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Why don't brokerages charge commissions on forex trades? | Investopedia has a section in their article about currency trading that states: The FX market does not have commissions. Unlike exchange-based markets, FX is a principals-only market. FX firms are dealers, not brokers. This is a critical distinction that all investors must understand. Unlike brokers, dealers assume market risk by serving as a counterparty to the investor's trade. They do not charge commission; instead, they make their money through the bid-ask spread. Principals-only means that the only parties to a transaction are agents who actively bear risk by taking one side of the transaction. There are forex brokers who charge what's called a commission, based on the spread. Investopedia has another article about the commission structure in the forex market that states: There are three forms of commission used by brokers in forex. Some firms offer a fixed spread, others offer a variable spread and still others charge a commission based on a percentage of the spread. So yes, there are forex brokers who charge a commission, but this paragraph is saying mostly the same thing as the first paragraph. The brokers make their money through the bid-ask spread; how they do so varies, and sometimes they call this charge a commission, sometimes they don't. All of the information above differs from the stock markets, however, in which The broker takes the order to an exchange and attempts to execute it as per the customer's instructions. For providing this service, the broker is paid a commission when the customer buys and sells the tradable instrument. The broker isn't taking a side in the trade, so he's not making money on the spread. He's performing the service of taking the order to an exchange an attempting to execute it, and for that, he charges a commission. |
Do I have to pay taxes on income from my website or profits? | Being a tax professional, my understanding is that the threshold limit is a single limit for all your source(s) of income. Now many people who already draw salary which is liable to tax, develop application for mobile and generate some income. Such income is liable to tax, if along with other income they exceed the threshold limit. Income will have surely related expenses. And the expenses which are related to earning of the income are allowed to be deducted. |
how do capital gains work if you don't know the original purchase price? | There are two scenarios to determine the relevant date, and then a couple of options to determine the relevant price. If the stocks were purchased in your name from the start - then the relevant date is the date of the purchase. If the stocks were willed to you (i.e.: you inherited them), then the relevant date is the date at which the person who willed them to you had died. You can check with the company if they have records of the original purchase. If it was in "street name" - they may not have such records, and then you need to figure out what broker it was to hold them. Once you figured out the relevant date, contact the company's "investor relationships" contact and ask them for the adjusted stock price on that date (adjusted for splits/mergers/acquisitions/whatever). That would be the cost basis per share you would be using. Alternatively you can research historical prices on your favorite financial information site (Google/Yahoo/Bloomberg or the stock exchange where the company is listed). If you cannot figure the cost basis, or it costs too much - you can just write cost basis as $0, and claim the whole proceeds as gains. You'll pay capital gains tax on the whole amount, but that may end up being cheaper than conducting the investigation to reveal the actual numbers. |
How does the yield on my investments stack up against other investors? | From an article I wrote a while back: “Dalbar Inc., a Boston-based financial services research firm, has been measuring the effects of investors’ decisions to buy, sell, and switch into and out of mutual funds since 1984. The key finding always has been that the average investor earns significantly less than the return reported by their funds. (For the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.)” It's one thing to look at the indexes. But quite another to understand what other investors are actually getting. The propensity to sell low and buy high is proven by the data Dalbar publishes. And really makes the case to go after the magic S&P - 0.09% gotten from an ETF. |
Does FHA goes hand in hand with PMI ? | I don't know that FHA loans have better rates than conventional loans. I've never heard that and some quick googling didn't yield anything (please correct me if I'm wrong). So if you have the necessary down payment to get a conventional loan, I'm not sure I see any benefit for looking at FHA loans. I think the only benefit outside of a low down payment is the ability to (possibly) get a loan with a lower credit score. |
Difference between Hedge Fund and Private Equity? | Private Equity is simply some type of an investment company, which is owned in a way not accessible to the public. ie: Warren Buffet runs Berkshire Hatheway, which is an investment company which itself is traded on the New York Stock Exchange. This means that anyone can buy shares in the company, and own a small fraction of it. If Warren Buffet owned all the shares of Berkshire Hatheway, it would be a Private Equity company. Note that 'Equity' refers to the ownership of the company itself; a private investment company may simply buy Bonds (which are a form of Debt), in which case, they would not be technically considered a 'Private Equity' company. A Hedge Fund is a very broad term which I don't believe has significant meaning. Technically, it means something along the lines of an investment fund (either public or private) which attempts to hedge the risks of its portfolio, by carefully considering what type of investments it purchased. This refers back to the meaning of 'hedge', ie: 'hedging your bets'. In my opinion, 'Hedge Fund' is not meaningfully different from 'investment fund' or other similar terms. It is just the most popular way to refer to this type of industry at the present time. You can see the trend of using the term 'investment fund' vs 'hedge fund' using this link: https://trends.google.com/trends/explore?date=all&q=hedge%20fund,investment%20fund Note that the high-point of the use of 'hedge fund' occurred on October 2008, right at the peak of the global financial crisis. The term evokes a certain image of 'high finance' / 'wall-street types' that may exploit various situations (such as tax legislation, or 'secret information') for their own gain. Without a clear definition, however, it is a term without much meaning. If you do a similar comparison between 'hedge fund' and 'private equity', you can see that the two correlate very closely; I believe the term 'private equity' is similarly misused to generally refer to 'investment bankers'. However in that case, 'private equity' has a more clear definition on its own merits. |
What investment strategy would you deduce from the latest article from Charles Munger? | So, I've read the article in question, "Basically, It's Over". Here's my opinion: I respect Charlie Munger but I think his parable misses the mark. If he's trying to convince the average person (or at least the average Slate-reading person) that America is overspending and headed for trouble, the parable could have been told better. I wasn't sure how to follow some of the analogies he was making, and didn't experience the clear "aha" I was hoping for. Nevertheless, I agree with his point of view, which I see as: In the long run, the United States is going to have serious difficulty in supporting its debt habit, energy consumption habit, and its currency. In terms of an investment strategy to protect oneself, here are some thoughts. These don't constitute a complete strategy, but are some points to consider as part of an overall strategy: If the U.S. is going to continue amassing debt fast, it would stand to reason it will become a worse credit risk, requiring it to pay higher interest rates on its debt. Long-term treasury bonds would decline as rates increase, and so wouldn't be a great place to be invested today. In order to pay the mounting debt and debt servicing costs, the U.S. will continue to run the printing presses, to inflate itself out of debt. This increase in the money supply will put downward pressure on the U.S. dollar relative to the currencies of better-run economies. U.S. cash and short-term treasuries might not be a great place to be invested today. Hedge with inflation-indexed bonds (e.g. TIPS) or the bonds of stronger major economies – but diversify; don't just pick one. If you agree that energy prices are headed higher, especially relative to U.S. dollars, then a good sector to invest a portion of one's portfolio would be world energy producing companies. (Send some of your money over to Canada, we have lots of oil and we're right next door :-) Anybody who has already been practicing broad, global diversification is already reasonably protected. Clearly, "diversification" across just U.S. stocks and bonds is not enough. Finally: I don't underestimate the ability of the U.S. to get out of this rut. U.S. history has impressed upon me (as a Canadian) two things in particular: it is highly capable of both innovating and of overcoming challenges. I'm keeping a small part of my portfolio invested in strong U.S. companies that are proven innovators – not of the "financial"-innovation variety – and with global reach. |
Options profit calculation and cash settlement | Marketwatch reports that the 108 strike call option sells for 1.45, down 1.53 from yesterday. If we split the bid and ask you get 1.415. That is what that contract will, likely, trade at. The biggest problems with options are commissions and liquidity. I have seen a commission as high as $45 per trade. I have also seen open interest disappear overnight. Even if you obtain contracts that become worth more than you paid for them you may find that no one wants to pay you what they are worth. Track your trade over a few weeks to see how you would have done. It is my experience that the only people who make money on options are the brokers. |
Hedging against an acquisition of a stock | For a cheaper hedge , you can try a call spread. e.g if you shorted a stock at 40 but are worried that it can get bought out for 60. then buy a 50-60 bull call spread with appropriate number of contracts or even 50-55. this is better than just buying a 50 call as it will be expensive. Also the other option is not to short but buy a debit bear put spread 40-30 near the money and then buy an out of money call spread ( 55-60). |
Why are residential investment properties owned by non-professional investors and not large corporations? | As other answers have pointed out, professional real estate investors do own residential investment properties. However, small residential units typically are not owned by professional real estate investors as your experience confirms. This has a fairly natural cause. The size of the investment opportunity is insufficient to warrant the proper research/due diligence to which a large investment firm would have to commit if it wanted to properly assess the potential of a property. For a small real estate fund managing, say, $50 MM, it would take 100 properties at a $500K valuation in order to fully invest the funds. This number grows quickly as we decrease the average valuation to reflect even smaller individual units. Analogously, it is unlikely that you will find large institutional investors buying stocks with market caps of $20 MM. They simply cannot invest a large enough portion of total AUM to make the diligence make economic sense. As such, institutional real estate money tends to find its way into large multi-family units that provide a more convenient purchase size for a fund. |
Can I save our credit with a quickie divorce? | My advice to you? Act like responsible adults and owe up to your financial commitments. When you bought your house and took out a loan from the bank, you made an agreement to pay it back. If you breach this agreement, you deserve to have your credit score trashed. What do you think will happen to the $100K+ if you decide to stiff the bank? The bank will make up for its loss by increasing the mortgage rates for others that are taking out loans, so responsible borrowers get to subsidize those that shirk their responsibilities. If you were in a true hardship situation, I would be inclined to take a different stance. But, as you've indicated, you are perfectly able to make the payments -- you just don't feel like it. Real estate fluctuates in value, just like any other asset. If a stock I bought drops in value, does the government come and bail me out? Of course not! What I find most problematic about your plan is that not only do you wish to breach your agreement, but you are also looking for ways to conceal your breach. Please think about this. Best of luck with your decision. |
High dividend stocks | Like almost all investing question: it depends! Boring companies generally appreciate slowly and as you note, pay dividends. More speculative investing can get you some capital gains, but also are more likely to tank and have you lose your original investment. The longer your time horizon, and the more risk you are willing to take, then it is reasonable to tilt towards, but not exclusively invest in, more speculative stocks. A shorter horizon, or if you have trouble sleeping at night if you lose money, or are looking for an income stream, would then tend towards the boring side. Good Luck |
