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Can somebody give a brief comparison of TSP and IRAs? | The TSP is similar to a 401K. If you were hired as a federal employee on or after 1 January 1987 you are under the FERS retirement program. That means that you are eligible for matching. If they will match your deposits then the TSP, up to the matching limit, is a better choice. Skipping the TSP will mean that you you are leaving money on the table. |
If the co-signer on my car loan dies, can the family take the car from me like they're threatening to? | It looks to me like this is a 'call an attorney' situation, which is always a good idea in situations like this (family legal disputes). But, some information. First off, if your family is going to take the car, you certainly won't need to make payments on it any more at that point, in my opinion. If the will goes through probate (which is the only way they'd really be able to take it), the probate judge should either leave you with the car and the payments, or neither (presumably requiring the family to pay off the loan and settle your interest in the car). Since the car has negative net value, it seems unlikely that the probate judge would take the car away from you, but who knows. Either way, if they do take the car away from you, they'll be doing you a service: you have a $6,000 car that you owe $12,000 on. Let them, and walk away and buy another car for $6,000. Second, I'm not sure they would be allowed to in any event. See the Illinois DMV page on correcting titles in the case of a deceased owner; Illinois I believe is a joint tenancy state, meaning that once one owner dies, the other just gets the car (and the loan, though the loan documents would cover that). Unless you had an explicit agreement with your grandfather, anyway. From that page: Joint Ownership A title in the names of two or more persons is considered to be in joint tenancy. Upon the death of one of them, the surviving joint tenant(s) becomes the owner(s) of the vehicle by law. Third, your grandfather can fix all of this fairly easily by mentioning the disposition of the car and loan in his will, if he's still mentally competent and wishes to do so. If he transfers his ownership of the car to you in the will, it seems like that would be that (though again, it's not clear that the ownership wouldn't just be yours anyway). Finally, I am not a lawyer, and I am not your lawyer, so do not construe any of the text of this post as legal advice; contact a lawyer. |
Why is it rational to pay out a dividend? | The main reason, as far as I can see, is that the dividends are payments with which the shareholders may do what they want. Capital that the company has no use for does not make a significant positive return on investment, as you pointed out, yes the company could accrue interest, but that is not going to make the company large sums of cash. While the company may be great at making shoes - maybe even the best in the world - doesn't mean they are good investors. Sure they could dabble at using their capital to invest in other equities, but they don't, because they just want to focus on making shoes. If the dividend goes to the investors, they can do what they wish, be it reinvest in the company, or invest elsewhere. Other companies that may make good use of the capital, and create significant returns on it are one such example. That is the rational answer, beyond that, one of the main reasons is that people like the feeling of receiving dividends - it might not be the answer you are looking for, but many people prefer companies that pay dividends for no rational reason over companies which grow their asset value. |
Can I move my 401k to another country without paying tax penalty? | hello – I am a natural born US citizen; I have worked 35+ years in the United States; I have a 401(k), IRA, Social Security benefits. I have researched the ex-patriot possibilities for several years. I've consulted both accountants and tax attorneys. The long answer is: hire tax consultants/attorneys to try to shelter what assets you can. 401(k), IRA, and Social Security benefits are all taxable worldwide to US citizens. unless you become the citizen of your new country of residence, these taxes are unavoidable. since all of the above assets are considered "pretax" to the US government, they are all taxable on distribution whether slowly or in lump sum. the short answer is: "Hotel California"… "Relax, said the watchman – we are programmed to receive. You can check out any time, but you can never leave…" |
Vanguard ETF vs mutual fund | Where are you planning on buying this ETF? I'm guessing it's directly through Vanguard? If so, that's likely your first reason - the majority of brokerage accounts charge a commission per trade for ETFs (and equities) but not for mutual funds. Another reason is that people who work in the financial industry (brokerages, mutual fund companies, etc) have to request permission for every trade before placing an order. This applies to equities and ETFs but does not apply to mutual funds. It's common for a request to be denied (if the brokerage has inside information due to other business lines they'll block trading, if a mutual fund company is trading the same security they'll block trading, etc) without an explanation. This can happen for months. For these folks it's typically easier to use mutual funds. So, if someone can open an account with Vanguard and doesn't work in the financial industry then I agree with your premise. The Vanguard Admiral shares have a much lower expense, typically very close to their ETFs. Source: worked for a brokerage and mutual fund company |
Should I pay off my 401k loan or reinvest the funds elsewhere? | Pay the 401(k) loan back as soon as possible. To be clear, the money from your 401(k) loan is no longer invested and working for you. It doesn't make sense to pull money out of your 401(k) investments and then invest it in something else. If you want to invest for retirement, pay back the loan and invest that money inside your 401(k). If you leave your job, the 401(k) loan needs to be paid back in full, or else taxes and penalties will apply. If you have put the funds in an IRA, they won't be available to you should you need to pay back the loan early. Instead of making a monthly payment to the 401(k) loan, pay off the loan and then make a monthly investment to an IRA. |
