinions of bond traders. Markets were already unstable long before the downrating. However, from the US perspective, it is a timely reminder to politicians that the global balance is shifting and that the US cannot count on incumbency to protect it from the disapproval of financial analysts. |
Why so much noise about USA's credit rating being lowered? | Because the USA is the world's biggest economy - everybody in the world works with the USA (even if the american companies are not direct suppliers, they are surely somewhere in the supply chain). If USA credit rating is lower, that means american companies will find it harder to get loans to finance their business (i.e. the price of capital will be higher), and this will consequently lead to higher prices for partners of american companies, etc. This will certainly lead to slowdown of global economy. Plus, the lower credit rating also means that the USA govt. is less likely to pay off the debts (Chinese already stated they will diversify their bonds portfolio -i.e. they will start selling out american govt. bonds). This will lead to cuts in public sector in USA, less spending by the consumers, also probably less import from abroad and less travel which will affect - you get it - the "RoW". It's not by chance we have a saying in Europe, when USA sneezes, the rest of the world catches a flu! |
Recent college grad. Down payment on a house or car? | Buy a car. Unless you definitely know you are living in the area for a good long time, avoid buying a house and get a car instead. |
What is the correct way to report a tender offer fee on my taxes? | Using a different cost basis than your broker's reporting is NOT a problem. You need to keep your own records to account for this difference. Among the other many legitimate reasons to adjust your cost basis, the most popular is when you have two brokerage accounts and sell an asset in one then buy in another. This is called a Wash Sale and is not a taxable event for you. However from the perspective of each broker with their limited information you are making a transaction with tax implications and their reported 1099 will show as such. Links: https://www.firstinvestors.com/docs/pdf/news/tax-qa-2012.pdf |
How do i get into investing stocks [duplicate] | 50 (dollars, Euros?) is a very small amount to invest. The first time I ever bought stock I picked a winner. It went up by about 40% in the first few months. I sold it and lost money. How? I only bought 10 shares at $7.50 each. The profit was less than the two commissions for buying and selling (about $17 a piece). If you are thinking of buying individual stocks, You simply need to save up more money before it will be practical. If you are not trying to beat the market, which is probably not something an amateur like you or I should attempt, then you should consider low cost index funds. I have money in mutual funds, some of which, have as low as a $100 minimum investment. I have moved entirely away from picking stocks. It was a good experience and I could afford to lose the money, but as a long term strategy, it just was not working for me. Note: This is coming from an American. If this somehow does not apply in Europe... |
Does this sound like a great idea regarding being a landlord and starting a real estate empire? | This is a common and good game-plan to learn valuable life skills and build a supplemental income. Eventually, it could become a primary income, and your strategic risk is overall relatively low. If you are diligent and patient, you are likely to succeed, but at a rate that is so slow that the primary beneficiaries of your efforts may be your children and their children. Which is good! It is a bad gameplan for building an "empire." Why? Because you are not the first person in your town with this idea. Probably not even the first person on the block. And among those people, some will be willing to take far more extravagant risks. Some will be better capitalized to begin with. Some will have institutional history with the market along with all the access and insider information that comes with it. As far as we know, you have none of that. Any market condition that yields a profit for you in this space, will yield a larger one for them. In a downturn, they will be able to absorb larger losses than you. So, if your approach is to build an empire, you need to take on a considerably riskier approach, engage with the market in a more direct and time-consuming way, and be prepared to deal with the consequences if those risks play out the wrong way. |
How does stock dilution work in relation to share volume? | Here is an example for you. We have a fictional company. It's called MoneyCorp. Its job is to own money, and that's all. Right now it owns $10,000. It doesn't do anything special with that $10,000 - it stores it in a bank account, and whenever it earns interest gives it to the shareholders as a dividend. Also, it doesn't have any expenses at all, and doesn't pay taxes, and is otherwise magic so that it doesn't have to worry about distractions from its mathematical perfection. There are 10,000 shares of MoneyCorp, each worth exactly $1. However, they may trade for more or less than $1 on the stock market, because it's a free market and people trading stock on the stock market can trade at whatever price two people agree on. Scenario 1. MoneyCorp wants to expand. They sell 90,000 shares for $1 each. The money goes in the same bank account at the same interest rate. Do the original shareholders see a change? No. 100,000 shares, $100,000, still $1/share. No problem. This is the ideal situation. Scenario 2: MoneyCorp sells 90,000 shares for less than the current price, $0.50 each. Do the original shareholders lose out? YES. It now has something like $55,000 and 100,000 shares. Each share is now worth $0.55. The company has given away valuable equity to new shareholders. That's bad. Why didn't they get more money from those guys? Scenario 3: MoneyCorp sells 90,000 shares for more than the current price, $2 each, because there's a lot of hype about its business. MoneyCorp now owns $190,000 in 100,000 shares and each share is worth $1.90. Existing shareholders win big! This is why a company would like to make its share offering at the highest price possible (think, Facebook IPO). Of course, the new shareholders may be disappointed. MoneyCorp is actually a lot like a real business! Actually, if you want to get down to it, MoneyCorp works very much like a money-market fund. The main difference between MoneyCorp and a random company on the stock market is that we know exactly how much money MoneyCorp is worth. You don't know that with a real business: sales may grow, sales may drop, input prices may rise and fall, and there's room for disagreement - that's why stock markets are as unpredictable as they are, so there's room for doubt when a company sells their stock at a price existing shareholders think is too cheap (or buys it at a price that is too expensive). Most companies raising capital will end up doing something close to scenario 1, the fair-prices-for-everyone scenario. Legally, if you own part of a company and they do something a Scenario-2 on you... you may be out of luck. Consider also: the other owners are probably hurt as much as you are. Only the new shareholders win. And unless the management approving the deal is somehow giving themselves a sweetheart deal, it'll be hard to demonstrate any malfeasance. As an individual, you probably won't file a lawsuit either, unless you own a very large stake in the company. Lawsuits are expensive. A big institutional investor or activist investor of some sort may file a suit if millions of dollars are at stake, but it'll be ugly at best. If there's nothing evil going on with the management, this is just one way that a company loses money from bad management. It's probably not the most important one to worry about. |
Comparison between buying a stock and selling a naked put | Why do all this work yourself? Pay a modest price to have a professional do this for you. Look at the tickers PUTX, PUTW. |
Why would a company sell debt in order to buy back shares and/or pay dividends? | When I play Railroad Tycoon III, I often send my company deep into debt to get cash on hand to buy back shares, effectively increasing my ownership of the company as an absolute percentage. Then I issue massive dividends until my company goes bankrupt, and start a new company. It's a way to shuttle money borrowed against a company's assets into my personal bank account at no risk to me. In the MSFT case, maybe they think there will be inflation and this is a hedge against holding so many dollars in cash already. If they can borrow a couple billion in 2010 dollars and pay it back in 2015 dollars, they're probably going to end up ahead if all they do is buy back shares. Paying dividends with the money seems stupid vs. buying back shares - they're just driving up income taxes for investors. |
How does Big Money work? (i.e. stocks, Enron, net worth) | 1) You ignore dividends. You can hold your 10 million shares and never sell them and still get cash to live on if the security pays dividends. McDonalds stock pays 3% in dividends (a year). If you owned 10 million shares of McDonalds you would get 75,000 every three months. I am sure you could live on 25,000 a month. 2) Enron was an energy company. They sold energy and made a profit (or rather were supposed to). Enron didn't make their money by selling stock. McDonalds makes their money by selling hamburgers (and other food). The income of a company comes from their customers, not from selling stock. 3) IF you sold all of your 10 million shares within a short time frame it, likely, would drive the price of the stock down. But you do not need a billion dollars to live on. If you sold 1000 shares each month you would have plenty for buying cars and pizza. Selling 1000 shares may drive the price of the stock down for a minute or two. But the rest of the transactions, for that security made the same day, would quickly obscure the effect you had on the stock. 4) When you buy stock your money does not (usualy) go to the company. If I were to buy 100 shares of McDonalds, McDonalds would not get $11670.That money is (usually) paid to a 'Market Maker' who, in turn, will use the cash to buy MCD from other individual shareholders (presumably for less than 116.70 a share). |