How to pick a state to form an LLC in? | There are very few circumstances where forming an out of state entity is beneficial, but a website is within these circumstances in certain instances. Businesses with no physical operations do not need to care what jurisdiction they are registered in: your home state, a better united state or non-united state. The "limited liability" does it's job. If you are storing inventory or purchasing offices to compliment your online business, you need to register in the state those are located in. An online business is an example of a business with no physical presence. All states want you to register your LLC in the state that you live in, but this is where you need to read that state's laws. What are the consequences of not registering? There might be none, there might be many. In New York, for example, there are no consequences for not registering (and registering in new york - especially the city - is likely the most expensive in the USA). If your LLC needs to represent itself in court, New York provides retroactive foreign registrations and business licenses. So basically, despite saying that you need to pay over $1000 to form your LLC "or else", the reality is that you get the local limited liability protection in courts whenever you actually need it. Check your local state laws, but more times than not it is analogous to asking a barber if you need a haircut, the representative is always going to say "yes, you do" while the law, and associated case law, reveals that you don't. The federal government doesn't care what state your form an LLC or partnership in. Banks don't care what state you form an LLC or partnership in. The United States post office doesn't care. Making an app? The Apple iTunes store doesn't care. So that covers all the applicable authorities you need to consider. Now just go with the cheapest. In the US alone there are 50 states and several territories, all with their own fee structures, so you just have to do your research. Despite conflicting with another answer, Wyoming is still relevant, because it is cheap and has a mature system and laws around business entity formation. http://www.incorp.com has agents in every state, but there are registered agents everywhere, you can even call the Secretary of State in each state for a list of registered agents. Get an employer ID number yourself after the business entity is formed, it takes less than 5 minutes. All of this is also contingent on how your LLC or partnership distributes funds. If your LLC is not acting like a pass through entity to you and your partner,but instead holding its own profits like a corporation, then again none of this matters. You need to form it within the state you live and do foreign registrations in states where it has any physical presence, as it has becomes its own tax person in those states. This is relevant because you said you were trying to do something with a friend. |
What one bit of financial advice do you wish you could've given yourself five years ago? | 2 things: |
Is real (physical) money traded during online trading? | With Forex trading - physical currency is not involved. You're playing with the live exchange rates, and it is not designed for purchasing/selling physical currency. Most Forex trading is based on leveraging, thus you're not only buying money that you're not going to physically receive - you're also paying with money that you do not physically have. The "investment" is in fact a speculation, and is akin to gambling, which, if I remember correctly, is strictly forbidden under the Islam rules. That said, the positions you have - are yours, and technically you can demand the physical currency to be delivered to you. No broker will allow online trading on these conditions, though, similarly to the stocks - almost no broker allows using physical certificates for stocks trading anymore. |
No-line-of-credit debit card? | We have a pre-paid mastercard. This will only allow the spending up to the amount already paid into the card account. Visa Electron is a bank account linked debit card that will not allow the account to go overdrawn but this card type is getting quite rare. |
Relation between interest rates and currency for a nation | What you are asking about is called Interest Rate Parity. Or for a longer explanation the article Interest Rate Parity at Wikipedia. If the US has a rate of say zero, and the rate in Elbonia is 10%, one believes that in a year the exchange rate will be shifted by 10%, i.e. it will take 1.1 unit of their currency to get the dollars one unit did prior. Else, you'd always profit from such FOREX trades. (Disclaimer - I am not claiming this to be true or false, just offering one theory that explains the rate difference effect on future exchange rates. |
Should a high-school student invest their (relative meager) savings? | You have a few correlated questions here: Yes you can. There are only a few investment strategies that require a minimum contribution and those aren't ones that would get a blanket recommendation anyway. Investing in bonds or stocks is perfectly possible with limited funds. You're never too young to start. The power of interest means that the more time you give your money to grow, the larger your eventual gains will be (provided your investment is beating inflation). If your financial situation allows it, it makes sense to invest money you don't need immediately, which brings us to: This is the one you have to look at most. You're young but have a nice chunk of cash in a savings account. That money won't grow much and you could be losing purchasing power to inflation but on the other hand that money also isn't at risk. While there are dozens of investment options1 the two main ones to look at are: bonds: these are fixed income, which means they're fairly safe, but the downside is that you need to lock up your money for a long time to get a better interest rate than a savings account index funds that track the market: these are basically another form of stock where each share represents fractions of shares of other companies that are tracked on an index such as the S&P 500 or Nasdaq. These are much riskier and more volatile, which is why you should look at this as a long-term investment as well because given enough time these are expected to trend upwards. Look into index funds further to understand why. But this isn't so much about what you should invest in, but more about the fact that an investment, almost by definition, means putting money away for a long period of time. So the real question remains: how much can you afford to put away? For that you need to look at your individual situation and your plans for the future. Do you need that money to pay for expenses in the coming years? Do you want to save it up for college? Do you want to invest and leave it untouched to inspire you to keep saving? Do you want to save for retirement? (I'm not sure if you can start saving via IRAs and the like at your age but it's worth looking into.) Or do you want to spend it on a dream holiday or a car? There are arguments to be made for every one of those. Most people will tell you to keep such a "low" sum in a savings account as an emergency fund but that also depends on whether you have a safety net (i.e. parents) and how reliable they are. Most people will also tell you that your long-term money should be in the stock market in the form of a balanced portfolio of index funds. But I won't tell you what to do since you need to look at your own options and decide for yourself what makes sense for you. You're off to a great start if you're thinking about this at your age and I'd encourage you to take that interest further and look into educating yourself on the investments options and funds that are available to you and decide on a financial plan. Involving your parents in that is sensible, not in the least because your post-high school plans will be the most important variable in said plan. To recap my first point and answer your main question, if you've decided that you want to invest and you've established a specific budget, the size of that investment budget should not factor into what you invest it in. 1 - For the record: penny stocks are not an investment. They're an expensive form of gambling. |
Principal 401(k) managed fund fees, wow. What can I do? | In my opinion, the fee is criminal. There are ETFs available to the public that have expenses as low as .05%. The index fund VIIIX an institution level fund available to large 401(k) plans charges .02%. I'll pay a total of under 1% over the next 50 years, Consider that at retirement, the safe withdrawal rate has been thought to be 4%, and today this is considered risky, perhaps too high. Do you think it's fair, in any sense of the word to lose 30% of that withdrawal? Another angle for you - In my working years, I spent most of those years at either the 25% or 28% federal bracket taxable income. I should spend my retirement at 15% marginal rate. On average, the purpose of my 401(k) was to save me (and my wife) 10-13% in tax from deposit to withdrawal. How long does it take for an annual 1.1% excess fee to negate that 10% savings? If one spends their working life paying that rate, they will lose half their wealth to those managing their money. PBS aired a show in its Frontline series titled The Retirement Gamble, it offers a sobering look at how such fees are a killer to your wealth. |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | First you should maintain a monthly expense and find out the burn rate. There would be certain expenses that are annual but mandatory [School fees, Insurance Premium, Property Taxes, etc]. So the ideal emergency fund depending on your industry should be 3 month to 6 months plus your mandatory yearly payments, more so if they come together. For example Most of my annual payments come out in May and I bank on the Bonus payout in April to cater to this spike in expense. So if I were to lose a job in March, my emergency funds would be sufficient for routine expenses, if i don't provision for additional funds Second you need to also figure out the reduced rate of monthly burn and ideally the emergency funds should be for 3 months of normal burn and 6 months of reduced burn. |
Why is the number of issued shares less than the number of outstanding shares | I have been asking myself a similar question about the financial statements of Weyerhaeuser. In response to Dheer's comment, whilst treasury shares are treated as a negative, it is issued shares less treasury shares (the negative) which gives the outstanding shares. So the original query remains unanswered. I've searched several sources and all state that outstanding shares will never be greater than issued shares. I've realized that the shares referred to are those authorized followed by those issued and outstanding (current year and prior year respectively) i.e. the shares that are both issued and outstanding as they must be issued in order to be outstanding This is supported in the example of Weyerhaeuser as there was a large increase in shares during Q1 2016 as a result of their merger with Plum Creek. Shares issued and outstanding are 510 million and 759 million respectively. |
What percent of my salary should I save? | What percent of my salary should I save? is tightly coupled with its companion, What size “nest egg” should my husband and I have, and by what age? Interestingly, Mr.Christer's answer, 10%, is the number that plugs into the equation that I reference. Jay's 25X rule is part of this. We start with the assumption that one's required income at retirement will be 80% of their pre-retirement income. That's high by some observations, low by others. A quick look at the expenses that go away in retirement - The above can total 35-40% It would be great if it ended there, but there are costs that go up. The above extra spending is tough to nail down, after all, you knew what you spent, and what's going away, but the new items? Crapshoot. (For non-native speakers - this refers to a game with dice, meaning a random event) Again, referencing Mr Christer's answer "financial planners whom you could pay to give you a very accurate number," I'm going to disagree with that soundbyte. Consider, when retirement is 30 years away, you don't know much If I can offer an analogy. I once had the pleasure of hearing Jim Lovell (The astronaut played by Tom Hanks in Apollo 13) give a speech. He said that for the first 99% of the trip to the moon, they simply aimed ahead of their target, never directly at the moon. In this manner, I suggest that with so many variables, accuracy is impossible, it's a moving target. Start young, take the 10% MrC offered, and keep saving. Every few years, stop and see if you are on target, if not, bump the number a bit. Better to turn 50 and find that after a good decade you've reached your number and can drop your savings to a minimum, perhaps just to capture a 401(k) match, than to turn 50 and realize you've undersaved and need to bump to an unsustainable level. Imagine planning ahead in 1999. You've seen 2 great decades of returns, and even realizing that 18%/yr couldn't continue, you plan for a below average 7%, this would double your 1999 balance in 10 years. Instead you saw zero return. For a decade. In sum, when each variable has an accuracy of +/-50% you are not going to combine them all and get a number with even 10% accuracy (as if MrC were wrong, but the pro would tell you 11% is right for you?). This is as absurd as packaging up a bunch of C rated debt, and thinking that enough of this paper would yield a final product that was AAA. |
What options do I have at 26 years old, with 1.2 million USD? | Something not in answers so far: define your goals. What is important to you? My goals, if I were in your shoes, would include a debt-free home, passive (investment) income so I would not have to work, and have health insurance covered. I could think of many more details, and already have, but you get the idea. To help determine which investment information to learn first, consider how much risk you can tolerate. I know that's vague at this point, but if you're looking for safe investments first, you could learn about mutual funds, and then index funds specifically. At the risky extreme, you could learn about stock options, but I would not recommend such risk. |
Confused about google portfolio chart | You bought 1 share of Google at $67.05 while it has a current trading price of $1204.11. Now, if you bought a widget for under $70 and it currently sells for over $1200 that is quite the increase, no? Be careful of what prices you enter into a portfolio tool as some people may be able to use options to have a strike price different than the current trading price by a sizable difference. Take the gain of $1122.06 on an initial cost of $82.05 for seeing where the 1367% is coming. User error on the portfolio will lead to misleading statistics I think as you meant to put in something else, right? |
Relative Strength Index: Yahoo vs Google Finance | Look at the 'as of'. Google's as of is 11:27 whil Yahoo's is 11:19. Given the shape of the Google curve, it looks to me that Yahoo's may well drop that much in the next 8 minutes. In fact, looking at it now, Yahoo's algorithm showed it as about 30 at 11:24, before going back up again some. It may not have been identical to Google's, but it was certainly close. |
Is there a term that better describes a compound annual growth rate (CAGR) when it is negative? | Same question had popped up in our office,and we got an answer from one of the senior colleague. He said that we can call it CARC (Compounded Annual Rate of Change). |
Why do cash back credit cards give a higher rate for dining and gasoline purchases? | I am not sure but probably it depends upon the cut the credit card company receives from the merchant. For Hotels such as dining etc. the cut could be more. Again, periodically, many merchants join with the card company to launch promotions. It could be part of such promotions. Apart from class of merchants, these points also differ on class of cards e.g a premium card will earn more rewards than a simple classic card. |