What happens if one brings more than 10,000 USD with them into the US? | The $10,000 mark is not a ceiling in importing cash, but rather a point where an additional declaration needs to be made (Customs Form 4790). At 1 million, I suspect you might be in for a bit of an interview and delay. Here's an explanation of what happens when the declaration isn't made: https://www.cbp.gov/newsroom/local-media-release/failure-declare-results-seizure-24000-arrest-two |
How long should I keep my bills? | Consumerist posted a list of how long to keep bills. |
Should I set a stop loss for long term investments? | The only time I've bothered with stop orders is when I think the position is in a particularly volatile state and there is an earnings report pending. In this situation it's an easily debatable thing to do. If I'm so concerned that the earnings report will be enough to cause a wild downswing that I'd place a stop order, maybe I should just drop the position now. I subscribe to the school of thought that you don't sell your MVPs. I've bought a few things on a whim that really performed well over the few years to follow. To me it doesn't make sense to pick a return at which I would turn off the spigot. So generally it doesn't make sense to hold orders that would force a sale, either after some upside or downside occurs. Additionally, if I've chosen something as a long term hold. I never spend all my cash opening up a position. I've frequently opened positions that subsequently experienced a decline, when that happens I buy more. Meaningless side thought: With the election coming I've been seriously considering pulling some of my gains off the table. My big apprehension with doing that is that I have no near-term alternative use for the money. So what's the point of selling a position I'm otherwise comfortable with just to pay taxes on the gain then probably buy back in? |
Dad paying for my new home in cash. How can I buy the house from him? | You are going to need a lawyer anyway so check with him. But here is a path you might be able to go down. Put the house in your name right from the get go. He gives you the money but you sign over a promissory note to him so that you net less than $14000 (gift tax annual exclusion for the calendar year). He can gift everyone in your household 14k per year tax free and he could gift it to you and your partner in less than 7 years. You can pay him back in anyway you like or not at all as the promissory note could be reduced by 28k per year. I think a CPA and lawyer in your state would be able to confirm that this would work for you. |
Should I remodel or buy a bigger house? | After a 6% commission to sell, you have $80K in equity. 20% down on a $400K house. 5% down will likely cost you PMI, and I don't know that you'll ever see a 3.14% rate. The realtor may very well have knowledge of the cost to finish a basement, but I don't ask my doctor for tax advice, and I'd not ask a realtor for construction advice. My basement flooring was $20/sqft for a gym quality rubber tile. You can also get $2/sqft carpet. I'd take the $15K number with a grain of salt until I got real bids. What's there now? Poured cement? Is there clearance to put in a proper subfloor and still have adequate ceiling height? There are a lot of details that you need to research to do it right. That said, the move to a bigger house impacts your ability to save to the extent that you are taking too large a risk. The basement finish, even if $20K, is just a bit more than the commission on your home. I like the idea of sticking it out. Once the nanny is gone, enjoy the extra income, and use the money to boost your savings and emergency funds. As I read your question again, I suggest you cut the college funding in favor of the emergency fund. What good is a funded college account if you have no funds to sustain you through a period of unemployment? There's a lot to be gained in holding tight for these 3 years. It seems that what's too small for 5 would be spacious once the nanny is gone and the basement added. The cost of a too-big house is enormous over the long run. It's going to rise in value with inflation, but no more, and has all the added costs that you've mentioned. On a personal note, I'm in a large house, with a dining room that's used 2 or 3 times a year, and a living room (different from family room) that is my dog's refuge, but we never go in there. In hindsight, a house 2/3 the size would have been ideal. Finishing the basement doesn't just buy you time, it eliminates the need for the larger house. |
What is the meaning of realization in finance? | Realization is when you actually have something in hand, it isn't just theoretical anymore. For instance, you may win the lottery, but until they hand you a check, you haven't realized the windfall. Another example is that you may be paid a particular hourly wage, but until you cash the paycheck, you haven't realized the pay. |
Mitigate Effects Of Credit With Tangible Money | If you have no credit history but you have a job, buying an inexpensive used car should still be doable with only a marginally higher interest rate on the car. This can be offset with a cosigner, but it probably isn't that big of a deal if you purchase a car that you can pay off in under a year. The cost of insurance for a car is affected by your credit score in many locations, so regardless you should also consider selling your other car rather than maintaining and insuring it while it's not your primary mode of transportation. The main thing to consider is that the terms of the credit will not be advantageous, so you should pay the full balance on any credit cards each month to not incur high interest expenses. A credit card through a credit union is advantageous because you can often negotiate a lower rate after you've established the credit with them for a while (instead of closing the card and opening a new credit card account with a lower rate--this impacts your credit score negatively because the average age of open accounts is a significant part of the score. This advice is about the same except that it will take longer for negative marks like missed payments to be removed from your report, so expect 7 years to fully recover from the bad credit. Again, minimizing how long you have money borrowed for will be the biggest benefit. A note about cosigners: we discourage people from cosigning on other people's loans. It can turn out badly and hurt a relationship. If someone takes that risk and cosigns for you, make every payment on time and show them you appreciate what they have done for you. |