Best Time to buy a stock in a day | Buy it at the close. That way you won't lose money (even if marked to market) on the day. |
What happens when PayPal overdrafts a checking account (with an ample backup funding source available)? | I made this mistake and tried calling Paypal...the first time I have ever been unhappy with their service. The girl gave me some number but didn't make it clear whether it was an order reference number or a reference phone number for the company I ordered from. I called within 10 minutes of placing my order and they were unable to cancel or change the payment method. I did find however, that even though you can't pay paypal with your credit card, some banks will let you. I went into my account and "paid" my account the amount needed using my credit card from the same bank that I had intended to use in the first place...hopefully it went through quickly enough to not get a service fee from Paypal |
Why is volatility in a positive direction clubbed in the same risk category as volatility in a negative direction? | Mostly, when an equity's price rises, its statistical and implied volatilities fall and vice versa. The reason why is a mathematical phenomenon mixed with the reality that a unceasingly falling asset price will soon not exist, skewing the results with survivorship bias. Since volatility is standard deviation of price indexes, a security that changes in price by the same amount every day will have lower volatility, so a rising price will have lower implied volatility because its mostly experiencing positive daily price change while a recently falling price will have higher volatility because factored together with the positive price changes, the negative price changes will widen the standard deviation of the securities price index. Quantitatively, any change, in or out of one's favor, is a risk because change is uncertain, and any uncertainty is a risk. This quantitative interpretation while valid runs almost totally counter to the value opinion, that a lower price relative to value is a lower risk than a higher price relative to value, but both have their place in time. Over long time periods, it's best to use the value interpretation, quantitative for shorter. Using the opposite has hastily destroyed many a fund manager. |
Idea for getting rich using computers to track stocks | The main reason I'm aware of that very few individuals do this sort of trading is that you're not taking into account the transaction costs, which can and will be considerable for a small-time investor. Say your transaction costs you $12, that means in order to come out ahead you'll have to have a fairly large position in a given instrument to make that fee back and some money. Most smaller investors wouldn't really want to tie up 5-6 figures for a day on the chance that you'll get $100 back. The economics change for investment firms, especially market makers that get special low fees for being a market maker (ie, offering liquidity by quoting all the time). |
What happens to people without any retirement savings? | Social security was created with just such people in mind. It's a meager living, but it is an income stream that can be supplemented by Walmart greeter income. It probably isn't so dire that it leads to homelessness, but it might mean not having some of the other comforts that we take for granted. |
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.) |
Does the Black-Scholes Model apply to American Style options? | Just a few observations within the Black-Scholes framework: Next, you can now use the Black-Scholes framework (stock price is a Geometric Brownian Motion, no transaction costs, single interest rate, etc. etc.) and numerical methods (such as a PDE solver) to price American style options numerically, but not with a simple closed form formula (though there are closed-form approximations). |
Missing opportunity cost of mortgage prepayment | One other consideration is that by paying off your mortgage early versus, for example, investing that capital in a mutual fund is that you are reducing your net liquidity to some degree. That is, if you find yourself needing an emergency infusion of cash it is easier to sell a stock/fund than to sell your house or get a equity loan. I suppose if you were planning to need a lot of cash to start a business or invest in real estate, then maybe it would make sense to keep your cash more liquid. However, in your situation I agree with Joe. Pay it off. It feels REALLY good to write that last check! |
Closing a futures position | Ignoring the complexities of a standardised and regulated market, a futures contract is simply a contract that requires party A to buy a given amount of a commodity from party B at a specified price. The future can be over something tangible like pork bellies or oil, in which case there is a physical transfer of "stuff" or it can be over something intangible like shares. The purpose of the contract is to allow the seller to "lock-in" a price so that they are not subject to price fluctuations between the date the contract is entered and the date it is complete; this risk is transferred to the seller who will therefore generally pay a discounted rate from the spot price on the original day. In many cases, the buyer actually wants the "stuff"; futures contracts between farmers and manufacturers being one example. The farmer who is growing, say, wool will enter a contract to supply 3000kg at $10 per kg (of a given quality etc. there are generally price adjustments detailed for varying quality) with a textile manufacturer to be delivered in 6 months. The spot price today may be $11 - the farmer gives up $1 now to shift the risk of price fluctuations to the manufacturer. When the strike date rolls around the farmer delivers the 3000kg and takes the money - if he has failed to grow at least 3000kg then he must buy it from someone or trigger whatever the penalty clauses in the contract are. For futures over shares and other securities the principle is exactly the same. Say the contract is for 1000 shares of XYZ stock. Party A agrees to sell these for $10 each on a given day to party B. When that day rolls around party A transfers the shares and gets the money. Party A may have owned the shares all along, may have bought them before the settlement day or, if push comes to shove, must buy them on the day of settlement. Notwithstanding when they bought them, if they paid less than $10 they make a profit if they pay more they make a loss. Generally speaking, you can't settle a futures contract with another futures contract - you have to deliver up what you promised - be it wool or shares. |
Relative worth of investment versus spending for the economy | I don't think that there's a specific number or index that gives you what you're looking for. I think the closest thing to it would be the velocity of money, which is a measure of how often money changes hands. Also, for what it's worth, I believe that this concept is controversial in some circles. |
What is the smartest thing to do in case of a stock market crash | Precious metals also tend to do well during times of panic. You could invest in gold miners, a gold or silver ETF or in physical bullion itself. |
How can I determine how much my car insurance will cost me? | The best way to determine how much it will cost you is to call the insurance companies to get a quote from them for all the vehicles that you are planning on purchasing. They will have a set amount depending on the year/make/model of the car combined with all your personal details like where you live, age, sex, occupation. There are many online sites where you an get quotes as well, though talking with a rep may be the better option since you have a lot of questions. If you are still living with your parents, you may be able to get a cheaper rate with that company as you might qualify for a multi-vehicle discount or combined property/vehicle insurance with them. You might also be able to get a better rate since you were probably insured as a secondary driver with that company for several years. The cost of your auto insurance will depend also on what type of premium you choose. For instance, it will be cheaper if you opt to only purchase 3rd party liability insurance (which only covers the cost of repairing the 3rd party's vehicle - ie the person you hit). You may also get discounts for having certain (optional) safety equipment/options - like snow tires. You will need to have your insurance purchased and sorted out before you are able to drive your car out of the dealership. For a male with ~10 years driving experience and a clean record. You could probably find something good for about $120 a month. Of course, this depends on the many factors listed above. |
I'm only spending roughly half of what I earn; should I spend more? | If you are happy, really honestly happy, there is no need to change because you read it somewhere. While I believe that budgeting in some fun is smart so you don't go crazy, I am really speaking for myself. I personally have to work at not spending more than I make, so I need to blow off some steam. I also think that you will find in the future something you want to do that costs money, and you would be glad to have it now. The same rules apply for you as they apply to everybody |