Is there a widely recognized bond index? | The iShares Barclays Aggregate Bond - ticker AGG, is a ETF that may fit the bill for you. It's an intermediate term fund with annual expenses of .20%. It "seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Barclays Capital U.S. Aggregate Bond Index" |
Why would a long-term investor ever chose a Mutual Fund over an ETF? | http://www.efficientfrontier.com/ef/104/stupid.htm would have some data though a bit old about open-end funds vs an ETF that would be one point. Secondly, do you know that the Math on your ETF will always work out to whole numbers of shares or do you plan on using brokers that would allow fractional shares easily? This is a factor as $3,000 of an open-end fund will automatically go into fractional shares that isn't necessarily the case of an ETF where you have to specify a number of shares when you purchase as well as consider are you doing a market or limit order? These are a couple of things to keep in mind here. Lastly, what if the broker you use charges account maintenance fees for your account? In buying the mutual fund from the fund company directly, there may be a lower likelihood of having such fees. I don't know of any way to buy shares in the ETF directly without using a broker. |
What options do I have at 26 years old, with 1.2 million USD? | That's what I would do; 1.2 million dollars is a lot of money, but it doesn't make you retired for the rest of your life: There is a big crisis coming soon (my personal prediction) in the next 10-15 years, and when this happens: government will hold your money if you leave them in the bank (allowing you to use just part of it; you will have to prove the reason you need it), government will pass bills to make it very hard to close your investment positions, and government will pass new laws to create new taxes for people with a lot of money (you). To have SOME level of security I would separate my investment in the following: 20% I would buy gold certificates and the real thing (I would put the gold in a safe(s)). 20% I would put in bitcoin (you would have to really study this if you are new to crypto currency in order to be safe). 40% I would invest in regular finance products (bonds, stocks and options, FX). 20% I would keep in the bank for life expenses, specially if you don't want work for money any more. 20% I would invest in startup companies exchanging high risk hoping for a great return. Those percentages might change a little depending how good/confident you become after investing, knowing about business, etc... |
As a 22-year-old, how risky should I be with my 401(k) investments? | Current evidence is that, after you subtract their commission and the additional trading costs, actively managed funds average no better than index funds, maybe not as well. You can afford to take more risks at your age, assuming that it will be a long time before you need these funds -- but I would suggest that means putting a high percentage of your investments in small-cap and large-cap stock indexes. I'd suggest 10% in bonds, maybe more, just because maintaining that balance automatically encourages buy-low-sell-high as the market cycles. As you get older and closer to needing a large chunk of the money (for a house, or after retirement), you would move progressively more of that to other categories such as bonds to help safeguard your earnings. Some folks will say this an overly conservative approach. On the other hand, it requires almost zero effort and has netted me an average 10% return (or so claims Quicken) over the past two decades, and that average includes the dot-bomb and the great recession. Past results are not a guarantee of future performance, of course, but the point is that it can work quite well enough. |
How to handle taxes related to affiliate marketing? | Is it right that I request form W-9 or form W-8BEN (for non U.S. citizens) from the affiliate users before sending them payments? Not just OK. Required. I know that I have to send form 1099, but I don't know where does this form should go to. Should I send it to the IRS or the affiliate user or both? Both. There's also form 1096 that you need to send to the IRS. Read the instructions. Should I send form 1099 once a year or each time I make a payment to the affiliate? Once a year. Read the instructions. Do I have to send form 1099 when the money earned by the affiliate hit a certain threshold or I have to send it anyway? $600 or more requires the form, but you can send for any amount. Read the instructions. Is there any other forms or documents to request from or send to the affiliate user or the IRS? There may be additional forms. Especially if the recipient is a foreign person and you withhold taxes. Talk to your tax adviser. |
Do market shares exhaust? | Stock trades are always between real buyers and real sellers. In thinly-traded small stocks, for example, you may not always be able to find a buyer when you want to sell. For most public companies, there is enough volume that individual investors can just about always fill their market orders. |
Questions about government bonds that have already matured | I am assuming that you are talking about US Savings Bonds: Here is a page that talks about maturity dates of US Savings bonds. If They aren'tSavings bonds but are another type ofUS Government Bond Assuming they are Savings bonds, here is information regarding redeeming of bonds. How do I redeem my EE/E Bonds? Electronic bonds: Log in to Treasury Direct and follow the directions there. The cash amount can be credited to your checking or savings account within one business day of the redemption date. Paper bonds You can cash paper EE/E Bonds at many local financial institutions. We don't keep a list of banks that redeem bonds, so check with banks in your area. What will I need to redeem a paper bond? Before taking in the bonds to redeem them, it's usually a good idea to check with the financial institution to find out what identification and other documents you'll need. When you present your paper bonds, you'll be asked to show your identity. You can do this by being a customer with an active account open for at least 6 months at the financial institution that will be paying the bonds, or presenting acceptable identification such as a valid driver's license if the >redemption value of the bonds is less than $1,000. If you are not listed as the owner or co-owner on the bond, you'll have to show that you >are entitled to cash in the bond. The treasury direct website also discusses converting bonds, rules regarding using them for education, how often they are credited with interest |
Why do people buy insurance even if they have the means to overcome the loss? | Ignoring that liability car insurance is usually a state mandated requirement and that all banks require full coverage, there are quite a few reasons to buy it. No matter how much money you have, you can't really guarantee that you can recover financially from an accident. Yes, you can buy a new car. But what happens if you are sued because the other driver died or is now in a long term coma? The legal costs alone would financially bury most people. It's even worse if you are rich. Let's say someone rear ended you. If you had no insurance (again ignoring the legality here), you can bet their attorney would take a look at your considerable financial assets and do whatever it took to get as much of that as possible. The legal fees alone of defending yourself at trial would likely far outstrip everything else. And that's just one little situation. |
Company asking for card details to refund over email | A bona-fide company never needs your credit card details, certainly not your 3-digit-on-back-of-card #, to issue a refund. On an older charge, they might have to work with their merchant provider. But they should be able to do it within the credit card handling system, and in fact are required to. Asking for details via email doesn't pass the "sniff test" either. To get a credit card merchant account, a company needs to go through a security assessment process called PCI-DSS. Security gets drummed into you pretty good. Of course they could be using one of the dumbed-down services like Square, but those services make refunds ridiculously easy. How did you come to be corresponding on this email address? Did they initially contact you? Did you find it on a third party website? Some of those are fraudulent and many others, like Yelp, it's very easy to insert false contact information for a business. Consumer forums, even moreso. You might take another swing at finding a proper contact for the company. Stop asking for a cheque. That also circumvents the credit card system. And obviously a scammer won't send a check... at least not one you'd want! If all else fails: call your bank and tell them you want to do a chargeback on that transaction. This is where the bank intervenes to reverse the charge. It's rather straightforward (especially if the merchant has agreed in principle to a refund) but requires some paperwork or e-paperwork. Don't chargeback lightly. Don't use it casually or out of laziness or unwillingness to speak with the merchant, e.g. to cancel an order. The bank charges the merchant a $20 or larger investigation fee, separate from the refund. Each chargeback is also a "strike"; too many "strikes" and the merchant is barred from taking credit cards. It's serious business. As a merchant, I would never send a cheque to an angry customer. Because if I did, they'd cash the cheque and still do a chargeback, so then I'd be out the money twice, plus the investigation fee to boot. |
In double entry book-keeping, how should I record writing of a check? | I'm no accounting expert, but I've never heard of anyone using a separate account to track outstanding checks. Instead, the software I use (GnuCash) uses a "reconciled" flag on each transaction. This has 3 states: n: new transaction (the bank doesn't know about it yet), c: cleared transaction (the bank deducted the money), and y: reconciled transaction (the transaction has appeared on a bank statement). The account status line includes a Cleared balance (which should be how much is in your bank account right now), a Reconciled balance (which is how much your last bank statement said you had), and a Present balance (which is how much you'll have after your outstanding checks clear). I believe most accounting packages have a similar feature. |
Does doing your “research”/“homework” on stocks make any sense? | The markets are not as information efficient as some might have you believe. But on the contrary, looking up what the aggregate professional analysts have said is also part of "doing your homework" |
Is the stock market a zero-sum game? | While this seems overall a macroeconomics question and not really personal finance, let me give it a shot: The question of why corporations form in a free or efficient market is why Ronald Coase received the 1991 Nobel Prize in Economics, for his work developing the theory of the firm Corporations organize when there are transaction costs in the free market; corporations form when it is in fact more efficient for a corporation to exist than a number of small producers contracting with one another. To the extent that corporations add efficiency to a total market, they are not "zero sum" at all; the net production is increased over what would exist in a market of sole proprietors who would have costs (such as researching the trust levels in counterparts, regulatory compliance, etc) that they cannot bear to engage in the same level of transactions. |
Why does Yahoo Finance's data for a Vanguard fund's dividend per share not match the info from Vanguard? | http://finance.yahoo.com/q/hp?s=EDV+Historical+Prices shows this which matches Vanguard: Mar 24, 2014 0.769 Dividend Your download link doesn't specify dates which makes me wonder if it is a cumulative distribution or something else as one can wonder how did you ensure that the URL is specifying to list only the most recent distribution and not something else. For example, try this URL which specifies date information in the a,b,c,d,e,f parameters: http://real-chart.finance.yahoo.com/table.csv?s=EDV&a=00&b=29&c=2014&d=05&e=16&f=2014&g=v&ignore=.csv |
Super-generic mutual fund type | Congrats on having such a nice emergency fund. That's pretty substantial. I don't want to be the one to suggest the One Investment To Rule Them All because I might be wrong. :) I'd investigate other avenues for investment. Here are a few (in no particular order): My two cents but I think you're wise to be wary of investing in US equities now. Hedging (both with your passive investments and with another source of income) is something you can afford to do. (But to answer your question, there are indexes that are broader than the S&P 500. The Wilshire 5000 index has all of them, for example.) |