How to spend more? (AKA, how to avoid being a miser) | How much is your time worth This has been useful for me, judging things based on how much their time value is worth to me, weighted more heavily than their actual worth. For instance, there was a time when I used to work on the weekends and pay to have my laundry done. Doing the laundry myself would have cost 25 cents, but taken two hours at least. Since I was making $45 an hour, I would have lost $90 dollars by doing my laundry, instead of paying specialists $28 to do it for me, much better than I would. Your own capital should begin growing at a rate that makes many MANY things worth less than the time it takes for you to entertain it. So in your cable bill example, you shouldn't have argued for a $5 credit for two hours, unless you make $2.25 an hour, after tax. This is simplistic, as you would extrapolate how much this would cost you over a year or two, but such cost benefit analysis' become easy with this simple concept. This can also be used to rationalize your lavish expenditures. Such as not really comparing the costs for a flight, because its a 2 hour flight for $400 and you've found yourself making at least $200 an hour with your $416,000 annual earnings and capital gains. This will cure your frugality while retaining safe guards on your spending. |
Is CFD a viable option for long-term trading? | Yes it is viable but uncommon. As with everything to do with investment, you have to know what you are doing and must have a plan. I have been successful with long term trading of CFDs for about 4 years now. It is true that the cost of financing to hold positions long term cuts into profits but so do the spreads when you trade frequently. What I have found works well for me is maintaining a portfolio that is low volatility, (e.g. picking a mix of positions that are negatively correlated) has a good sharpe ratio, sound fundamentals (i.e. co-integrated assets - or at least fairly stable correlations) then leveraging a modest amount. |
Is there any reason not to put a 35% down payment on a car? | Do you guys think it's a good idea to put that much down on the car ? In my opinion, it depends on a lot of factors. If you have nothing to pay, and are not planning to invest in something that cost a lot soon (I.E an house, etc). Then I see no problem in put "that much down on the car". Remember that the more you pay at first, the less you will pay interest on. However, if you are planning on buying something big soon, then you might want to pay less and keep moneys for your future investment. I would honestly not finance a car with the garage as I find their interest rate to high. Possibilities depends a lot of your bank accounts, but what I would personally do is pay it cash using my credit margin with the bank which is only 2.8% interest rate. Garage where I live rarely finance under 7% interest rate. You may not have a credit margin, but maybe you could get a loan with the bank instead ? Many bank keep an history of your loan which will get you a better credit name when trying to buy an home later. On the other side, having a good credit name is not really useful in a garage. What interest rate is reasonable based on my credit score? I don't think it is possible to give a real answer to this as it change a lot around the world. However, I would recommend to simply compare with the interest rate asked when being loan by the bank. |
Should I continue to invest in an S&P 500 index fund? | 5-8 years is not quite long term. Until the naughts (the 2001-10 decade), advisors were known to say that the S&P was always positive given a 10 year holding period. Now, we're saying 15 years is always positive looking back. One can easily pull S&P return data which would let you run numbers showing the range of returns for the 5-8 yr period you have in mind. A bit of extra effort and you can include the dollar cost averaging factor. This wouldn't produce a guarantee, but a statistical range of expected returns over your time horizon. Then a decision like "with a 1/4 chance of losing 25% of my money, should I stay with this plan?" This is just an example. The numbers for 1900-2014 look like this - In any 5 year period, an average return of 69.2% (note 1.69 means a 69% gain). Of the 111 5 year periods, 14 were negative with the worst being a 46% loss. I maintain 5 years is not really long term, but the risk is relatively low of being in the red. |
Why does an option lose time value faster as it approaches expiry | Don´t forget that changing volatility will have an impact on the time value too! So at times it can happen that your time value is increasing instead of decreasing, if the underlying (market) volatility moves up strongly. Look for articles on option greeks, and how they are interdependent. Some are well explaining in simple language. |
How can I estimate business taxes / filing fees for a business that has $0 income? | You need to hire a tax professional and have them sort it out for you properly and advise you on how to proceed next. Don't do it yourself, you're way past the stage when you could. You're out of compliance, and you're right - there are penalties that a professional might know how to mitigate, and maybe even negotiate a waiver with the IRS, depending on the circumstances of the case. Be careful of answers like "you don't need to pay anything" that are based on nothing of facts. Based on what you said in the question and in the comments, it actually sounds like you do have to pay something, and you're in trouble with the IRS already. It might be that you misunderstood something in the past (e.g.: you said the business had filed taxes before, but in fact that might never happened and you're confusing "business filed taxes" with "I filed schedule C") or it might be the actual factual representation of things (you did in fact filed a tax return for your business with the IRS, either form 1120 of some kind or 1065). In any case a good licensed (CPA or EA) professional will help you sort it out and educate you on what you need to do in the future. |