What prices are compared to decide a security is over-valued, fairly valued or under-valued? | I was wondering how "future cash flows of the asset" are predicted? Are they also predicted using fundamental and/or technical analysis? There are a many ways to forecast the future cash flows of assets. For example, for companies: It seems like calculating expected/required rate using CAPM does not belong to either fundamental or technical analysis, does it? I would qualify the CAPM as quantitative analysis because it's mathematics and statistics. It's not really fundamental since its does not relies on economical data (except the prices). And as for technical analysis, the term is often used as a synonym for graphical analysis or chartism, but quantitative analysis can also be referred as technical analysis. the present value of future cash flows [...] (called intrinsic price/value, if I am correct?) Yes you are correct. I wonder when deciding whether an asset is over/fair/under-valued, ususally what kind of price is compared to what other kind of price? If it's only to compare with the price, usually, the Net asset value (which is the book value), the Discount Cash flows (the intrinsic value) and the price of comparable companies and the CAPM are used in comparison to current market price of the asset that you are studying. Why is it in the quote to compare the first two kinds of prices, instead of comparing the current real price on the markets to any of the other three kinds? Actually the last line of the quote says that the comparison is done on the observed price which is the market price (the other prices can't really be observed). But, think that the part: an asset is correctly priced when its estimated price is the same as the present value of future cash flows of the asset means that, since the CAPM gives you an expected rate of return, by using this rate to compute the present value of future cash flows of the asset, you should have the same predicted price. I wrote this post explaining some valuation strategies. Maybe you can find some more information by reading it. |
What are the implications of a corporate stock repurchase or share buyback program? | the implications are that the company's earnings per share may seem greater, (after the company buys them there will be less shares outstanding), giving wall street the impression that there is more growth potential than there really is. its an accounting gimmick that can work for a few quarters while the company evaluates how else to impress wall street |
Claiming business expenses for a business with no income | Yes you can claim your business deductions if you are not making any income yet. But first you should decide what structure you want to have for your business. Either a Company structure or a Sole Trader or Partnership. Company Structure If you choose a Company Structure (which is more expensive to set up) you would claim your deductions but no income. So you would be making a loss, and continue making losses until your income from the business exceed your expenses. So these losses will remain inside the Company and can be carried forward to future income years when you are making profits to offset these profits. Refer to ATO - Company tax losses for more information. Sole Trader of Partnership Structure If you choose to be a Sole Trader or a Partnership and your business makes a loss you must check the non-commercial loss rules to see if you can offset the loss against your income from other sources, such as wages. In order to offset your business losses against your other income your business must pass one of these tests: If you don't pass any of these tests, which being a start-up you most likely won't, you must carry forward your business losses until an income year in which you do pass one of the tests, then you can offset it against your other income. This is what differentiates a legitimate business from someone having a hobby, because unless you start making at least $20,000 in sales income (the easiest test to pass) you cannot use your business losses against your other income. Refer to ATO - Non-commercial losses for more information. |
Historical company performance data | Morningstar has that 10 history at http://financials.morningstar.com/ratios/r.html?t=JNJ®ion=usa&culture=en-US |
Why is auto insurance ridiculously overpriced for those who drive few miles? | There is plenty of over-rationalisation in the majority of these answers, when the simple answer is that it is simply down to statistics. Say an insurer had two pieces of information about two separate drivers: annual mileage, and whether they had had an accident in the last 3 years. Driver A drives 10,000 miles a year and hasn't had an accident in the past 3 years. Driver B drives 500 miles a year and hasn't had an accident in the past 3 years. Which would the insurer think was the safer bet? The answer is A, and this makes his premiums lower. The reason for this is that the insurer has a lot more data about Driver A than Driver B: they know that Driver A has driven 30,000 miles without having an accident. This could, of course, be luck, or a fluke, but it is likely that Driver A is actually a safe driver. The chance that Driver A hasn't had an accident just through sheer luck and that they are actually a terrible driver is quite slim. On the other hand, Driver B has only driven 1,500 miles in the past three years. Whilst this seems like prima facie evidence of them being as safe a driver as Driver A, it is much more likely that Driver B could have driven 1,500 miles and avoided an accident through sheer luck, even though they are a terrible driver. This means drivers who drive low amounts of mileage will be penalised relative to other drivers who have high mileage. It has nothing to do with insurers taking a judgement that 'doing more mileage makes you more experienced' or 'makes you a better driver' as others have suggested here (although, it is probably true - it's not quantifiable from an insurer's perspective). |
Boyfriend is coowner of a house with his sister, he wants to sell but she doesn't | Rent the property?? Is that a possible solution? Since selling the house is not an option and living in it isn't either, then perhaps renting it is the way to go? Since no explanation for the sister's motives is given, i'd speculate it is a mixture of emotional and financial concerns. Maybe mostly emotional. I imagine letting go of the one physical thing that has memories of you and your parents attached to it is very difficult. I don't think getting a lawyer or doing what's convenient for only your boyfriend is the way to go...But that's my own personal opinion. Clearly, he only has one close family member left alive. Creating permanent wounds in that relationship will cost more along the way. And quite frankly, if the house is owned 50-50, don't you need both owners to sign the deed to sell the house anyways? If renting is not an option, then maybe refinancing the mortgage to lower payments? Or Airbnb it only half the time? Or rent it out for events to help with payments? Or ask the sister for a little money...Not for half the mortgage, but at least a few hundred dollars to maintain the house and heat. If she is indeed concerned with the property, then maintaining it to prevent serious damagae is in her interests, no matter her income. |
How to calculate years until financial independence? | In this equation the withdrawal rate is the percent you must pull from your savings to meet your expenses. For example if your savings is $100,000 and you need $10,000 annually for your living expenses then your withdrawal rate would be 10% (where 10k is 10% of 100k). To complete this formula, you need to know how much savings you need to be financially independent before you can use this formula to find out how long it will take you. |
Understanding SEC Filings | There are a whole host of types of filings. Some of them are only relevant to companies that are publicly traded, and other types are general to just registered corps in general. ... and many more: http://reportstream.io/explore/has-form Overall, reading SEC filings is hard, and for some, the explanations of those filings is worth paying for. Source: I am currently trying to build a product that solves this problem. |
Roth vs. Whole Insurance vs. Cash | Advantage of cash: You can spend the money without having to pay any fees or taxes to get it out. Disadvantage: When inflation is greater than zero, which it has been for many decades, your cash is continually losing value. Advantages of an IRA (Roth or classic): Your money will usually grow as the investments return a profit. You get special tax benefits. Disadvantages: There's risk -- you may lose money. There are tax penalties for withdrawing the money before retirement. In general, you should only put money in an IRA if you expect to leave it there until you retire. Or at least, for a long time. Whole life is a combination of a life insurance policy and an investment. Advantages: Combines insurance and investment into one convenient monthly payment. Disadvantages: The investment portion typically has lower returns than you could get elsewhere. If you have no need for life insurance -- if you're not supporting anyone or you're confidant they could get along without you or you don't like them and don't care what happens to them when you're gone or whatever -- then there's no point buying life insurance, whole or term. You're paying for a product that you don't need. It's pretty common advice to tell people that instead of buying a whole life policy, they should buy a term policy with the same coverage, and then invest the difference in the premium. For example, if you were considering getting a $100,000 whole life policy that costs $50 per month (just making up numbers, of course it depends on your age, health, etc), and you see you could get a $100,000 term life policy for $30 per month, you will almost certainly do better in the long run to buy the $30 term policy and put the other $20 into investments. The catch to this plan is that there are usually transaction costs to investing. Even a discount broker like Ameritrade or Scott Trade charges around $10 per transaction. So if you tried to invest $20 each month, you'd lose half of it to transaction fees. Which means that in practice, you'd have to save that money up until you had at least a few hundred. And at that point many people find other things always seem to come up to spend the money on, so that while they start out with every intention of investing this money, they don't. |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | A lot of these answers are really weak. The expected value is pretty much the answer. You have to also though, especially as many many millions of tickets are purchased--make part of the valuation the odds of the jackpot being split x ways. So about 1 in 290--> the jackpot needs to be a take-home pot of $580 million for the $2 ticket. Assume the average # of winners is about 1.5 so half the time you're going to split the pot, bringing the valuation needed for the same jackpot to be $870 million. It's actually somewhat not common to have split jackpots because the odds are very bad + many people pick 'favourite numbers'. |