In the US, does getting a loan with a cosigner, help your credit rating? | It all comes down to how the loan itself is structured and reported - the exact details of how they run the loan paperwork, and how/if they report the activity on the loan to one of the credit bureaus (and which one they report to). It can go generally one of three ways: A) The loan company reports the status to a credit reporting agency on behalf of both the initiating borrower and the cosigner. In this scenario, both individuals get a new account on their credit report. Initially this will generally drop related credit scores somewhat (it's a "hard pull", new account with zero history, and increased debt), but over time this can have a positive effect on both people's credit rating. This is the typical scenario one might logically expect to be the norm, and it effects both parties credit just as if they were a sole signor for the loan. And as always, if the loan is not paid properly it will negatively effect both people's credit, and the owner of the loan can choose to come after either or both parties in whatever order they want. B) The loan company just runs the loan with one person, and only reports to a credit agency on one of you (probably the co-signor), leaving the other as just a backup. If you aren't paying close attention they may even arrange it where the initial party wanting to take the loan isn't even on most of the paperwork. This let the person trying to run the loan get something accepted that might not have been otherwise, or save some time, or was just an error. In this case it will have no effect on Person A's credit. We've had a number of question like this, and this isn't really a rare occurrence. Never assume people selling you things are necessarily accurate or honest - always verify. C) The loan company just doesn't report the loan at all to a credit agency, or does so incorrectly. They are under no obligation to report to credit agencies, it's strictly up to them. If you don't pay then they can report it as something "in collections". This isn't the typical way of doing business for most places, but some businesses still operate this way, including some places that advertise how doing business with them (paying them grossly inflated interest rates) will "help build your credit". Most advertising fraud goes unpunished. Note: Under all of the above scenarios, the loan can only effect the credit rating attached to the bureau it is reported to. If the loan is reported to Equifax, it will not help you with a TransUnion or Experian rating at all. Some loans report to multiple credit bureaus, but many don't bother, and credit bureaus don't automatically copy each other. It's important to remember that there isn't so much a thing as a singular "consumer credit rating", as there are "consumer credit ratings" - 3 of them, for most purposes, and they can vary widely depending on your reported histories. Also, if it is only a short-term loan of 3-6 months then it is unlikely to have a powerful impact on anyone's credit rating. Credit scores are formulas calibrated to care about long-term behavior, where 3 years of perfect credit history is still considered a short period of time and you will be deemed to have a significant risk of default without more data. So don't expect to qualify for a prime-rate mortgage because of a car loan that was paid off in a few months; it might be enough to give you a score if you don't have one, but don't expect much more. As always, please remember that taking out a loan just to improve credit is almost always a terrible idea. Unless you have a very specific reason with a carefully researched and well-vetted plan that means that it's very important you build credit in this specific way, you should generally focus on establishing credit in ways that don't actually cost you any money at all. Look for no fee credit cards that you pay in full each month, even if you have to start with credit-building secured card plans, and switch to cash-value no-fee rewards cards for a 1-3% if you operate your financial life in a way that this doesn't end up manipulating your purchasing decisions to cost you money. Words to the wise: "Don't let the credit score tail wag the personal financial dog!" |
Money transfer to the U.K | I've been using xetrade for quite awhile, also used nzforex (associated with ozforex / canadian forex, probably ukforex as well) -- xetrade has slightly better rates than I've gotten at nzforex, so I've been using them primarily. That said, I am in the process of opening an account at CurrencyFair, because it appears that I'll be able to exchange money at better rates there. (XETrade charges me 1.5% off the rate you see at xe.com -- which is the FX conversion fee I believe -- there are no fees other than the spread charged). I think the reason CurrencyFair may be able to do better is because the exchange is based on the peer-to-peer trade, so you could theoretically get a deal better than xe.com. I'll update my answer here after I've been using CurrencyFair for awhile, and let you know. They theoretically guarantee no worse than 0.5% though (+ $4.00 / withdrawal) -- so I think it'll save me quite a bit of money. |
How to compute for losses in an upside down trade-in of a financed car? | Numbers: Estimate you still owe around 37000 (48500 - 4750, 5% interest, 618 per month payment). Initial price, down payment, payments made - none of these mean anything. Ask your lender, "What is the payoff of the current loan?" Next, sell or trade the current vehicle. Compare to the amount owed. Any shortfall has to be repaid, out of pocket, or in some cases added to the price of the new car and included in the principal of the new loan. You cannot calculate how much you still owe the way you have, because it totally ignores interest. Advice on practicality: Don't do this. You will be upside down even worse on the new car from the instant you drive off the lot. Sell the current vehicle, find a way to pay the difference - one that doesn't involve financing. Cut your losses on the upside down vehicle. Then purchase a new vehicle. I'm in the "Pay cash for gently used" school, YMMV. Another option is to go to your bank. Refinance your car now to get a lower interest rate. Pay as much of the principal as you can. Keep that car until it is paid off. Then you will not be upside down. If you're asking how to use the estimator on the webpage. Put the payoff in the downpayment as a negative and the trade in value in the trade in spot. Expect the payment to go up significantly. Another opinion that might be practical advice. Nothing we say here will convince your financially responsible spouse that this is a good idea. |
Should I get cash from credit card at 0% for 8 months and put it on loans? | On the face, this appears a sound method to manage long run cumulative interest, but there are some caveats. Maxing out credit cards will destroy your credit rating. You will receive no more reasonable offers for credit, only shady ones. Though your credit rating will rise the moment you bring the balance back down to 10%, even with high income, it's easy to overshoot the 8 months, and then a high interest rate kicks in because of the low credit rating. Further, maxing out credit cards will encourage credit card lenders to begin cutting limits and at worse demand early payment. Now, after month 6 hits, your financial payment obligations skyrocket. A sudden jolt is never easy to manage. This will increase risk of missing a payment, a disaster for such hair line financing. In short, the probability of decimating your financial structure is high for very little benefit. If you are confident that you can pay off $4,000 in 8 months then simply apply those payments to the student loan directly, cutting out the middle man. Your creditors will be pleased to see your total liabilities fall at a high rate while your utilization remains small, encouraging them to offer you more credit and lower rates. The ideal credit card utilization rate is 10%, so it would be wise to use that portion to repay the student loans. Building up credit will allow you to use the credit as an auxiliary cushion when financial disaster strikes. Keeping an excellent credit rating will allow you to finance the largest home possible for your money. Every percentage point of mortgage interest can mean the difference between a million USD home and a $750,000 one. |
What does inflation mean to me? | Inflation as defined in the general, has many impacts at a personal level. For example, you say that the reduction in the price of oil has no impact on you. That's absolutely not true, unless you're a hermit living off of the land. Every box or can or jar of food you buy off the shelf of the grocery store has the price of oil baked into it, because it had to get there somehow. High fuel costs for trucks mean increased costs to put food on shelves, which mean increased prices for that food. Even tobacco prices can affect you, because they affect what other people are spending. Demand is always a significant factor in prices, particularly retail prices, and if people are spending more money on tobacco, they're probably spending less on other things - either buying less snacks, for example, or buying cheaper brands of those snacks. So the price of Doritos may drop a bit (or not rise), for example. General inflation also tends to drive raises, particularly in industries with relatively small performance ties to raises. If inflation is 3%, wages need to raise 3% or so in order to keep up, on average; even if your personal cost-of-living went up 0%, or 5%, or 10%, the default wage inflation will be closer to that of the national average. Any raise less than national average is effectively a pay cut (which is one reason why inflation is needed in a healthy economy). So your company probably has a cost-of-living raise everyone gets that's a bit less than inflation, and then good performers get a bump up to a bit more than inflation. You can read more on this topic for a more in-depth explanation. Finally, inflation rates tend to be major factors in stock market movement. Inflation that is too high, or too low, can lead to higher volatility; inflation that is "right" can lead to higher stability. An economy that has consistently "right" inflation (around 2-3% typically) will tend to have more stable stock market in general, and thus more reliable returns from that market. There are many other factors that lead to stock markets rising and falling, but inflation is one very relevant one, particularly if it's not in the "right" zone. |
Where can I find accurate historical distribution data for mutual funds? | In the case of a specific fund, I'd be tempted to get get an annual report that would disclose distribution data going back up to 5 years. The "View prospectus and reports" would be the link on the site to note and use that to get to the PDF of the report to get the data that was filed with the SEC as that is likely what matters more here. Don't forget that mutual fund distributions can be a mix of dividends, bond interest, short-term and long-term capital gains and thus aren't quite as simple as stock dividends to consider here. |
Where can I find all public companies' information? | Moody's is now Mergent Online. It's no longer being printed, and must be accessed digitally. In order to browse the database, check with your local public library or university to see if you can get access. (A University will probably require you to visit for access). Another good tool is Value Line Reports. They are printed information sheets on public companies that are updated regularly, and are convenient for browsing and for comparing securities. Again, check your local libraries. A lot of the public information you may be looking for can be found on Yahoo Finance, for free, from home. Yahoo finance, will give financial information, ratios, news, filings, analysis, all in one place. |
Formula to determine readiness to retire based on age, networth and annual expense | The standard interpretation of "can I afford to retire" is "can I live on just the income from my savings, never touching the principal." To estimate that, you need to make reasonable guesses about the return you expect, the rate of inflation, your real costs -- remember to allow for medical emergencies, major house repairs, and the like when determining you average needs, not to mention taxes if this isn't all tax-sheltered! -- and then build in a safety factor. You said liquid assets, and that's correct; you don't want to be forced into a reverse mortgage by anything short of a disaster. An old rule of thumb was that -- properly invested -- you could expect about 4% real return after subtracting inflation. That may or may not still be correct, but it makes an easy starting point. If we take your number of $50k/year (today's dollars) and assume you've included all the tax and contingency amounts, that means your nest egg needs to be 50k/.04, or $1,250,000. (I'm figuring I need at least $1.8M liquid assets to retire.) The $1.5M you gave would, under this set of assumptions, allow drawing up to $60k/year, which gives you some hope that your holdings would mot just maintain themselves but grow, giving you additional buffer against emergencies later. Having said that: some folks have suggested that, given what the market is currently doing, it might be wiser to assume smaller average returns. Or you may make different assumptions about inflation, or want a larger emergency buffer. That's all judgement calls, based on your best guesses about the economy in general and your investments in particular. A good financial advisor (not a broker) will have access to better tools for exploring this, using techniques like monte-carlo simulation to try to estimate both best and worst cases, and can thus give you a somewhat more reliable answer than this rule-of-thumb approach. But that's still probabilities, not promises. Another way to test it: Find out how much an insurance company would want as the price of an open-ended inflation-adjusted $50k-a-year annuity. Making these estimates is their business; if they can't make a good guess, nobody can. Admittedly they're also factoring the odds of your dying early into the mix, but on the other hand they're also planning on making a profit from the deal, so their number might be a reasonable one for "self-insuring" too. Or might not. Or you might decide that it's worth buying an annuity for part or all of this, paying them to absorb the risk. In the end, "ya pays yer money and takes yer cherce." |
Is there any instance where less leverage will get you a better return on a rental property? | Leverage means you can make more investments with the same amount of money. In the case of rental properties, it means you can own more properties and generate more rents. You exchange a higher cost of doing business (higher interest fees) and a higher risk of total failure, for a larger number of rents and thus higher potential earnings. As with any investment advice, whenever someone tells you "Do X and you are guaranteed to make more money", unless you are a printer of money that is not entirely true. In this case, taking more leverage exposes you to more risk, while giving you more potential gain. That risk is not only on the selling front; in fact, for most small property owners, the risk is primarily that you will have periods of time of higher expense or lower income. These can come in several ways: If you weather these and similar problems, then you will stand to make more money using higher leverage, assuming you make more money from each property than your additional interest costs. As long as you're making any money on your properties this is likely (as interest rates are very low right now), but making any money at all (above and beyond the sale value) may be challenging early on. These sorts of risks are magnified for your first few years, until you've built up a significant reserve to keep your business afloat in downturns. And of course, any money in a reserve is money you're not leveraging for new property acquisition - the very same trade-off. And while you may be able to sell one or more properties if you did end up in a temporarily bad situation, you also may run into 2008 again and be unable to do so. |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | The risk is that you will owe the bank the principal amount of the mortgage. Based on your question it would be foolish for you to sign. Anyone who describes a mortgage as "something" obviously has no idea what they are doing and should never sign a mortgage which is a promise to pay hundreds of thousands of dollars. You would be doubly foolish to sign the mortgage because if you are guaranteeing the loan, you own nothing. So, for example, if your friend sold the house, pocketed the money, then left the country you would owe the full amount of the mortgage. Since you are not on the deed there is no way you can prevent this from happening. He does not need your approval to sell the house. So, essentially what your "friend" is doing is asking you to assume all the risk of the mortgage with none of the benefits, since he gets the house, not you. If a "girlfriend" is involved, that just increases the risk you will have a problem. Also, although it is not clear, it appears this is a second house for him. If so, that disqualifies him from any mortgage assistance or relief, so the risk is even higher. Basically, it would foolish in the extreme to co-sign the loan. |