Does a bid and ask price exist for indices like the S&P500? | You can trade an index by using a Contract For Difference, or CFD. Various brokers offer this method and the spreads are quite low. They tend to widen outside of market hours, and not all brokers offer the same spreads. I would look for a broker that offers the lowest spread on the index you are interested in. You should also do your due diligence and check they are regulated by the relevant authority pertaining to their territory, eg FSA for uk |
Should I get an accountant for my taxes? | I don't know if I would go so far as to hire an accountant. None of those things you listed really complicates your taxes all that much. If you were self-employed, started a business, got a big inheritance, or are claiming unusually large deductions, etc. then maybe. The only thing new from your post seems to be the house and a raise. The 3rd kid doesn't substantially change things on your taxes from the 2nd. I'd suggest just using tax preparation software, or if you are especially nervous a tax-preparation service. An accountant just seems like overkill for an individual. |
What are the differences between gold/siver “coin” vs. “round”? | Coins are legal tender. They're authorized by governments and have a face value. Rounds are simply coined pieces of metal minted by private manufacturers. They do not have any face value and are not legal tender. Rounds are used to own metal, they have no value other than the value of the metal in them. Any premium you pay over the price of the metal is the mint's profit. Coins are also used as bulions (i.e.: to own metal and create profits for the government), but many times coins have limited issue and become valuable because of the rarity, specific issues with a specific coin (mistakes, impurities, exclusive designs), etc. So they also may have some numismatic value (depends on the specific coin). Coins also have the assurance of quality of the authorizing government (and fakes are dealt with by the law as forgery of coins is illegal and is a crime), rounds however do not enjoy such protection, and any one can mint them (only copyright/trademark protections apply, where the enforcement is by the owner and not the government). Re the advantages - coins (if you pick the right ones...) appreciate much more than the metal. However, this is mostly in hindsight, and most of the "bulion" coins do not appreciate significantly beyond the price of the metal unless there's something else significant about them (first year of issue, high quality certification, etc). Rounds on the other hand are cheaper (1 oz round will be significantly cheaper than 1 oz coin), and monitor more closely the price of the metal. It is unlikely for rounds to significantly deviate from the spot price (although this does happen occasionally, for specific designs or if a mint goes out of business). |
Should we buy a house, or wait? | You are very young, you make a huge amount of money, and you have (from what information you provide) very little debt. If you simply want to buy a house for whatever reason, sure, but be honest with yourself about why you want to buy it. I see a lot of people who think they're doing it for smart financial reasons, but then when I ask them about their pension savings and credit card debts and so on, there is no evidence that they are actually the kind of person who makes decisions for smart financial reasons. If you want a house because that seems like the thing that people do, maybe you could think more about what you actually want. If your concern is putting your money to work for you (you seem to dislike that you pay rent each month and after that month you don't have anything to show for your money, except of course that you didn't spent the last month living on the streets), you can do a lot better than getting a mortgage. For example, living frugally you should be able to dump 50k a year into investments; if you did that for a few years, you could reasonably expect the return to cover your rent and bills in a surprisingly small number of years (a lot less than a 25 year mortgage). Your question seems to be starting from the position that you should buy a house. You're asking if you should buy it now, or wait. You are rich enough now (and if your earnings keep going up, will be even more rich in a few years) that you should perhaps question your need to buy a house. With your kind of money, at this stage of your life, you can do a lot better. |
Shouldn't a Roth IRA accumulate more than 1 cent of interest per month? | There are a couple of misconceptions I think are present here: Firstly, when people say "interest", usually that implies a lower-risk investment, like a government bond or a money market fund. Some interest-earning investments can be higher risk (like junk bonds offered by near-bankrupt companies), but for the most part, stocks are higher risk. With higher risk comes higher reward, but obviously also the chance for a bad year. A "bad year" can mean your fund actually goes down in value, because the companies you are invested in do poorly. So calling all value increases "interest" is not the correct way to think about things. Secondly, remember that "Roth IRA fund" doesn't really tell you what's "inside" it. You could set up your fund to include only low-risk interest earning investments, or higher risk foreign stocks. From what you've said, your fund is a "target retirement date"-type fund. This typically means that it is a mix of stocks and bonds, weighted higher to bonds if you are older (on the theory of minimizing risk near retirement), and higher to stocks if you are younger (on the theory of accepting risk for higher average returns when you have time to overcome losses). What this means is that assuming you're young and the fund you have is typical, you probably have ~50%+ of your money invested in stocks. Stocks don't pay interest, they give you value in two ways: they pay you dividends, and the companies that they are a share of increase in value (remember that a stock is literally a small % ownership of the company). So the value increase you see as the increase due to the increase in the mutual fund's share price, is part of the total "interest" amount you were expecting. Finally, if you are reading about "standard growth" of an account using a given amount of contributions, someone somewhere is making an assumption about how much "growth" actually happens. Either you entered a number in the calculator ("How much do you expect growth to be per year?") or it made an assumption by default (probably something like 7% growth per year - I haven't checked the math on your number to see what the growth rate they used was). These types of assumptions can be helpful for general retirement planning, but they are not "rules" that your investments are required by law to follow. If you invest in something with risk, your return may be less than expected. |