Can someone help me understand my student loans? | If you want to pay them off as quickly as possible, pay the minimum payment on the larger two and dump as much as you can into the one with the 8.75% interest. Then, even though it has a slightly lower interest rate, I would attack the one with the next smallest balance after that, while continuing to make the minimum payment on the one with the largest balance. |
The doctor didn't charge the health insurance in time, am I liable? | If you read all that paperwork they made you fill out at the emergency room, there is probably something in there explicitly stating that you owe any bills you rack up regardless of what happens with the insurance company. They generally have a disclaimer that filing for you with your insurance company is a courtesy service they offer, but they are not obliged to do it. Ultimately, you are responsible for your bills even if the provider slow-billed you. Sorry. |
If I go to a seminar held overseas, may I claim my flights on my tax return? | I think you can. I went to Mexico for business and the company paid for it, so if you are self employed you should be able to expense it. |
$200k in an IRA, unallocated. What's the safest investment? | Note that long term you need to plan for possible inflation, so "a little bit of return" generally wants to be at least high enough to offset that plus "a little bit". Which is why just shoving it in a bank, while extremely safe, isn't usually the best choice. You need to make some decisions about how you trade off risk versus return, whether you will comfortable riding out a downturn while waiting for recovery, and so on. My standard advice, as someone else who knows how little he knows: It's worth spending a few hundred of those dollars to talk to a real financial planner. (NOT someone who has any interest in selling you particular products, like a broker or agent!) They can help you ask yourself the right questions about comfort and goals and timeframe to pick a strategy which suits your needs. It won't be "exciting", but it sounds luke you agree with me that this shouldn't be exciting and "market rate of return" (about 8% annually, long term) is generally good enough, with more conservative positions as you approach the point of needing that money. |
Credit card issued against my express refusal; What action can I take? | You can always cancel the card and close this account. Consider switching to a bank that has better customer service. Closing accounts typically gets a lot of attention and it's fairly likely they will contact you to reconsider and so you'll have a chance to air your grievances. Whether they have anything to offer that would cause you to stay is for you to decide. |
devastated with our retirement money that we have left | It sounds like the kinds of planners you're talking to might be a poor fit, because they are essentially salespersons selling investments for a commission. Some thoughts on finding a financial planner The good kind of financial planner is going to be able to do a comprehensive plan - look at your whole life, goals, and non-investment issues such as insurance. You should expect to get a document with a Monte Carlo simulation showing your odds of success if you stick to the plan; for investments, you should expect to see a recommended asset allocation and an emphasis on low-cost no-commission (commission is "load") funds. See some of the other questions from past posts, for example What exactly can a financial advisor do for me, and is it worth the money? A good place to start for a planner might be http://napfa.org ; there's also a franchise of planners providing hourly advice called the Garrett Planning Network, I helped my mom hire someone from them and she was very happy, though I do think your results would depend mostly on the individual rather than the franchise. Anyway see http://www.garrettplanningnetwork.com/map.html , they do require planners to be fee-only and working on their CFP credential. You should really look for the Certified Financial Planner (CFP) credential. There are a lot of credentials out there, but many of them mean very little, and others might be hard to get but not mean the right thing. Some other meaningful ones include Chartered Financial Analyst (CFA) which would be a solid investment expert, though not necessarily someone knowledgeable in financial planning generally; and IRS Enrolled Agent, which means someone who knows a lot about taxes. A CPA (accountant) would also be pretty meaningful. A law degree (and estate law know-how) is very relevant to many planning situations, too. Some not-very-meaningful certifications include Certified Mutual Fund Specialist (which isn't bogus, but it's much easier to get than CFP or CFA); Registered Investment Adviser (RIA) which mostly means the person is supposed to understand securities fraud laws, but doesn't mean they know a lot about financial planning. There are some pretty bogus certifications out there, many have "retirement" or "senior" in the name. A good question for any planner is "Are you a fiduciary?" which means are they legally required to act in your interests and not their own. Most sales-oriented advisors are not fiduciaries; they wouldn't charge you a big sales commission if they were, and they are not "on your side" legally speaking. It's a good idea to check with your state regulators or the SEC to confirm that your advisor is registered and ask if they have had any complaints. (Small advisors usually register with the state and larger ones with the federal SEC). If they are registered, they may still be a salesperson who isn't acting in your interests, but at least they are following the law. You can also see if they've been in trouble in the past. When looking for a planner, one firm I found had a professional looking web site and didn't seem sketchy at all, but the state said they were not properly registered and not in compliance. Other ideas A good book is: http://www.amazon.com/Smart-Simple-Financial-Strategies-People/dp/0743269942 it's very approachable and you'd feel more confident talking to someone maybe with more background information. For companies to work with, stick to the ones that are very consumer-friendly and sell no-load funds. Vanguard is probably the one you'll hear about most. But T. Rowe Price, Fidelity, USAA are some other good names. Fidelity is a bit of a mixture, with some cheap consumer-friendly investments and other products that are less so. Avoid companies that are all about charging commission: pretty much anyone selling an annuity is probably bad news. Annuities have some valid uses but mostly they are a bad deal. Not knowing your specific situation in any detail, it's very likely that 60k is not nearly enough, and that making the right investment choices will make only a small difference. You could invest poorly and maybe end up with 50K when you retire, or invest well and maybe end up with 80-90k. But your goal is probably more like a million dollars, or more, and most of that will come from future savings. This is what a planner can help you figure out in detail. It's virtually certain that any planner who is for real, and not a ripoff salesperson, will talk a lot about how much you need to save and so forth, not just about choosing investments. Don't be afraid to pay for a planner. It's well worth it to pay someone a thousand dollars for a really thorough, fiduciary plan with your interests foremost. The "free" planners who get a commission are going to get a whole lot more than a thousand dollars out of you, even though you won't write a check directly. Be sure to convert those mutual fund expense ratios and sales commissions into actual dollar amounts! To summarize: find someone you're paying, not someone getting a commission; look for that CFP credential showing they passed a demanding exam; maybe read a quick and easy book like the one I mentioned just so you know what the advisor is talking about; and don't rush into anything! And btw, I think you ought to be fine with a solid plan. You and your husband have time remaining to work with. Good luck. |
How much does it cost to build a subdivision of houses on a large plot of land? | A bank may not like loaning money to you for this. That is one snag. You listed 500,000-600,000$ for a monster of a house (3000 sqft is over three times the average size of homes a hundred years ago). Add in the price of the land at 60K (600K divided ten ways). Where I live, there is a 15% VAT tax on new homes. I can't find out if California imposes a VAT tax on new homes. Anyway, returning back to the topic, because of the risk of loaning you 660K for a piece of land and construction, the bank may only let you borrow half or less of the final expected cost (not value). Another huge snag is that you say in a comment to quid "I came up with this conclusion after talking to someone who had his property built in early 2000s in bay area for that average price". Let's apply 3% inflation over 15 years to that number of 200$/sqft. That brings the range for construction costs to 780K-930K. Even at 2% inflation 670K-810K. Edit: OP later expanded the question making it an inquiry on why people don't collaborate to buy a plot of land and build their homes. "Back in the day" this wasn't all that atypical! For example, my pastor's parents did just this when he was a young lad. Apart from the individual issues mentioned above, there are sociological challenges that arrive. Examples: These are the easy questions. |
How does a typical vesting timeline work with respect to employer contributions? | There are two dates that matter for vesting in this situation: If you left the company on 12/31/16, you would be entitled to none of the company contributions. If you left on 1/1/17, you would be entitled to all $20k. This is sometimes known as a cliff vesting schedule. Some companies do a stair step - 20% after year 1, 40% after year 2, etc. This is known as graded vesting. But, that is not the case based on the language here. |
Will getting a new credit card and closing another affect my credit? | I once called Amex to cancel a card with an annual fee. Instead, they were able to give me a different card with no fee. They were happy to do it. Of course, Amex has fantastic customer service, while Capital One is not known for it. But, its worth a five minute call, and you will retain your good score. |