Hypothetical: can taxes ever cause a net loss on otherwise-profitable stocks? | This was the day traders dilemma. You can, on paper, make money doing such trades. But because you do not hold the security for at least a year, the earnings are subject to short term capital gains tax unless these trades are done inside a sheltered account like a traditional IRA. There are other considerations as well: wash sale rules and number of days to settle. In short, the glory days of rags to riches by day trading are long gone, if they were ever here in the first place. Edit: the site will not allow me to add a comment, so I am putting my response here: Possibly, yes. One big 'gotcha' is that your broker reports the proceeds from your sales, but does not report your outflows from your buys. Then there is the risk you take by the broker refusing to sell the security until the transaction settles. Not to mention wash sale rules. You are trying to win at the 'buy low, sell high' game. But you have a 25% chance, at best, of winning at that game. Can you pick the low? Maybe, but you have a 50% chance of being right. Then you have to pick the high. And again you have a 50% chance of doing that. 50% times 50% is 25%. Warren Buffet did not get rich that way. Buffet buys and holds. Don't be a speculator, be a 'buy and hold' investor. Buy securities, inside a sheltered account like a traditional IRA, that pay dividends then reinvest those dividends into the security you bought. Scottrade has a Flexible Reinvestment Program that lets you do this with no commission fees. |
For net worth, should I value physical property at my cost to replace it, or the amount I could get for selling it? | You're asking for opinions here, because it's a matter of how you look at it. I'll give it a shot anyway. For insurance purposes - there's a clear answer: you insure based on how much it would cost you to replace it. For some reason, you're considering as a possibility negotiating with the insurance company about that, but I've never heard of insuring something at a "possible sales value" unless you're talking about a one of a kind thing, or a particularly valuable artifact: art, jewelry, etc. That it would be appraised and insured based on the appraised value. Besides, most of the stuff usually loses value once you bought it, not gains, so insuring per replacement costs makes more sense because it costs more. As to your estimations of your own net worth to yourself - its up to you. I would say that something only worth what people would pay for it. So if you have a car that you just bought brand new, replacing it would cost you $X, but you can only sell it for $X-10%, because it depreciated by at least 10% once you've driven it off the dealer's lot. So I would estimate your worth as $X-10% based on the car, not $X, because although you spent $X on it - you can never recover it if you sell it, so you can't claim to have it as your "net worth". |
Is being a landlord a good idea? Is there a lot of risk? | Buying a property and renting it out can be a good investment if it matches your long term goals. Buying an investment property is a long term investment. A large chunk of your money will be tied up with the property and difficult to access. If you put your money into dividend producing stocks you can always sell the stock and have your money back in a matter of days this is not so with a property. (But you can always do a Home equity line of credit (HELOC)) I would also like to point out landlording is not a passive endeavor as JohnFx stated dealing with a tenant can be a lot of work. This is not work you necessarily have to deal with, it is possible to contract with a property management company that would place tenants and take care of those late night calls. Property management companies often charge 10% of your monthly rent and will eat a large portion of your profits. It could be worth the time and headache of tenant relations. You should build property management into you expenses anyway in case you decide to go that route in the future. There are good things about owning an investment property. It can produce returns in a couple of ways. If you choose this route it can be lucrative but be sure to do your homework. You must know the area you are investing very well. Know the rent, and vacancy rates for Single family homes, look at multifamily homes as a way of mitigating risk(if one unit is vacant the others are still paying). |
Is Real Estate ever a BAD investment? If so, when? | As Yishani points out, you always have to do due diligence in buying a house. As I mentioned in this earlier post I'd highly recommend reading this book on buying a house associated with the Wall Street Journal - it clearly describes the benefits and challenges of owning a house. One key takeaway I had was - on average houses have a "rate of return" on par with treasury bills. Its best to buy a house if you want to live in a house, not as thinking about it as a "great investment". And its certainly worth the 4-6 hours it takes to read the book cover to cover. |
Will my current employer find out if I have a sole proprietarship/corporation? | Some governments offer business information search for corporations in their jurisdiction. The search results may show the director information for the company. If this information is made publicly available, keep in mind there are websites that make money from indexing publicly available information to show in Google search results. I don't mean to scare you as this is a likely a slim possibility. It really depends on the privacy practices in place at the jurisdiction you're in. But do keep in mind if you're planning on doing business on the side for a few years policies may change. I would call Service Ontario (or whichever province you're incorporating in) or Corporations Canada if federally incorporating and ask them if they offer a business search service and exactly what information they make public. You might be able to reach a Privacy Officer and find out what exactly their policy is. |
What is a good rental yield? | I would just like to point out that the actual return should be compared to your down payment, not the property price. After all, you didn't pay $400K for that property, right? You probably paid only 20%, so you're collecting $20K/year on a $80K investment, which works out to 25%. Even if you're only breaking even, your equity is still growing, thanks to your tenants. If you're also living in one of the units, then you're saving rent, which frees up cash flow. Your increased savings, combined with the contributions of your tenants will put you on a very fast track. In a few years you should have enough to buy a second property. :) |
Why liquidity implies tight spread and low slippage | Theoretically, it's a question of rate of return. If a desired or acceptable rate of return for market makers' capital is X, and X is determined by the product of margin & turnover then higher turnover means lower margin for a constant X. Margin, in the case of trading, is the bid/ask spread, and turnover, in the case of trading, is volume. Empirically, it has been noted in the last markets still offering such wide-varying evidence, equity options: http://faculty.baruch.cuny.edu/lwu/890/mayhew_jf2002.pdf |
Is Amazon's offer of a $50 gift card a scam? | The most likely reason for this card is that Amazon has an arrangement with the issuer (I believe that that used to be Chase; may have changed since). Such an arrangement may allow Amazon to take the risk of chargebacks, etc. in return for the issuer handling the mechanics of billing. This is advantageous for Amazon, as otherwise they are subject to both their own procedures and those of the issuer. Amazon would rather take the entire risk than share it with someone else who charges for the privilege. Fees for processing credit cards can be as much as 5%, although 1-2% is more typical. Due to its size, Amazon may already have negotiated fees lower than 1%. But even so, any savings they make are to their benefit. Further, now they can get a share of the fees charged to other merchants. For example, if you buy a book from Barnes & Noble (an Amazon competitor) with the Amazon card, then Amazon gets some money in return, say 1% of the transaction. If the price is the same on Amazon and at Barnes & Noble, you can actually save money with the Amazon card. Amazon gives more "cash back" in the form of gift card balance for an Amazon purchase. So the card may mean that you buy from Amazon when you might otherwise have chosen someone else. If we again assume a 20% margin, they only need $200 of additional purchases to make $40 of profit. Someone who buys $1000 additional on the Amazon site makes them $200 of profit. They're over $160 ahead. Also note that Amazon is only giving you a gift card, which you have to use on Amazon. And it's difficult to spend exactly $50. As a practical matter, most people will buy, say, $60, with $10 of that money. So they sell you $48 of merchandise (their cost, assuming a 20% margin) for $10. They lost $38 on that transaction, but they've lured you into a long term relationship that may return more than that. And they didn't lose the $50 you gained. They only lost $38. Think about it as a marketing cost. Amazon is willing to pay $38 for a long term relationship with you. From their perspective, doing so in such a way that you come out $50 ahead (assuming you would have made the same purchases without this), is a win-win. Because once they have that relationship, they can leverage it to give them savings elsewhere. This is Amazon's approach in general. Originally all their products were drop shipped (from someone like Ingram Micro). They handled the web site and billing while the drop shipper handled inventory and shipping. Then Amazon added their own warehouses. Now they can do all that separately. This is just the same thing for buyers. Amazon manages all the risk of the transaction and thus gets all the profit. Because Amazon is managing the credit card risk, they have access to all the credit history. This helps them better determine if that sudden shipment of a $2000 camera to Thailand is a real transaction (you're a photographer who regularly vacations in Thailand) or a fake (you've never been to Thailand in your life and your phone is camera enough). That additional information may itself be worth enough to make the relationship profitable for Amazon. Amazon certainly gets something out of the relationship. You give them money. And you are likely to give them more money with the Amazon card than they would otherwise receive. But you get products in return. Is that a good deal? If you prefer having the products to the money, then yes. Others have suggested that it's the irresponsible credit card users that generate the real profit. I disagree. They generate more revenue in the short term, but then they overspend and declare bankruptcy. Then Amazon loses its money. Yes, they get more interest and fees in that case, but if they lose $1000, they needed to make $1000 in profit just to break even. It's safer to make the smaller short term profits with responsible customers who will continue to be customers for the long term. A steady profit of $100 or $200 a year is better than a one time profit of $500 followed by a loss of $1000 followed by nothing for ten years. Anyway, your question was if you should sign up for the card. If you are planning on doing a lot of shopping on Amazon, you might as well. It gives you cash back. If shopping on Amazon is inconvenient, then perhaps that outweighs the advantage of the card. The "cash back" is just Amazon money. You can't spend it anywhere but Amazon. If each transaction gives you a little bit of Amazon money, you have to keep going back to spend it. |
Where can I find all public companies' information? | Here are some approaches you may value: Wolfram Alpha This is a search engine with a difference. It literally is connected to thousands of searchable databases, including financial databases. http://www.wolframalpha.com/input/?i=list+of+public+companies+ Just keep clicking the "more" button until you have them all.You can also get great company specific information there: http://www.wolframalpha.com/input/?i=NYSE%3ADIS&lk=1&a=ClashPrefs_*Financial.NYSE%3ADIS- Just keep clicking the "more" button until you have them all.Then the company it'self will have great information for investors too: [http://thewaltdisneycompany.com/investors][3] (Just keep clicking the "more" button until you have them all.) Regards, Stephen |
Setting up auto-pay. Should I use my bank that holds mortage or my personal bank? | Depending on your bank you may receive an ACH discount for doing automatic withdrawals from a deposit account at that bank. Now, this depends on your bank and you need to do independent research on that topic. As far as dictating what your extra money goes towards each month (early payments, principal payments, interest payments) you need to discuss that with your bank. I'm sure it's not too difficult to find. In my experience most banks, so long as you didn't sign a contract on your mortgage where you're penalized for sending additional money, will apply extra money toward early payments, and not principal. I would suggest calling them. I know for my student loans I have to send a detailed list of my loans and in what order I want my extra payments toward each, otherwise it will be considered an early payment, or it will be spread evenly among them all. |
What is the difference between speculating and investing? | Speculation is when someone else makes an investment you don't like. The above is tongue in cheek, but is a serious answer. There are several attempts at separating the two, but they turn into moral judgements on the value of a pure "buy and hold" versus any other investment strategy (which is itself doubtful: is shorting an oil stock more "speculation" than buying and holding an alternative energy stock?). Some economists take the other route and just argue that we should remove the moral judgement and celebrate speculation as we celebrate investment. |