What is the benefit of investing in retirement plan versus investing directly in stocks yourself? | @Victor above has provided a very good answer, I shall try and highlight some differences. The differences are specific to a country, however, it does offer some insight regarding the difference between investing in retirement fund vis-a-vis investing in stock directly: In many countries the retirement fund is mandated by the govt. and has to be invested in (in form of direct deduction from salary) ~ Investing in stock is up to the individual In many cases (if not most) capital gain/interest accrual in retirement funds are not taxable ~ Depending upon current laws capital gain (long term/short term) from stocks are taxable Retirement funds are managed and are (in general) more stable in their returns ~ Returns from direct stock investments are dependent on investment decisions of the investor Retirement funds tend to, (though this is very country specific) return somewhat less than market, as an example, in India Public Provident Fund (PPF)/Employee Provident Fund (EPF) return 8.68% tax free ~ As for direct investment on stocks, Nifty has returned approx. 17% CAGR over 15-20 years. Given the above, if you can invest in stock by taking informed calls and you have a good understanding of the financial markets and their underpinning and (probably) looking at long term investment, then investing directly in stock could fetch returns that might not be paralled by retirement funds. If on the other hand, if you feel investing in stock is not for you, then it probably is better to stick with retirement funds and other low risk investments. Either way, you probably have to (and may be you should) carry some portion of your portfolio as retirement funds. |
On paper I have 1 share in my company. How can I sell a smaller percentage of my company to another party? | Do a share split. Your initial 1 share each becomes 10 (or 100) shares each, then you can sell/gift/etc shares as needed. |
Bank statements - should I retain hardcopies for tax or other official purposes (or keep digital scanned copies)? | Digital records are fine, but record-keeping practices are important. Be consistent. |
Mortgage vs. Cash for U.S. home buy now | I'm in the "big mortgage" camp. Or, to put this another way - what would you be happier to have in 15 years? A house that is worth $300,000, or $50,000 of equity in a house and $225,000 in the bank? I would much rather have the latter; it gives me so many more options. (the numbers are rough; you can figure it out yourself based on the current interest rate you can get on investments vs the cost of mortgage interest (which may be less if you can deduct the mortgage interest)). |
Financially Shielded Entity Separating Individuals Behind It From Risks | You are describing a corporation. You can set up a corporation to perform business, but if you were using the money for any personal reasons the courts could Pierce the corporate veil and hold you personally liable. Also, setting up a corporation for purely personal reasons is fraud. |
Tax Implications - First 2-Family Rental Property | You should really be talking to a tax adviser (EA/CPA licensed in your State) about taxes and to a lawyer about the liability protection. You won't find answers from neither of theses here. Besides the liability protection, how do these 2 options affect taxes? There's no liability protection difference between the two (talk to a lawyer to verify) since you'll be cosigning them personally either way. In the first case (loan to the LLC) - everything goes on the 1065 and you get the bottom line on K-1 which transfers to you own tax return. In the second case the loan interest is your personal investment expense (Schedule A deduction) while the loan proceeds you moved to the LLC add to your basis. I'd suggest getting the loan directly in the LLC name, if you can. However, the Lawyers seem to agree that this would void the mortgage because of the "Due on Sale" clause in mortgage loans. "Due on sale" may or may not be invoked, but that's a risk you'd be taking, yes. LLC is a separate legal entity (as opposed to a living trust, to which your second quote seems to be referring), so it is definitely a possibility for a lender to call on the loan if you re-title it. |
What forms of payment am I compelled to accept? | I think cash, travelers checks (little iffy about this one: they're legal tender cash equivalents), and money orders are the only ones that you'd be a little weird to not accept. You certainly don't have to accept regular checks, credit cards, or barter. In the end though, you don't HAVE to accept anything. Accept only small bills, accept only checks from certain banks, accept only the diners card. Your sale, your rules. |
One of my stocks dropped 40% in 2 days, how should I mentally approach this? | The mental approach should be that you always knew the risk of gambling and it was extra money that you had (or should have had). Now think that the 'horse' race is not over and in the near future it will pick up pace against the others and be back on track. |