Income At the Sell or Reception? | It looks like fair-market value when you receive your virtual currency is counted as income. And you're also subject to self-employment tax on that income. Here's an FAQ from the IRS: Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities? A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.Q-9: Is an individual who “mines” virtual currency as a trade or business subject to self-employment tax on the income derived from those activities? A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute selfemployment income and are subject to the self-employment tax. See Chapter 10 of Publication 334, Tax Guide for Small Business, for more information on selfemployment tax and Publication 535, Business Expenses, for more information on determining whether expenses are from a business activity carried on to make a profit. You'd of course be able to offset that income with the expense of mining the virtual currency, depreciation of dedicated mining equipment, electricity, not sure what else. Edit: Here's a good resource on filing taxes with Bitcoin: Filling in the 1040 Income from Bitcoins and all crypto-currencies is declared as either capital gains income or ordinary income, for example from mining. Income Ordinary income will be declared on either your 1040 (line 21 - Other Income) for an individual, or within your Schedule C, if you are self-employed or have sole-proprietor business. Capital Gains Capital gains income, or losses, are declared on Schedule D. Since there are no reported 1099 forms from Bitcoin exchanges, you will need to include your totals with Box C checked for short-term gains, and with Box F checked for long-term gains. Interesting notes from that article, your first example could actually be trickier than expected if you started mining before there was a Monero to USD exchange. Also, there can also be capital gains implications from using your virtual currency to buy goods, which sounds like a pain to keep track of. |
I have $12k in a Chase checking account, but want to start earning interest/saving/investing/etc to make more money. What should I do? | These are the basics in order: Max your employer contributions to your 401k if available Pay off any loans Contribute to an IRA Perhaps max out your 401k Look into other investment options (refinance your mortgage, buy stocks) Those are the typical rules, special situations may need specials actions... |
Buy and sell stock at specific earnings | Enjoy the free trades as long as they last, and take advantage of it since this is no longer functionally a tax on your potential profits. On a side note, RobinHood and others in the past have roped customers in with low-to-zero fee trades before changing the business paradigm completely or ceasing operations. All brokers could be charging LESS fees than they do, but they get charged fees by the exchanges, and will eventually pass this down to the customer in some way or go bankrupt. |
Does an index have a currency? | There's no need for an index to have a currency as its purpose is not to act as an asset but rather to signal investors about the performance of a collection of stocks. An index can be price-weighted, meaning that its value equals the (arithmetic) average of the prices of each stock in the index. With no stock splits, the return on this index is the same as the return on a portfolio composed of one share of each stock. If there is a stock split, however instead of dividing by the number of stocks, as you normally would when taking the arithmetic average, you divide it by the number that will make the value of the index pre-stock-split (arithmetic average) equal to the value post stock split. Then use that dividing number for all periods until a new stock split occurs. An index can be value-weighted, meaning that its changes in value track the percentage changes in total market capitalization of the stocks in the index. Price weighted indexes ignore for "firm size" and percentage changes in price weighted indexes are not robust to stock-splits. Value weighted indexes take "firm size" into account and are robust to stock-splits. DJIA is price-weighted. S&P 500 is value-weighted. |
Are junk bonds advisable to be inside a bond portfolio that has the objective of generating stable income for a retiree? | Corporate bonds have gotten very complicated in the last 20 years to the point where individual investors are at significant disadvantages when lending money. Subordinated debentures, covenants, long maturities with short call features, opaque credit analysis, etc. Interest rates are so low now that investors (individual & professionals) are forced further out the risk & maturity spectrum for yield. It's a very crowded and busy street.....stay out of the traffic. Really you are better off owning a low cost bond fund that emulates the Barclays Corp/Gov index, or similar. That said, junk bonds may be useful to you if you can tolerate losing money when companies default....you've got to look in the mirror. Choose a fund that is diverse, Treasuries, agencies, corps both high and low.....and don't go for the highest yield. |
Are Chase credit cards commonly accepted for purchases? | If you read the fine print in the Pricing & Terms section of that card, you'll see: By becoming a Visa Business Card cardmember, you agree that the card is being used only for business purposes and that the card is being issued to a public or private company including a sole proprietor or employees or contractors of an organization. So that card is a Chase-branded Visa card, and should be accepted anywhere other Visa cards are. Credit cards are normally either MasterCard or Visa, although many of them make that rather inconspicuous. The only major exceptions I know of are American Express and Discover. (And store cards that are only good at one particular store.) |
Can you beat the market by investing in double long ETFs? [duplicate] | If the index goes up every single day during your investment, you would indeed be better off with 2x ETFs, assuming no tracking errors. However, this is basically never the case. Indexes fluctuate up and down. And the problem is, with these sorts of ETFs, you double your win on the upside but your downside is more than double. If an index goes up 10% one day and down 10% the next, you lose 1% of the value of your investment (1.1 * 0.9). If you are using 2x ETFs, you lose 4% of the value of your investment (1.2 * 0.8), not 2%. If you are using 3x ETFs, you lose 9% of the value of your investment (1.3 * 0.7), not 3%. So, if the index will continue to rise during your holding period, yes, you are better off with these 2x or 3x ETFs. If the index falls on some days, but rises most other days, the added downside is all but certain to make you lose money even though the stock trends upward. That's why these ETFs are designed for single-day bets. Over the long-term, the volatility of the stock market, combined with your exponentially increased downside, guarantees you will lose money. |
For an equivalent company security, does it make more sense to trade them in country with dividend tax free? | You might have to pay a premium for the stocks on the dividend tax–free exchanges. For example, HSBC on the NYSE yields 4.71% versus HSBC on the LSE which yields only 4.56%. Assuming the shares are truly identical, the only reason for this (aside from market fluctuations) is if the taxes are more favorable in the UK versus the US, thus increasing demand for HSBC on the LSE, raising the price, and reducing the yield. A difference of 0.15% in yield is pretty insignificant relative to a 30% versus 0% dividend tax. But a key question is, does your country have a foreign tax credit like the US does? If so you (usually) end up getting that 30% back, just delayed until you get your tax return, and the question of which exchange to buy on becomes not so clear cut. If your country doesn't have such a tax credit, then yes, you'll want to buy on an exchange where you won't get hit with the dividend tax. Note that I got this information from a great article I read several months back (site requires free registration to see it all unfortunately). They discuss the case of UN versus UL--both on the NYSE but ADRs for Unilever in the Netherlands and the UK, respectively. The logic is very similar to your situation. |
How are long-term/short-term capital gains tax calculated on restricted stock? | Fidelity has a good explanation of Restricted Stock Awards: For grants that pay in actual shares, the employee’s tax holding period begins at the time of vesting, and the employee’s tax basis is equal to the amount paid for the stock plus the amount included as ordinary compensation income. Upon a later sale of the shares, assuming the employee holds the shares as a capital asset, the employee would recognize capital gain income or loss; whether such capital gain would be a short- or long-term gain would depend on the time between the beginning of the holding period at vesting and the date of the subsequent sale. Consult your tax adviser regarding the income tax consequences to you. So, you would count from vesting for long-term capital gains purposes. Also note the point to include the amount of income you were considered to have earned as a result of the original vesting [market value then - amount you paid]. (And of course, you reported that as income in 2015/2016, right?) So if you had 300 shares of Stock ABC granted you in 2014 for a price of $5/share, and in 2015 100 of those shares vested at FMV $8/share, and in 2016 100 of those shares vested, current FMV $10/share, you had $300 in income in 2015 and $500 of income in 2016 from this. Then in 2017 you sold 200 shares for $15/share: |
Avoid Capital Gains on Rental | Don't let the tax tail wag the investment dog. There is risk in exchanging this (known) property for another (unknown) property. That risk may be more than $9000 worth of risk. Tax considerations are important, but most important is that your investments make money. If you intend to continue as a landlord, you had better be sure you are finding a better deal elsewhere if you are going to trade this property up. I should also mention that you have a 5 year window in which you need to have lived in the home for 2 years. You have time and might be able to sell for a higher price if you wait a little longer. |