How to pay with cash when car shopping? | The very first time I bought a new car I wrote out a personal check for $5000 (this was a looong time ago!). And got a call from the sales person that he had called the bank and was told that I did not have that much money in my checking account! I explained that I had just that day transferred money from savings to checking. The sales person accepted that and there was never a problem after that. |
What would a stock be worth if dividends did not exist? [duplicate] | Unrealistic assumption, but I'll play along. Ultimately, dividends would exist because some innovative shareholder of some company, at some time, would desire income from their investment and could propose the idea of sharing the profit. Like-minded investors also desiring income could vote for dividends to come into existence — or, rather, vote for a board of directors that supports enactment of the idea. (In your fictitious world, shareholders do still control the corporation, right?) In this world, though, dividends wouldn't be called "dividends", a terrible name that's too "mathy" for the inhabitants of that world. Rather, they would institute a quarterly or annual shareholder profit share. Governments would enact legislation to approve of—nay, encourage such an innovation because it becomes a new source of recurring income they can tax. Alternatively, even if the idea of a cash dividend didn't occur to anybody in that world, investors would realize the stock price is depressed and could propose and vote for the board to institute share buybacks. The company repurchasing some portion of shares periodically would provide income to shareholders participating in the buyback. If the buyback were oversubscribed, they could structure it fairly (pro-rata participation, etc.) Alternatively, shareholders would pressure the board (or fire them and vote in a new board) to put the company up for sale and find a larger buyer, who would purchase the shares for cash. This can't scale forever, though, so the pressure will increase for solutions like #1 and #2. |
what is a mortgage gift exchange? | The issue is that the lender used two peoples income, debts, and credit history to loan both of you money to purchase a house. The only way to get a person off the loan, is to get a new loan via refinancing. The new loan will then be based on the income, debt, and credit history of one person. There is no paperwork you can sign, or the ex-spouse can sign, that will force the original lender to remove somebody from the loan. There is one way that a exchange of money between the two of you could work: The ex-spouse will have to sign paperwork to prove that it is not a loan that you will have to payback. I picked the number 20K for a reason. If the amount of the payment is above 14K they will have to document for the IRS that this is a gift, and the amount above 14K will be counted as part of their estate when they die. If the amount of the payment is less than 14K they don't even have to tell the IRS. If the ex-souse has remarried or you have remarried the multiple payments can be constructed to exceed the 14K limit. |
Stock market order execution | When you are placing an order with an online broker you should already know what exchange or exchanges that stock trades on. For example if you look up under Yahoo Finance: Notice how News Corp is traded both on the ASX and the Nasdaq. The difference is the shares traded on the ASX have the extension .AX, that is how you know the difference between them. When you are putting orders in with your online broker you will need to select the exchange you wish your order to go to (if your broker allows trading on multiple exchanges). So you should always know which exchange your order goes to. |
I'm 23 and was given $50k. What should I do? | I'll add 2 observations regarding current answers. Jack nailed it - a 401(k) match beats all. But choose the right flavor account. You are currently in the 15% bracket (i.e. your marginal tax rate, the rate paid on the last taxed $100, and next taxed $100.) You should focus on Roth. Roth 401(k) (and if any company match, that goes into a traditional pretax 401(k). But if they permit conversions to the Roth side, do it) You have a long time before retirement to earn your way into the next tax bracket, 25%. As your income rises, use the deductible IRA/ 401(k) to take out money pretax that would otherwise be taxed at 25%. One day, you'll be so far into the 25% bracket, you'll benefit by 100% traditional. But why waste the opportunity to deposit to Roth money that's taxed at just 15%? To clarify the above, this is the single rate table for 2015: For this discussion, I am talking taxable income, the line on the tax return designating this number. If that line is $37,450 or less, you are in the 15% bracket and I recommend Roth. Say it's $40,000. In hindsight on should put $2,550 in a pretax account (Traditional 401(k) or IRA) to bring it down to the $37,450. In other words, try to keep the 15% bracket full, but not push into 25%. Last, after enough raises, say you at $60,000 taxable. That, to me is "far into the 25% bracket." $20,000 or 1/3 of income into the 401(k) and IRA and you're still in the 25% bracket. One can plan to a point, and then use the IRA flavors to get it dead on in April of the following year. To Ben's point regarding paying off the Student Loan faster - A $33K income for a single person, about to have the new expense of rent, is not a huge income. I'll concede that there's a sleep factor, the long tern benefit of being debt free, and won't argue the long term market return vs the rate on the loan. But here we have the probability that OP is not investing at all. It may take $2000/yr to his 401(k) capture the match (my 401 had a dollar for dollar match up to first 6% of income). This $45K, after killing the card, may be his only source for the extra money to replace what he deposits to his 401(k). And also serve as his emergency fund along the way. |
Is there a Canadian credit card which shows holds? | As for PC Mastercard like stated by @nullability, VISA Desjardins list the "Pending Authorizations" almost instantly (the time it's take to get back home) in AccesD (Their Web portal for managing accounts). |
How does a online only bank protect itself against fraud? | I don't see why an online-only bank would need to do anything more against fraud than a bank that also has brick-and-mortars. In the contrary, they would need less (physical) security, as they don't have to protect cash, lock boxes, and other physical assets. All banks nowadays have an online business, so they all have the same online fraud risks, and they all need the same level of protection. |
Can I get my property taxes lowered? | There is no relationship between the government appraisal and the mortgage appraisal. The loan appraisal is done by a lender to determine if the property value is in agreement with the loan amount. The government appraisal is done to determine how much to charge you in taxes. They use the values of residences and commercial property to get their operating budget each year. They also set the rate to generate the amount of income money they need. If they cut all appraisals in half, they would just double the rate. In some jurisdictions the government appraises every year, in other places every three years. Some only when the property is sold. In some jurisdictions the maximum increase or decrease in government appraisal is set by law. But then they reset after the house is sold. That being said. Use this time to review the appraisal from the government. They may have facts wrong. They may think you have a pool, or more bedrooms or a garage, when you don't. Some jurisdictions use an automated process, others do a more detailed/individual process. If there was a mistake ten years ago with the description it will never get caught unless you complain. Check with the governemnt website for how to appeal. Some have windows of opportunity for an appeal. |
Wardrobe: To Update or Not? How-to without breaking the bank | If you budget for cloths and save up the money, you may be able to take advantage of sales when they are on. However only buy what you will use! You need to ask yourself what value you put on cloths compared to other things you can spend the money on. Also would you rather have money in the bank encase you need it rather than lots of cloths in the wardrobe? |
How to amend an amended return? | File a 2nd amended return that corrects the mistake I made on the 1st amended return This. Pay the $500 before April 27th and try to get it back later This. |
Buying my first car out of college | I've seen this approach to buying/funding cars described in a couple of different ways over the years. Random thoughts: |
Why do financial institutions charge so much to convert currency? | In my experience working at a currency exchange money service business in the US: Flat fees are the "because we can" fee on average. These can be waived on certain dollar values at some banks or MSBs, and sometimes can even be haggled. If you Google EURUSD, as an example, you also get something like $1.19 at 4pm, 9/18/2017. If you look at the actual conversion that you got, you may find your bank hit you with $1.30 or something close to convert from USD to Euro (in other words, you payed 10% more USD per Euro). And, if you sell your Euro directly back, you might find you only make $1.07. This spread is the real "fee" and covers a number of things including risk or liquidity. You'll see that currencies with more volatility or less liquidity have a much wider spread. Some businesses even go as far as to artificially widen the spread for speculators (see IQD, VND, INR, etc.). Typically if you see a 3% surcharge on international ATM or POS transactions, that's the carrier such as Visa or Mastercard taking their cut for processing. Interestingly enough, you also typically get the carrier-set exchange rate overseas when using your card. In other words, your bank has a cash EURUSD of $1.30 but the conversion you get at the ATM is Visa's rate, hence the Visa fee (but it's typically a nicer spread, or it's sometimes the international spot rate depending on the circumstances, due to the overhead of electronic transactions). You also have to consider the ATM charging you a separate fee for it's own operation. In essence, the fees exist to pad every player involved except you. Some cards do you a solid by advertising $0 foreign exchange fees. Unfortunately these cards only insulate you from the processing/flat fees and you may still fall prey to the fee "hidden" in the spread. In the grander scheme of things, currency exchange is a retail operation. They try to make money on every step that requires them to expend a resource. If you pay 10% on a money transaction, this differs actually very little from the mark-up you pay on your groceries, which varies from 3-5% on dry food, to 20% on alcohol such as wine. |
Is the writer of a call ever required to surrender dividends to the call option buyer? | The dividend goes to he who owns the stock when it goes ex-div. A buyer (the call buyer who exercises) will not exercise unless the stock plus dividend are in the money. Otherwise they'd be buying the stock at a premium. I like the scenario your friend doesn't. If I can find a high dividend stock and sell the call for a decent price, I may get a great return on a stock that's gone down 5% over a year's time. If it goes up and called away, that's fine too, it means a profit. |
Is Stock Trading legal for a student on F-1 Visa in USA? [duplicate] | As an F1 student, I have been investing (and occasionally buying and selling within few weeks) for several years, and I have never had problems (of course I report to IRS gains/losses every year at tax time). On the other hand, the officer in charge of foreign students at my school advised me to not run ads on a website and make a profit. So, it seems to me that investing is perfectly legit for a F1 student, as it's not considered a business activity. That's obviously my personal understanding, you may want to speak with an immigration attorney to be on the safe side. |
How risky is it to keep my emergency fund in stocks? | I do this very thing, but with asset allocation and risk parity in mind. I disagree with the cash or bust answers above, but many of the aforementioned facts are valuable and I don't mean to undermine them in anyway. That said, let's look at two examples: Option 1: All-in For the sake of argument let's say you had $100k invested in the SPY (S&P 500 ETF) in early 2007, and you kept it there until today. Your lowest balance would have been about $51k, and at this point the possibility of you losing your job was probably at a peak. Today you would be left with $170k assuming no withdrawal. Option 2: Risk Parity BUT if you balanced your investments with a risk parity approach, using negatively correlated asset classes you avoid this dilemma. If you had invested 50% in XLP (Consumer Staples Sector ETF) and 50% in TLT ( Long Term Treasury ETF) your investments low point would have been $88k, and your lowest annual return would be +0.69%. Today you would be left with $214k assuming no withdrawals. I chose option #2 and it hasn't failed me yet, even in 2016 so far the results are steady and reliably given the reward. My general opinion is simple: when you have money always grow it. Just be sure to cover your ass and prepare for rain. Backtesting for this was done at portfoliovisualizer.com, the one caveat to this approach is that inflation and a lack of international exposure are a risk here. |
Are index-tracking ETF popular in Japan? | The Japanese stock market offers a wide selection of popular ETFs tracking the various indices and sub-indices of the Tokyo Stock Exchange. See this page from the Japan Exchange Group site for a detailed listing of the ETFs being offered on the Tokyo exchange. As you have suggested, one would expect that Japanese investors would be reluctant to track the local market indices because of the relatively poor performance of the Japanese markets over the last couple of decades. However, this does not appear to be the case. In fact, there seems to be a heavy bias towards Tokyo indices as measured by the NAV/Market Cap of listed ETFs. The main Tokyo indices - the broad TOPIX and the large cap Nikkei - dominate investor choice. The big five ETFs tracking the Nikkei 225 have a total net asset value of 8.5Trillion Yen (72Billion USD), while the big four ETFs tracking the TOPIX have a total net asset value of 8.0Trillion Yen (68Billion USD). Compare this to the small net asset values of those Tokyo listed ETFs tracking the S&P500 or the EURO STOXX 50. For example, the largest S&P500 tracker is the Nikko Asset Management S&P500 ETF with net asset value of just 67Million USD and almost zero liquidity. If I remember my stereotypes correctly, it is the Japanese housewife that controls the household budget and investment decisions, and the Japanese housewife is famously conservative and patriotic with their investment choices. Japanese government bonds have yielded next to nothing for as long as I can remember, yet they remain the first choice amongst housewives. The 1.3% yield on a Nikkei 225 ETF looks positively generous by comparison and so will carry some temptations. |