Invest in (say, index funds) vs spending all money on home? | Here in the UK, the rule of thumb is to keep a lot of equity in your home if you can. I assume here that you have a lot of savings you're considering using. If you only have say 10% of the house price you wouldn't actually have a lot of choice in the matter, the mortgage lender will penalise you heavily for low deposits. The practical minimum is 5%, but for most people a 95% mortgage is just silly (albeit not as silly as the 100% or greater mortgages you could get pre-2008), and you should take serious individual advice before considering it. According to Which, the average in the UK for first-time buyers is 20% (not the best source for that data I confess, but a convenient one). Above 20% is not at all unusual. You'll do an affordability calculation to figure out how much you can borrow, which isn't at all the same as how much you should borrow, but does get you started. Basically you, decide how much a month you can spend on mortgage payments. The calculation will let you put every penny into this if you choose to, but in practice you'll want some discretionary income so don't do that. decide the term of the mortgage. For a young first-time buyer in the UK I think you'd typically take a 25-year term and consider early repayment options rather than committing to a shorter term, but you don't have to. Mortgage lenders will offer shorter terms as long as you can afford the payments. decide how much you're putting into a deposit make subtractions for cost of moving (stamp duty if applicable, fees, removals aka "people to lug your stuff"). receive back a number which is the house price you can pay under these constraints (and of course a breakdown of what the mortgage principle would be, and the interest rate you'll pay). This step requires access to lender information, since their rates depend on personal details, deposit percentage, phase of the moon, etc. Our mortgage advisor did multiple runs of the calculation for us for different scenarios, since we hadn't made up our minds entirely. Since you have not yet decided how much deposit to make, you can use multiple calculations to see the effect of different deposits you might make, up to a limit of your total savings. Putting up more deposit both increases the amount you can borrow for a given monthly payment (since mortgage rates are lower when the loan is a lower proportion of house value), and of course increases the house price you can afford. So unless you're getting a very high return on your savings, £1 of deposit gets you somewhat more than £1 of house, and the calculation will tell you how much more. Once you've chosen the house you want, the matter is even simpler: do you prefer to put your savings in the house and borrow less and make lower payments, or prefer to put your savings elsewhere and borrow more and make higher payments but perhaps have some additional income from the savings. Assuming you maintain a contingency fund, a lower mortgage is generally considered a good investment in the UK, but you need to check what's right for you and compare it to other investments you could make. The issue is complicated by the fact that residential property prices are rising quite quickly in most areas of the UK, and have been for a long time, meaning that highly-leveraged property investment appears to be a really good idea. This leads to the imprudent, but tempting, conclusion that you should buy the biggest house you can possibly afford and watch its value rises. I do not endorse this advice personally, but it's certainly true that in a sharply rising house market it's easier to get away with buying a bigger house than you need, than it is to get away with it in a flat or falling market. As Stephen says, an offset mortgage is a no-brainer good idea if the rate is the same. Unfortunately in the UK, the rate isn't the same (or anyway, it wasn't a couple of years ago). Offset mortgages are especially good for those who make a lot of savings from income and for any reason don't want to commit all of those savings to a traditional mortgage payment. Good reasons for not wanting to do that include uncertainty about your future income and a desire to have the flexibility to actually spend some of it if you fancy :-) |
Looking for a stock market simulation that's as close to the real thing as possible | I have a free account on http://optionshouse.com/ that allows me to invest fake money into different stocks and test their tracking software. It is free and easy to do, just create an account there and they give you $4000 (fake) to invest in the stock market. They do this so that you can test their tracking and other assorted tools, in hopes that you'll choose to invest your real hard earned money with them. |
What is a good way to save money on car expenses? | Manage the fuel consumption price: check the pattern of fuel prices if you can for your area. Some areas have weekly changes which are somewhat predictable and some sites will even predict the minimum price for the next day. Some other areas will have a discount fuel day. Switch to diesel: fuel consumption by diesel engines are much better than standard combustion engines. Downside is not as many refueling stations. Switch to a hybrid: fuel consumption is better than comparable combustion engines alone but the downside is that the technology is new and still maturing. Check out this site for more information. |
Is it better for a public company to increase its dividends, or institute a share buyback? | In some sense, the share repurchasing program is better if the company does not foresee the same profit levels down the road. Paying a dividend for several years and then suddenly not paying or reducing a dividend is viewed as a "slap in the face" by investors. Executing a share repurchase program one year and then not the next is not viewed as negatively. From an investor's standpoint, I would say a dividend is preferred over a share repurchase program for a similar reason. Typically companies that pay a dividend have been doing so for quite some time and even increasing it over time as the company increases profits. So, it can be assumed that if a company starts paying a dividend, it will do so for the long-run. |
Gift card fraud: To whom to report? How to recover funds? Is the party which issued me the card liable? | Citibank just sent me a $100 check. Here's how I got it: |
Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other? | I thought the other answers had some good aspect but also some things that might not be completely correct, so I'll take a shot. As noted by others, there are three different types of entities in your question: The ETF SPY, the index SPX, and options contracts. First, let's deal with the options contracts. You can buy options on the ETF SPY or marked to the index SPX. Either way, options are about the price of the ETF / index at some future date, so the local min and max of the "underlying" symbol generally will not coincide with the min and max of the options. Of course, the closer the expiration date on the option, the more closely the option price tracks its underlying directly. Beyond the difference in how they are priced, the options market has different liquidity, and so it may not be able to track quick moves in the underlying. (Although there's a reasonably robust market for option on SPY and SPX specifically.) Second, let's ask what forces really make SPY and SPX move together as much as they do. It's one thing to say "SPY is tied to SPX," but how? There are several answers to this, but I'll argue that the most important factor is that there's a notion of "authorized participants" who are players in the market who can "create" shares of SPY at will. They do this by accumulating stock in the constituent companies and turning them into the market maker. There's also the corresponding notion of "redemption" by which an authorized participant will turn in a share of SPY to get stock in the constituent companies. (See http://www.spdrsmobile.com/content/how-etfs-are-created-and-redeemed and http://www.etf.com/etf-education-center/7540-what-is-the-etf-creationredemption-mechanism.html) Meanwhile, SPX is just computed from the prices of the constituent companies, so it's got no market forces directly on it. It just reflects what the prices of the companies in the index are doing. (Of course those companies are subject to market forces.) Key point: Creation / redemption is the real driver for keeping the price aligned. If it gets too far out of line, then it creates an arbitrage opportunity for an authorized participant. If the price of SPY gets "too high" compared to SPX (and therefore the constituent stocks), an authorized participant can simultaneously sell short SPY shares and buy the constituent companies' stocks. They can then use the redemption process to close their position at no risk. And vice versa if SPY gets "too low." Now that we understand why they move together, why don't they move together perfectly. To some extent information about fees, slight differences in composition between SPY and SPX over time, etc. do play. The bigger reasons are probably that (a) there are not a lot of authorized participants, (b) there are a relatively large number of companies represented in SPY, so there's some actual cost and risk involved in trying to quickly buy/sell the full set to capture the theoretical arbitrage that I described, and (c) redemption / creation units only come in pretty big blocks, which complicates the issues under point b. You asked about dividends, so let me comment briefly on that too. The dividend on SPY is (more or less) passing on the dividends from the constituent companies. (I think - not completely sure - that the market maker deducts its fees from this cash, so it's not a direct pass through.) But each company pays on its own schedule and SPY does not make a payment every time, so it's holding a corresponding amount of cash between its dividend payments. This is factored into the price through the creation / redemption process. I don't know how big of a factor it is though. |
Finance options for a new furnace. | You walk into the finance company with a written quote from the supplier for the equipment you want to buy. You then fill out forms and sign a promissory note. The finance company then writes out a check to the supplier for the amount of the quoted equipment. Usually you need to provide at least 3 things: They will require you to provide your social security number and sign a document allowing them to check your credit history which they will look up using the social security number. Note that banks will generally give better rates on a personal loan than a finance company. People usually only use finance companies when their credit is so bad that a bank will not loan them money. Heating and cooling companies that provide equipment will often loan the money to buy that equipment. As a point of advice, it is generally poor financial management to take out personal loans and may indicate a person that is wasting money or be in financial difficulties. For personal loan items (furniture, cars, clothing, jewelry, etc) you are far better off saving money to buy the item, not borrowing beyond your means. If you need a new furnace and it is an emergency, for example, if it were winter (which it is not) and your furnace could not be repaired, then that might justifiable. But borrowing money at a high rate to just upgrade a furnace or get a luxury like AC is unwise. |
What does it mean for a normal citizen like me when my country's dollar value goes down? | One more effect that's not yet been mentioned is that companies based in Australia and listed on the Australian Securities Exchange, but which do most of their business overseas, will increase their earnings in AU$, since most of what they earn will be in foreign currencies. So their shares are likely to appreciate (in AU$). |
What is the difference between a bad/bounced check and insufficient funds? | This may vary some by the state, but the general facts are consistent broadly. The elements of check fraud typically are: This means that not only do you have to have presented a check that is returned for insufficient funds, but you must have known at the time that it wouldn't be honored. It must typically also be given for present consideration, which is why the comments to the other answer correctly note that the post-dated check "scam" cooked up by the payday loan folks shouldn't generally be relevant under these laws; on the same site, they note the cases that are clearly not present consideration: So if I give you a check for $50 and it's returned for NSF because I screwed up my bank accounts and had all my money in savings, that's probably not fraud. But if I decide I really want a Tesla X and give Tesla Motors a check for $95,000, knowing I don't have $95,000, that's fraud. How the prosecutor proves knowledge is probably beyond the scope of Personal Finance and Money Stack Exchange, though I imagine it tends to commonly be done so by showing the person doesn't normally have that much money in their account. |