How can we determine how much income our savings could generate if we purchase an annuity? | Annuity calculation formulas can be found here. http://en.wikipedia.org/wiki/Annuity_(finance_theory). In addition, as suggested in the comments, there are many sites that have calculators. Having said that, a simple financial mechanism that is followed by many is to invest a portion of the fund in regular income instruments, for example Govt. or corporate bonds that pay a regular coupon/interest and some in diversified instruments like gold, stock etc. The exact proportion is dependent on may factors, like mortality, inflation, lifestyle, health care requirements, other expenses. The regular income provides the day to day expenses on a monthly/yearly basis, while the other instruments hedge against inflation and provide growth. |
Where or how can I model historical market purchases | This site should help you to accomplish what you are looking for: https://www.quantopian.com |
Starting a large business with a not so large income? | There are three (or four) ways that a company can grow: (Crowdfunding is a relatively new (in mainstream businesses) alternative financing method where people will finance a company with the expectation that they will benefit from the product or service that they provide.) Obviously a startup has no prior income to use, so it must either raise money through equity or debt. People say that one must borrow contingent on their salary. Banks lend money based on the ability to pay the loan back plus interest. For individuals, their income is their primary source of cash flow, so, yes, it is usually the determining factor in getting a loan. For a business the key factor is future cash flows. So a business will borrow money, say, to buy a new asset (like a factory) that will be used to generate cash flows in the future so that they can pay down the debt. If the bank believes that the use of the money is going to be profitable enough that they will get their money back with interest, they'll loan the money. Equity investors are essentially the same, but since they don't get a guaranteed payback (they only get paid through non-guaranteed dividends or liquidation), their risk is higher and they are looking for higher expected returns. So the question I'd have as a bank or equity investor is "what are you going to do with the money?" What is your business strategy? What are you going to do that will make profits in the future? Do you have a special idea or skill that you can turn into a profitable business? (Crowdfunding would be similar - people are willing to give you money based on either the social or personal benefit of some product or service.) So any business either starts small and grows over time (which is how the vast majority of businesses grow), or has some special idea, asset, skill, or something that would make a bank willing to take a risk on a huge loan. I know, again, that people here tend to turn blind eyes on unfortunate realities, but people do make giant businesses without having giant incomes. The "unfortunate reality" is that most startups fail. Which may sound bad, but also keep in mind that most startups are created by people that are OK with failing. They are people that are willing to fail 9 times with the thought that the 10th one will take off and make up for the losses of the first 9. So I would say - if you have some great idea or skill and a viable strategy and plan to take it to market, then GO FOR IT. You don't need a huge salary to start off. You need something that you can take to market and make money. Most people (myself included) either do not have that idea or skill to go out on their own, or don't have the courage to take that kind of risk. But don't go in assuming all you need is a loan and you'll be an instant millionaire. You might, but the odds are very long. |
“In-the-Money” vs “Out-of-the-Money” Call Options | First, welcome to Money.SE. The selected page is awful. I don't know the value in listing different expirations at the same strike. Usually, all the strikes are grouped by month, so I'd be looking at Jan '15 across all strikes. "In the money" means the price of a stock is trading above the strike price, if a call, or below it, if a put. On 10/20 of some year, Intel was trading at $23.34. The January $25 call strike was just $0.70, and April's was $1.82. These were out of the money. The $25 puts were "in the money" by $1.66 so you could have paid $1.90 for the Jan $25 put, with $.24 of time premium. By November, the price rose and the put fell, to $.85, all time premium. As with stocks, the key thing is to only buy calls of stock that are going to go up. If a stock will fall, buy puts. Curious, what was the class discussion just before the teacher gave you this image? |
Why are banks providing credit scores for free? | Two possible reasons: You can tell which scenario it is based on the credit history they provide you. If you look at the history and they show you your scores for each month, even though you didn't initiate it, then they are auto checking it each month. If the historical dates are only on the dates you clicked on the button, they are only checking when you manually click on it. As for the why they provide it, a few years back it was a desirable feature. Now they all do it just to keep pace with everyone else. Note that most banks only provide a single scoring model from one bureau (but different banks use different bureaus). |
Currently sole owner of a property. My girlfriend is looking to move in with me and is offering to pay 'rent'. Am I at risk here? | Edit #2 My whole answer was based on my misunderstanding that you were renting out a totally separate property to your girl friend. I finally understand now that you're renting out a room in YOUR apartment flat to your gf. So, based on my new understanding, I don't think it's necessarily a bad idea. The answer below is my answer to a different question ;) Original Answer My answer has nothing to do with business, but is totally relationship based. If you care about her in a "we might be together a long time" way, then I wouldn't do this. I don't care what arrangements you setup before hand, at some point, you're bound to feel like she owes you something at some point. Let alone the easiest of situations to imagine (she's late on the rent, she loses her job and can't pay, etc) you'll be forced to make decisions about how much your desire to love and care for her outweighs your need to pay your mortgage. You can argue how magnanimous your are all day long, but is this something you want to bring into your relationship? Now, if you don't really care to stay with her that long and you could do life with or without her, then go for it. I think the big question is, is your relationship worth £200? Edit In the interest of supporting my opinion, here are a few articles I found on the subject: Unfortunately, the way renting to friends or family often works out is far from what would be expected between people who care about one another. For the most part, friends and family members will actually make bad renters, because they’ll expect more from you than a tenant who doesn’t know you. You may get a lot of requests for maintenance and repairs, even for minor things, and you may also find that family members and friends think they should be entitled to perks because of your personal relationship with them. When they don’t get special treatment, they can get angry with you, and that hurts both your professional relationship and your personal relationship. American Apartment Owners Association "In my experience, landlords renting to relatives doesn't work out perfectly," said Ceyhun Doker, a REALTOR® associate at Keller Williams Realty in Burlingame, CA. "When you don't know each other, there are fewer problems." realator.com |
Can gold prices vary between two places or country at the same time? | Most of the gold prices at international markets are USD denominated. Hence the prices would be same in international markets where large players are buying and selling. However this does not mean that the prices to the individuals in local markets is same. The difference is due to multiple things like cost of physical delivery, warehousing, local taxation, conversion of Local currency to USD etc. So in essence the price of Gold is similar to price of Crude Oil. The price of Oil is more or less same on all the markets exchanges, though there is small difference this is because of the cost of delivery/shipment which is borne by the buyer. However the cost of Oil to retail individual varies from country to country. |
Totally new to finance, economy, where should I start? | A couple of good books I enjoyed and found very understandable (regarding the stock market): As for investment information you can get lost for days in Investopedia. Start in the stock section and click around. The tutorials here (free) give a good introduction to different financial topics. Regarding theoretical knowledge: start with what you know well, like your career or your other interests. You'll get a running start that way. Beyond that, it depends on what area of finance you want to start with. If it's your personal finances, I and a lot of other bloggers write about it all the time. Any of the bloggers on my blogroll (see my profile for the link) will give you a good perspective. If you want to go head first into planning your financial life, take a look at Brett Wilder's The Quiet Millionaire. It's very involved and thorough. And, of course, ask questions here. |
How to spend more? (AKA, how to avoid being a miser) | There was a study last year -- it was all over the news -- that concluded that experiences, not stuff, is what makes people happy. The satisfaction from going on vacation lasts even after the holiday is long over. That new gadget only gives fleeting satisfaction. To that end, I recommend splurging on the affordable luxuries that give you a better experience. For example, I'm a big believer in paying the skycap a few dollars to check my bags at the curb rather than wait in line at the airport because I HATE airports. Valet parking is another affordable luxury when the alternative is circling a busy parking lot for 15 minutes. Pay for the better seats at the show. Get a room at the nicer hotel. Eat out a bit more often. I can't imagine willingly spending hours with customer support, though. They can have my $5. |