What should I be aware of as a young investor? | If you are going to the frenzy of individual stock picking, like almost everyone initially, I suggest you to write your plan to paper. Like, I want an orthogonal set of assets and limit single investments to 10%. If with such limitations the percentage of brokerage fees rise to unbearable large, you should not invest that way in the first hand. You may find better to invest in already diversified fund, to skip stupid fees. There are screeners like in morningstar that allow you to see overlapping items in funds but in stocks it becomes trickier and much errorsome. I know you are going to the stock market frenzy, even if you are saying to want to be long-term or contrarian investor, most investors are convex, i.e. they follow their peers, despite it would better to be a concave investor (but as we know it can be hard). If the last part confused you, fire up a spreadsheet and do a balance. It is a very motivating activity, really. You will immediately notice things important to you, not just to providers such as morningstar, but alert it may take some time. And Bogleheads become to your rescue, ready spreadsheets here. |
Is a currency “hedged” ETF actually a more speculative instrument than an unhedged version? | Overall, since gold has value in any currency (and is sort of the ultimate reserve currency), why would anyone want to currency hedge it? Because gold is (mostly) priced in USD. You currency hedge it to avoid currency risk and be exposed to only the price risk of Gold in USD. Hedging it doesn't mean "less speculative". It just means you won't take currency risk. EDIT: Responding to OP's questions in comment what happens if the USD drops in value versus other major currencies? Do you think that the gold price in USD would not be affected by this drop in dollar value? Use the ETF $GLD as a proxy of gold price in USD, the correlation between weekly returns of $GLD and US dollar index (measured by major world currencies) since the ETF's inception is around -47%. What this says is that gold may or may not be affected by USD movement. It's certainly not a one-way movement. There are times where both USD and gold rise and fall simultaneously. Isn't a drop in dollar value fundamentally currency risk? Per Investopedia, currency risk arises from the change in price of one currency in relation to another. In this context, it's referring to the EUR/USD movement. The bottom line is that, if gold price in dollar goes up 2%, this ETF gives the European investor a way to bring home that 2% (or as close to that as possible). |
best free web app or tools to track one's cash flow | The answer to this question can be found in the related question Is there any online personal finance software without online banking? |
Will my current employer find out if I have a sole proprietarship/corporation? | I can see why you'd be reluctant to tell them, but I think you need to be open and honest with them about what you're doing and where you see it going. If the roles were reversed, what would you want your employee to do in this situation? If it were me, I'd be much happier to be told up front than to find out some other way later. If I found out later, I'd feel somewhat betrayed and angry. With the Internet, it seems unlikely that they wouldn't find out eventually, so I think being up front about it is your best option. I also suggest you have a backup plan in case they say no. Perhaps you'd need to find another full-time job that is more tolerant (or even encouraging) of side businesses. |
Is business the only way to become a millionaire? | Not at all. The Millionaire Next Door offers a book full of anecdotes on couples that earned money and saved their way to being millionaires. I believe about 1/3 or so had businesses, but the rest were employed and simply saved wisely. $3860/yr saved for 40 years at 8% will return $1M. Adjust the numbers to hit a million sooner or reach a higher goal. The Author might be accused of survey bias. This is the phenomenon of studying the final results without looking at the pool of people years prior. Little Adv' is correct that while 1/3 of millionaires may have gotten that way by starting a business, that says nothing about how many businesses need to start to find the one millionaire that resulted. I view the book more as a lesson of "spend beneath your means" and focus on his anecdotes of the dual income couples who saved their way to this status. If you are in no rush, get this book from your library and spend the few hours to read it. In response to my Friend Dilip's comment, MoneyChimp offers a good look at compound growth (for the S&P) over time. The 40 years ending 2012, which obviously include the 'lost decade,' returned a CAGR of 9.78%. Not to be confused with the average 11.43%. When I pull the numbers for each year's return and apply an annual $3860 deposit, the 40 years ends with $2.2M. A 1% fee, or 1% lower return resulted in $1.6M. If 8% isn't conservative, of course you can run the numbers you wish. The 40 years contained both a lost decade and two great ones. Will the 3 decades post-lost average to get the Quad-Decade period to 8%+? I don't know. |
What are good games to play to teach young children about saving money? | I've found that good old fashioned "Monopoly" teaches children about cash flow, mortgaging properties, and paying income taxes. |
How do I know when I am financially stable/ready to move out on my own? | One big deciding factor will be what standard of living you want to maintain once you move out. Your parents have had years to get raises, accumulate savings, and establish the standard of living you are used to. Regardless of how much you save up now, you'll still have to be living at or below your means once you move out, that means that all the expenses you currently have covered by your parents have to come out of something you are currently spending elsewhere. If they can come out of whatever extra money you have now, then great. If not, you'll have to re-align your budget to align with your income. In my experience, seeing my friends and I move out, this was the biggest issue. Those who settled into a new standard of living until their wages went up did fine (even the few who moved out at 18 with no savings). Those who couldn't drop the extra expenses, and wanted to continue living at their parent's standard of living either never left home, ended up moving back, or ended up massively in debt. We're only just hitting 30 now, so it didn't take long for things to settle out. |
What is the best strategy for after hours trading? | I would never trade after hours and I have 30 years of trading experience. It is a very volatile emotion driven market without a lot of the big players that arbitrage wrong pricing. If I were you I would simply use limit orders you input while the market is closed. If you want to get kute you can put in low-ball offers (and vice versa) to see if they get filled in the volatility at market open. Then check in (when?) when you wake up (or before you go to bed, etc) and revise the limit if not filled. In other words don't 'trade'. Know what your company is worth and put in orders that reflect that. |
Why don't market indexes use aggregate market capitalization? | would constantly fluctuate and provide an indication of how well the market is doing. The index is there to tell if you made profit or loss by investing in the market. Using a pure total market cap will only tell you "Did IPO activity exceed bankruptcy and privatization activity". |
Is freelance income earned by a U.S. citizen while living abroad subject to state income tax? | No state taxes, but Italy also has a favorable treaty with the US Federal Government. Look into to lowering your federal taxes to 5% ;) its a thick read, http://www.irs.gov/businesses/international/article/0,,id=169601,00.html and also try to determine if the Foreign Earned Income Exclusion applies to you, reducing your Federal tax to ZERO on the first $95,100 earned abroad. http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html but then you may be subject to a 20%+ italy tax. so maybe you should just try for the tax treaty |
Can you explain the mechanism of money inflation? | An economy produces goods and services and people use money to pay for those goods and services. Money has value because people believe that they can buy and sell goods and services with it in that economy. How much the value of money is, is determined by how much money there is in comparison to goods and services (supply and demand). In most economies it is the job of the federal/national reserve bank to ensure that prices stay stable (ie the relationship of goods and services to how much money there is is stable); as this is necessary for a well running economy. The federal reserve bank does so by making more (printing, decreasing interest rates) or less (increasing interest rates) available to the economy. To determine how much money needs to be in the economy to keep prices stable is incredibly hard as many factors have an impact: If the reserve bank gets it wrong and there is more money compared to goods and services than previous, prices will rise to compensate; this is inflation If it's the other way round is deflation. Since it is commonly regarded that deflation is much more destabilizing to an economy than inflation the reserve banks tend to err on the side of inflation. |
Company revenue increased however stock price did not | It's great that you have gotten the itch to learn about the stock market. There are a couple of fundamentals to understand first though. Company A has strong, growing, net earnings and minimal debt, it's trading for $100 per share. Company B has good revenue but high costs of goods and total liabilities well in excess of total assets, it's trading for $0.10 per share. There is no benefit to getting 10,000 shares or 10 shares for your $1,000. Your goal is to invest in companies that have valuable products and services run by competent management teams. Sure, the number of shares you own will dictate what percentage of the company you own, and in a number of cases, your voting power. But even a penny stock will have a market capitalization of several million dollars so voting power isn't really a concern for your $1,000 investment. There is a lot more in the three basic financial statements (Income Statement, Balance Sheet, Statement of Cash Flows) than revenue. Seasoned accountants can have a hard time parsing out where money is coming from and where it's going. In general there are obvious red flags, like a fast declining cash balance against a fast growing liabilities balance or expenses exceeding revenue. While some of these things are common among new and high growth companies, it's not the place for a new investor with a small bankroll. A micro-cap company (penny stocks are in this group) will receive rounds of financing via issuing preferred convertible shares which may include options on more shares. For a company worth $20mm a $5mm financing round can materially change the finances of a company, and will likely dilute your holdings in common stock. Small growth companies need new financing frequently to fund their growth strategies. Revenue went up, great... why? Did you open another store? Did you open another sales office? Did the revenue increase this quarter based on substantially the same operation that existed last quarter or have you increased the capacity of your operation? If you increased the capacity of your operation what was the cost of the increase and did revenue increase as expected? Can you expect revenue to continue to grow at this rate or was it a one time windfall from an unusual order? Sure, there are spectacular gains to be had in penny stocks. XYZ Pharma Research (or whatever) goes from $0.05 to $0.60 and you've turned your $1,000 in to $12,000. This is a really unlikely event... Buying penny stocks is akin to buying lottery tickets. Unless you are a high ranking employee at the company capable of making decisions, or one of the investors buying the preferred shares mentioned in point 3, or are one of the insiders of a pump and dump scam on the stock, penny common stocks are not a place to invest. One could argue that even a company insider should probably avoid buying common stock. Just to illustrate the points above, you mention: Doing some really heavy research into this stock has made me question the whole penny stock market. Based on your research what is the enterprise value of the company? What were the gross proceeds of the last financing round, how many shares were issued and were there any warrants attached? What do you perceive to be heavy research? What background do you have in finance/accounting to give weight to your ability to perform such research? Crawl. Walk. Then run. Don't kid yourself in to thinking that since you have some level of education you understand the contracts involved in enterprise finance. |
What typically happens to unvested stock during an acquisition? | I've been through two instances where I worked for a public company that was merged (for stock) into another company. In both cases the options I had were replaced with equivalent options in the merged company with the number of shares and strike price adjusted at the same rate as the actual stock was converted, and the vesting terms remained essentially the same. In other words, the options before and after were in essence equivalent. |
Cash out 401k for house downpayment | Does it ever make sense? Yes, but almost never. If you're in a situation where you're invested in something with low rates (think government securities) or cash equivalents, then you do need to think about rate spread as you mention. Does the savings over the life over the mortgage beat out the 35% hit now, plus all the interest you would earn over those 20 years? Have you factored in other considerations such as mortgage interest deduction on taxes? Don't forget you need to think about how rates will change down the line (they can't go much lower, so potentially you'll get better rates in the 401(k) down the line). Don't forget there's also the impact of inflation; again the rates on your savings may go up, but your mortgage is a fixed payment, so with even a low rate of inflation, your payments effectively become "less" over time. If your investments are in something like stocks and bonds, then I would say undoubtedly you would want to keep the money in the 401(k). Time in market and compounding are your best friends over a long time horizon. Also, as mentioned by @JohnFX, the hit of your 35% now is something you will absolutely feel now. Hopefully not, but your life situation could change where you have an emergency and need to drain your savings or you may not see the end of that 20 years. |
Indie Software Developers - How do I handle taxes? | This is not an end-all answer but it'll get you started I have been through accounting courses in college as well as worked as a contractor (files as sole proprietor) for a few years but IANAA (I am not an accountant). Following @MasonWheeler's answer, if you're making that much money you should hire a bean counter to at least overlook your bookkeeping. What type of business? First, if you're the sole owner of the business you will most likely file as a sole proprietorship. If you don't have an official business entity, you should get it registered officially asap, and file under that name. The problem with sole proprietorships is liability. If you get sued, not only are your business' assets vulnerable but they can go after your personal assets too (including house/cars/etc). Legally, you and your business are considered one and the same. To avoid liability issues, you could setup a S corporation. Basically, the business is considered it's own entity and legal matters can only take as much as the business owns. You gain more protection but if you don't explicitly keep your business finances separate from your personal finances, you can get into a lot of trouble. Also, corporations generally pay out more in taxes. Technically, since the business is it's own entity you'll need to pay yourself a 'reasonable salary'. If you skip the salary and pay yourself the profits directly (ie evade being taxed on income/salary) the IRS will shut you down (that's one of the leading causes of corporations being shut down). You can also pay distribute bonuses on top of that but it would be wise to burn the words 'within reason' into your memory first. The tax man gets mad if you short him on payroll taxes. S corporations are complicated, if you go that route definitely seek help from an accountant. Bookkeeping If you're not willing to pay a full time accountant you'll need to do a lot of studying about how this works. Generally, even if you have a sole proprietorship it's best to have a separate bank account for all of your business transactions. Every source/drain of money will fall into one of 3 categories... Assets - What your business owns: Assets can be categorized by liquidity. Meaning how fast you can transform them directly into cash. Just because a company is worth a lot doesn't necessarily mean it has a lot of cash. Some assets depreciate (lose value over time) whereas some are very hard to transform back into cash based on the value and/or market fluctuations (like property). Liabilities - What you owe others and what others owe you: Everything you owe and everything that is owed to you gets tracked. Just like credit cards, it's completely possible to owe more than you own as long as you can pay the interest to maintain the loans. Equity - the net worth of the company: The approach they commonly teach in schools is called double-entry bookkeeping where they use the equation: In practice I prefer the following because it makes more sense: Basically, if you account for everything correctly both sides of the equation should match up. If you choose to go the sole proprietorship route, it's smart to track everything I've mentioned above but you can choose to keep things simple by just looking at your Equity. Equity, the heart of your business... Basically, every transaction you make having to do with your business can be simplified down to debits (money/value) increasing and credits (money/value) decreasing. For a very simple company you can assess this by looking at net profits. Which can be calculated with: Revenues, are made up of money earned by services performed and goods sold. Expenses are made up of operating costs, materials, payroll, consumables, interest on liabilities, etc. Basically, if you brought in 250K but it cost you 100K to make that happen, you've made 150K for the year in profit. So, for your taxes you can count up all the money you've made (Revenues), subtract all of the money you've paid out (Expenses) and you'll know how much profit you've made. The profit is what you pay taxes on. The kicker is, there are gray areas when it comes to deducting expenses. For instance, you can deduct the expense of using your car for business but you need to keep a log and can only expense the miles you traveled explicitly for business. Same goes for deducting dedicated workspaces in your house. Basically, do the research if you're not 100% sure about a deduction. If you don't keep detailed books and try to expense stuff without proof, you can get in trouble if the IRS comes knocking. There are always mythical stories about 'that one guy' who wrote off his boat on his taxes but in reality, you can go to jail for tax fraud if you do that. It comes down to this. At the end of the year, if your business took in a ton of money you'll owe a lot in taxes. The better you can justify your expenses, the more you can reduce that debt. One last thing. You'll also have to pay your personal federal/state taxes (including self-employment tax). That means medicare/social security, etc. If this is your first foray into self-employment you're probably not familiar with the fact that 1099 employers pick up 1/2 of the 15% medicare/social security bill. Typically, if you have an idea of what you make annually, you should be paying this out throughout the year. My pay as a contractor was always erratic so I usually paid it out once/twice a year. It's better to pay too much than too little because the gov't will give you back the money you overpaid. At the end of the day, paying taxed sucks more if you're self-employed but it balances out because you can make a lot more money. If as you said, you've broken six figures, hire a damn accountant/adviser to help you out and start reading. When people say, "a business degree will help you advance in any field," it's subjects like accounting are core requirements to become a business undergrad. If you don't have time for more school and don't want to pay somebody else to take care of it, there's plenty of written material to learn it on your own. It's not rocket surgery, just basic arithmetic and a lot of business jargon (ie almost as much as technology). |
If one owns 75% of company shares, does that mean that he would have to take upon himself 75% of the company's expenses? | I think you're looking at the picture in an odd way. When each of you made your initial investments and determined what portions you owned, that gave the company capital that they could use to finance its operations. In return, you are entitled to the future profits of the company (in proportion to your ownership). Any future investment by either of you is at your own discretion. Your company now faces a situation where it would like to pursue a potentially lucrative opportunity, but needs more capital than it has to do so. So, you need to raise more capital. That capital can come from one or both of you (or from an outsider). Since that investment would be discretionary, what the investor gets is a negotiation: the company negotiates with the investor how much equity (in the form of new shares) to award in exchange for the new investment (or whatever other compensation you decide on, if not equity). |
Are there Cashflow Positive Investment Properties in the USA? | I'm an Aussie and I purchased 5 of these properties from 2008 to 2010. I was looking for positive cash flow on properties for not too much upfront investment. The USA property market made sense because of the high Aussie $$ at the time, the depressed property market in the US and the expensive market here. I used an investment web-site that allowed me to screen properties by yield and after eliminating outliers, went for the city with the highest consistent yield performance. I settled on Toledo, Ohio as it had the highest yields and was severely impacted by the housing crisis. I bought my first property for $18K US which was a little over $17K AUD. The property was a duplex in great condition in a reasonable location. Monthly rentals $US900 and rents guaranteed and direct deposited into my bank account every month by section 8. Taxes $900 a year and $450 a year for water. Total return around $US8,000. My second property was a short sale in a reasonable area. The asking was $US8K and was a single family in good condition already tenanted. I went through the steps with the bank and after a few months, was the proud owner of another tenanted, positive cash flow property returning $600 a month gross. Taxes of $600 a year and water about the same. $US6K NET a year on a property that cost $AUD8K Third and fourth were two single family dwellings in good areas. These both cost $US14K each and returned $US700 a month each. $US28K for two properties that gross around $US15K a year. My fifth property was a tax foreclosure of a guy with 2 kids whose wife had left him and whose friend had stolen the money to repay the property taxes. He was basically on the bones of his butt and was staring down the barrel of being homeless with two kids. The property was in great condition in a reasonable part of town. The property cost me $4K. I signed up the previous owner in a land contract to buy his house back for $US30K. Payments over 10 years at 7% came out to around $US333 per month. I made him an offer whereby if he acted as my property manager, i would forgo the land contract payments and pay him a percentage of the rents in exchange for his services. I would also pay for any work he did on the properties. He jumped at it. Seven years later, we're still working together and he keeps the properties humming. Right now the AUD is around 80c US and looks like falling to around 65c by June 2015. Rental income in Aussie $$ is around $2750 every month. This month (Jan 2015) I have transferred my property manager's house back to him with a quit claim deed and sold the remaining houses for $US100K After taxes and commission I expect to receive in the vicinity of AUD$120K Which is pretty good for a $AUD53K investment. I've also received around $30K in rent a year. I'm of the belief I should be buying when everybody else is selling and selling when everybody else is buying. I'm on the look-out for my next positive cash flow investment and I'm thinking maybe an emerging market smashed by the oil shock. I wish you all happiness and success in your investment. Take care. VR |
What happens to options after a stock split? | Since you asked about Apple, and I happen to have two positions - This is what happened. I was long the $500, short the $600, in effect, betting Apple would recover from its drop from $700 down to $450 or so. Friday, my target was to hope that Apple remain above $600, but not really caring how much it went over. Now, post split, the magic number is $85.71. My account shows the adjusted option pricing, but doesn't yet show AAPL's new price. |
Should I invest in the world's strongest currency instead of my home currency? | Currency speculation is a very risky investment strategy. But when you are looking for which currency to denote your savings in, looking at the unit value is quite pointless. What is important is how stable the currency is in the long term. You certainly don't want a currency which is prone to inflation, because it means any savings denoted in that currency constantly lose purchasing power. Rather look for a currency which has a very low inflation rate or is even deflating. Another important consideration is how easy it is to exchange between your local currency and the currency you want to own. A fortune in some exotic currency is worth nothing when no local bank will exchange it into your local currency. The big reserve currencies like US Dollar, Euro, Pound Sterling and Japanes yen are usually safe bets, but there are regional differences which can be easily converted and which can't. When the political relations between your country and the countries which manage these currencies is unstable, this might change over night. To avoid these problems, rather invest into a diverse portfolio of commodities and/or stocks. The value of these kinds of investments will automatically adjust to inflation rate, so you won't need to worry about currency fluctuation. |
Does gold's value decrease over time due to the fact that it is being continuously mined? | As one can see here, the world population is growing. Assuming worldwide demand for gold is a function of population, the question you have to ask is whether gold mining outpaces population growth. Just eyeballing it, I'd say they're about even although annual production is far noisier. Keep in mind that gold extraction is not an easy process though. At the end of the day, gold is only worth what you can trade it for, just like any other store of value. |
How do I deal with a mistaken attempt to collect a debt from me that is owed by someone else? | It may be a scam. But it also may be a company trying to find a person with the same or similar name. They may have followed a trail to her old address, and still not have the correct person. They bought number of old debts at a large discount, and are trying to track down any money they can find. It is best to ignore it, especially if they know it isn't their debt. If they start providing more proof then get interested. If they keep contacting them tell them there is no business relationship and they should stop. |
How can I calculate how much an option would be worth after X days if the underlying stock changed by +/- $Y? | You'd need to know the delta and the theta of the option. You can either calculate them yourself using a model like Black-Scholes (assuming you have a market price and can imply a volatility, and know the other factors that go into the model) or, you can see if your broker quotes "greeks" as well (mine does). The delta is the sensitivity (rate of change in value) to the underlying stock price, and the theta is the sensitivity to time passing (usually expressed in $/day). So if your option has a delta of .5 and a theta of -.04, when one day passes and the underlying stock goes up $3, the option will gain roughly $1.50 due to the underlying stock price and lose $0.04 due to time passing. |
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