Taxes, Puts and the Wash Rule | There are different schools of thought. You can ask the IRS - and it would not surprise me if you got different answers on different phone calls. One interpretation is that a put is not "substantially identical" to the disposed stock, therefore no wash is triggered by that sale. However if that put is exercised, then you automatically purchase the security, and that is identical. As to whether the IRS (or your brokerage firm) recognizes the identical security when it falls out of an option, I can't say; but technically they could enforce it because the rule is based on 30 days and a "substantially identical" stock or security. In this interpretation (your investor) would probably at least want to stay out of the money in choosing a strike price, to avoid exercise; however, options are normally either held or sold, rather than be exercised, until at or very close to the expiration date (because time value is left on the table otherwise). So the key driver in this interpretation would be expiration date, which should be at least 31 days out from the stock sale; and it would be prudent to sell an out of the money put as well, in order to avoid the wash sale trigger. However there is also a more unfavorable opinion - see fairmark.com/capgain/wash/wsoption.htm where they hold that a "deep in the money" option is an immediate trigger (regardless of exercise). This article is sage, in that they say that the Treasury (IRS) may interpret an option transaction as a wash if it's ballpark to being exercisable. And, if the IRS throws paper, it always beats each of paper, rock and scissors :( A Schwab article ("A Primer on Wash Sales") says, if the CUSIPs match, bang, wash. This is the one that they may interpret unfavorably on in any case, supporting Schwab's "play it safe" position: "3. Acquire a contract or option to buy substantially identical stock or securities..." . This certainly nails buying a call. As to selling a put, well, it is at least conceivable that an IRS official would call that a contract to buy! SO it's simply not a slam dunk; there are varying opinions that you might describe as ranging from "hell no" to "only if blatant." If you can get an "official" predetermination, or you like to go aggressive in your tax strategy, there's that; they may act adversely, so Caveat Taxfiler! |
Take advantage of rock bottom oil prices | As others have alluded to but haven't said due to the lack of reputation points to spare, you can take advantage of oil prices by leveraging up and using as much credit and margin as the banks and brokerages (respectively) will lend you. People assume that the correct answer on this forum has to masquerade as conservative financial advice, and this is not advice nor conservative. Futures contracts are readily available, but they are expensive to obtain (like a minimum entry of $4,450). But if this expense is no such object to you then you can then obtain this contract which is actually worth 20x that and experience the price appreciation and depreciation of the whole contract. The concept is similar to a downpayment on a mortgage. You assume "rock bottom" oil prices, but fortunately for you, futures contracts will allow you to quickly change your bets from future price appreciation and allow you to speculate on future price depreciation. So although the union workers will be protesting full time after the drilling company lays them off, you will still be getting wealthier. Long Options. These are the best. The difference with options, amongst other speculation products, is that options require the least amount of capital risk for the greatest reward. With futures, or with trading shares of an ETF (especially on margin), you have to put up a lot of capital, and if the market does not go your desired direction, then will lose a lot. And on margin products you can lose more than you put in. Being long options does not come with these dilemmas. A long march 2015 call option on USO ETF can currently be bought for less than $200 of actual cash (ie. the trading quote will be less than $2.00, but this will cost you less than $200), and will be worth $1000 on a very modest rebound in prices. The most you can lose is the $200 for the contract. Compared to $4450 on the futures, or $100,000 (that you don't have) in the futures market if oil really moves against you, or compared to whatever large amount of cash needed to actually buy shares of an ETF needed to make any decent return. These are the most lucrative (and fun and exhilarating and ) ways to take advantage of rock bottom oil prices, as an individual. |
Can we compare peer-to-peer loans to savings accounts? | Peer to peer lending isn't FDIC insured. You can lose all your investment with peer to peer lending, whereas you will not lose your deposited money in a savings account, even if it doesn't grow very fast. |
Are Forex traders forced to use leverage? | While it's not true that you have to use leverage to participate in Forex, the alternative makes it impractical for most people to be able to do so. You need to be able to put a lot of money into it in order to not trade on leverage. The fact is, most accounts for "normal" people require leverage because the size of the typical contract is more than the average person can afford to risk (or usually more than the average person has). Leverage, however, in the Forex market is not like Leverage in the stock or commodities market (well, they're the same thing in theory, but they are executed differently). In Forex, the broker is the one lending you the money in nearly all cases, and they will cash out your position when your account balance is exhausted. Thus, there is no risk for them (barring fraud or other illegal issues). Technically, I don't believe they guarantee that you will not accrue a debt, but I've never heard of anyone having their position cashed out and then owed more money. They've very good about making sure you can only spend money you've deposited. To put this another way, if you have $1,000 in your account and you are leveraged to 100,000. Once your trade drops to $1000 in losses your position is automatically cashed out. There is no risk to the broker, and no risk to you (other than your $1000)... So trading without leverage has little value, while traiding with leverage has lots of potential gain and no downsides (other than a faster rate of loss, but if you're worried about that, just trade smaller lots.) |
Is there a way to claim a car purchase in the tax return? | You've got two options. Deduct the business portion of the depreciation and actual expenses for operating the car. Use the IRS standard mileage rate of $.575/mile in 2015. Multiply your business miles by the rate to calculate your deduction. Assuming you're a sole proprietor you'll include a Schedule C to your return and claim the deduction on that form. |
Currently a Microsoft Money user on PC, need a replacement suitable for Mac | I haven't found a drop-in replacement for MS Money, but I've tried a few of the Mac desktop programs. I settled on Iggsoftware's iBank, which seems to do what I need it to do. It also appears to be able to import transactions from MS Money if you export your accounts as QIF files at the MS Money end, but I never tried it. |
Should I Pay Off my Student Loan Debts First or Invest in an Index Fund? | Pay off the debt first. Life circumstances change without notice, and starting any stage of life with a debt puts you at a disadvantage. Luckily, your debt is small. Please also consider accumulating a 6 month emergency fund before making investments. This will further protect you when life hands you a curveball. |
Borrow from 401k for down payment on rental property? | the most important information that you provided was "I'm 25 years old". You have a few years to save for a rental property. Taking a loan against your 401k only invites a lot of paperwork and a good deal of risk. Not only the "if I lose my job I have to pay it back (in 60 days)", but it effectively locks you into your current job because changing jobs also causes the same repayment consequences. Do you really love your job that much that you would stick with it for the loan you have? (rhetorical) One could argue that real estate is a good way to diversify away from the stock market (assuming you have your 401k invested in stocks). Another way to get the same diversification is to invest in REITs through your 401k. Owning rental property isn't something to rush into. You really have to like it.The returns and headaches that accompany it can be a drag and it's harder to get out of then stocks. |
My bank often blocks my card during purchases - what is the most reliable bank card? (UK) | Having worked in the financial industry, I can say 9:10 times a card is blocked, it is not actually the financial industry, but a credit/credit card monitoring service like "Falcon" for VISA. If you have not added travel notes or similar, they will decline large, our of country purchases as a way to protect you, from what is most likely fraud. Imagine if you were living in Sweden and making regular steady purchases, then all of a sudden, without warning your card was used in Spain. This would look suspicious on paper, even it was obvious to you. This is less to do with your financial institution, and more to do with increased fraud prevention. Call your bank. They will help you. |
What's so hard about a mutual fund manager pricing their mutual fund? | Remember that in most news outlets journalists do not get to pick the titles of their articles. That's up to the editor. So even though the article was primarily about ETFs, the reporter made the mistake of including some tangential references to mutual funds. The editor then saw that the article talked about ETFs and mutual funds and -- knowing even less about the subject matter than the reporter, but recognizing that more readers' eyeballs would be attracted to a headline about mutual funds than to a headline about ETFs -- went with the "shocking" headline about the former. In any case, as you already pointed out, ETFs need to know their value throughout the day, as do the investors in that ETF. Even momentary outages of price sources can be disastrous. Although mutual funds do not generally make transactions throughout the day, and fund investors are not typically interested in the fund's NAV more than once per day, the fund managers don't just sit around all day doing nothing and then press a couple buttons before the market closes. They do watch their NAV very closely during the day and think very carefully about which buttons to press at the end of the day. If their source of stock price data goes offline, then they're impacted almost as severely as -- if less visibly than -- an ETF. Asking Yahoo for prices seems straightforward, but (1) you get what you pay for, and (2) these fund companies are built on massive automated infrastructures that expect to receive their data from a certain source in a certain way at a certain time. (And they pay a lot of money in order to be able to expect that.) It would be quite difficult to just feed in manual data, although in the end I suspect some of these companies did just that. Either they fell back to a secondary data supplier, or they manually constructed datasets for their programs to consume. |
Should I consolidate loans and cards, or just cards, leaving multiple loans? | My answer is similar to Ben Miller's, but let me make some slightly different points: There is one excellent reason to get a consolidation loan: You can often get a lower interest rate. If you are presently paying 19% on a credit card and you can roll that into a personal loan at 13.89%, you'll be saving over 5%, which can add up. I would definitely not consolidate a loan at 12.99% into a loan at 13.89%. Then you're just adding 1% to your interest rate. What's the benefit in this? Another good reasons for a consolidation loan is psychological. A consolidation loan with fixed payments forces you to pay that amount every month. You say you have trouble with credit cards. It's very easy to say to yourself, "Oh, just this month I'm going to pay just the minimum so I can use my cash for this other Very Important Thing that I need to buy." And then next month you find something else that you just absolutely have to buy. And again the next month, and the next, and your determination to seriously pay down your debt keeps getting pushed off. If you have a fixed monthly payment, you can't. You're committed. Also, if you have many credit cards, juggling payments on all of them can get complex and confusing. It's easy to lose track of how much you owe and to budget for payments. At worst, when there are many bills to pay you may forget one. (Personally I now have 3 bank cards, an airline card, and 2 store cards, and managing them is getting out of hand. I have good reasons for having so many cards: the airline card and the store cards give me special discounts. But it's confusing to keep track of.) As to adding $3,000 to the consolidation loan: Very, very bad idea. You are basically saying, "I have to start seriously paying down my debt ... tomorrow. Today I need a some extra cash so I'm going to borrow just a little bit more, but I'm going to get started paying it off next month." This is a trap, and the sort of trap that leads people into spiraling debt. Start paying off debt NOW, not at some vague time in the future that never seems to come. |
Using Loan to Invest - Paying Monthly Installments by Selling Originally Bought Shares | I will add one point missing from the answers by CQM and THEAO. When you take a loan and invest the proceeds, the interest that you pay on the loan is deductible on Schedule A, Line 14 of your Federal income tax return under the category of Investment Interest Expense. If the interest expense is larger than all your investment earnings (not just those from the loan proceeds), then you can deduct at most the amount of the earnings, and carry over the excess investment interest paid this year for deduction against investment earnings in future years. Also, if some of the earnings are long-term capital gains and you choose to deduct the corresponding investment interest expense, then those capital gains are taxed as ordinary income instead of at the favored LTCG rate. You also have the option of choosing to deduct only that amount of interest that offsets dividend (and short-term capital gain) income that is taxed at ordinary rates, pay tax at the LTCG rate on the capital gains, and carry over rest of the interest for deduction in future years. In previous years when the tax laws called for reduction in the Schedule A deductions for high-income earners, this investment interest expense was exempt from the reduction. Whether future tax laws will allow this exemption depends on Congress. So, this should be taken into account when dealing with the taxes issue in deciding whether to take a loan to invest in the stock market. |
Taxation from variations in currency | Here is the technical guidance from the accounting standard FRS 23 (IAS 21) 'The Effects of Changes in Foreign Exchange Rates' which states: Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognised in profit or loss in the period in which they arise. An example: You agree to sell a product for $100 to a customer at a certain date. You would record the sale of this product on that date at $100, converted at the current FX rate (lets say £1:$1 for ease) in your profit loss account as £100. The customer then pays you several $100 days later, at which point the FX rate has fallen to £0.5:$1 and you only receive £50. You would then have a realised loss of £50 due to exchange differences, and this is charged to your profit and loss account as a cost. Due to double entry bookkeeping the profit/loss on the FX difference is needed to balance the journals of the transaction. I think there is a little confusion as to what constitutes a (realised) profit/loss on exchange difference. In the example in your question, you are not making any loss when you convert the bitcoins to dollars, as there is no difference in the exchange rate between the point you convert them. Therefore you have not made either a profit or a loss. In terms of how this effects your tax position; you only pay tax on your profit and loss account. The example I give above is an instance where an exchange difference is recorded to the P&L. In your example, the value of your cash held is reflected in your balance sheet, as an asset, whatever its value is at the balance sheet date. Unfortunately, the value of the asset can rise/fall, but the only time where you will record a profit/loss on this (and therefore have an impact on tax) is if you sell the asset. |
I spend too much money. How can I get on the path to a frugal lifestyle? | Since you ask.... How do I do it? My frugality doesn't come from budgeting or even half so much from keeping money away from myself (though mostly-one-way retirement accounts help). It's a matter of world-view. Spending and shopping for things you don't need is a vice. Limit your indulgence in it. I've also made wasteful purchases in my life. When I find myself considering buying something that I don't really need, I ask myself whether it will end up like... like the stupid eyeglass cleaner gadget from the Sharper Image that I used twice. Or the Bluetooth earpiece that spent 98% of its time lost and .02% of its time in my ear. Or the little Sony VAIO laptop which was great on the train, but probably cost 8 times as much as an EeePC and didn't do way too much more. (In my defense on that one, it was just before netbooks were really taking off... but I still felt bad about it the next year). I've also got two savings goals. The first is responsible and very big (financial stability: a year's expenses plus money for a down payment on a house. a California house. in a good neighborhood.) The second is personal and just medium-big (a large musical instrument). I've decided not to spend money on the second until I'm financially stable and I have enough money to take care of the first... so that makes me more willing to scrimp and save to pursue the first than I would be otherwise. Advice for others? Ask yourself: Why are you buying that thing? You can survive without it, can't you? You didn't need it a week ago, did you? Does the old one have holes in it or something? Or will you at least use it regularly, for years? Why aren't you buying the cheaper kind? Or buying it used? |
Why are big companies like Apple or Google not included in the Dow Jones Industrial Average (DJIA) index? | Traditionally, the Dow Jones Industrial Average (DJIA) was only comprised of stocks that were traded on the New York Stock exchange. Neither Apple (AAPL) nor Google (GOOG) are traded on the New York Stock Exchange but instead are traded on NASDAQ. All NASDAQ tickers are four characters long and all NYSE tickers are only three or less characters long (e.g. IBM or T (AT&T)). However in 1999, MSFT became the first NASDAQ stock to be included in the DJIA. Given that AAPL now has the largest market capitalization of any company in U.S. history, I think it is likely if they retain that position, that they would eventually be let into the DOW club too, perhaps, ironically, even supplanting Microsoft. |
If I have a lot of debt and the housing market is rising, should I rent and slowly pay off my debt or buy and roll the debt into a mortgage? | The only way to "roll" debt into a home purchase is to have sufficient down payment. Under the "new" lending rules that took effect in Canada earlier this year, you must have at least 5% of the purchase price as a down payment. If you have $60,000 in additional debt, the total amount of mortgage still cannot be greater than 95% of the purchase price. Below is an example. Purchase price of home $200,000. Maximum mortgage $190,000 (95% of purchase price) Total outside debt $60,000 That means the mortgage (other than the current debt of $60k) can only be $130,000 This means you would need a down payment of $70,000. Also keep in mind that I have not included any other legal fees, real estate commissions, etc in this example. Since it is safe to assume that you do not have $70k available for a down payment, renting and paying down the debt is likely the better route. Pay off the credit card(s) first as they have the higher interest amount. Best of luck! |
What is the difference between a stock and a bond? | WilliamKF explained it pretty well, but I want to put it in a more simplistic form: |
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