Should I finance a used car or pay cash? | One additional reason to pay with cash rather than financing is that you will be able to completely shut down the dealership from haggling over finance terms and get right to the point of haggling over the cost of the car (which you should always do). |
What does a stock's quoted value represent? | The quote price is simply the last price at which a trade completed. |
How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score? | You really don't know how credit scoring works. Let's think about the purpose of a credit score: to assess whether you're a high default risk. A lender wants to know, in this order: Utilization factors into the solvency assessment. If you are at 100% utilization of your unsecured credit, you're insolvent -- you can't pay your bills. If you are at 0%, you're as solvent as you can be. Most people who use credit cards are somewhere in the middle. When a bank underwrites a large loan like a mortgage or car loan, they use your credit score an application information like income and employment history to figure out what kind of loan you qualify for. Credit cards are called "revolving" accounts for a reason -- you're supposed to use them to buy crap and pay your bill in full at the end of the month. My advice to you: |
If one owns 75% of company shares, does that mean that he would have to take upon himself 75% of the company's expenses? | Typically, no. Unless you have a detailed agreement spelling out the apportioning of costs, all operating expenses are deducted from gross income first, with the division of the proceeds coming out of net profit, in accordance with the type and % of shares you own, and per the terms of the shareholders agreement. This is a simplified answer, and does not address other methods of extraction, such as wages paid, loans to shareholders, interest paid on loans from shareholders, etc.. |
Why do people use mortgages, when they could just pay for the house in full? | Good question. If a person has a choice, it is probably better to pay cash. But not always. If your large pile of cash can earn more being invested than cost of the interest to borrow a similar large pile of cash, it is beneficial to get a mortgage. Otherwise pay cash. EXAMPLE: A house costs $100,000. I have $100,000 in extra money. I can invest that at 5% per year, and I can borrow an additional $100,000 at 2% per year. Since I can make more on my pile of cash than it costs to borrow another pile of cash, borrowing is better. Compound interest is the most powerful force on the planet according to Albert Einstein (maybe). That isn't likely for most people though. Here is the results from some online financial calculators. http://www.calcxml.com/do/hom03 Borrowing $100,000 with 2% interest for 30 years will cost a total of $148.662. You get $100,000, but it cost you $48,662 to do it. http://www.calcxml.com/do/sav07 Saving $100,000 in a bank account with an interest rate of %5 will be worth $432,194 in 30 years. By not spending the money you will earn $332,194 over the course of 30 years. So if you can invest at 5% and borrow at 2% you will end up with $283,532 more than if you didn't. It is a pretty extreme example, and financial advisers make a lot of money figuring out the complex nature of money to make situations like that possible. |
Are Index Funds really as good as “experts” claim? | The point of buying an index fund is that you don't have to pick winners. As long as the winners are included in the index fund (which can include far more than 500 stocks), you benefit on average because of overall upward historical market performance. Picking only the top 50 capitalized stocks in the S&P 500 does not guarantee you will successfully track the S&P 500 index because the stocks in the tail can account for an outsized amount of overall growth; the top 50 stocks by market capitalization change over time, and these stocks are not necessarily the stocks that perform better. As direct example, the 10 year average annual return for the S&P top 50 is 4.52%, while the 10 year average annual return for the S&P 500 is 5.10%. Issues of trading and balancing to maintain these aside, these indices are not the same. |
Questrade - What happens if I buy U.S. stock with Canadian money? | I don't believe from reading the responses above that Questrade is doing anything 'original' or 'different' much less 'bad'. In RRSPs you are not allowed to go into debt. So the costs of all trades must be covered. If there is not enough USD to pay the bill then enough CAD is converted to do so. What else would anyone expect? How margin accounts work depends on whether the broker sets up different accounts for different currencies. Some do, some don't. The whole point of using 'margin' is to buy securities when you don't have the cash to cover the cost. The result is a 'short' position in the cash. Short positions accrue interest expense which is added to the balance once a month. Every broker does this. If you buy a US stock in a USD account without the cash to cover it, you will end up with USD margin debt. If you buy US stock in an account that co-mingles both USD and CAD assets and cash, then there will be options during the trade asking if you want to settle in USD or CAD. If you settle in CAD then obviously the broker will convert the necessary CAD funds to pay for it. If you settle in US funds, but there is no USD cash in the account, then again, you have created a short position in USD. |
Why would I pick a specific ETF over an equivalent Mutual Fund? | Something to consider is how do you want to handle fractional shares. Most open-end funds can easily go to fractional shares to that if you want to invest $500 in a fund each month, it is a relatively easy transaction where some shares will be fractional and handled easily. An ETF may not always work that way unless you go through something like Sharebuilder that would allow the fractional shares as if the ETF is trading at $150/share, you could buy 3 shares but still have $50 that you want to invest but can't as stocks trade in whole share numbers usually. This is without adding brokerage commissions. Depending on the broker, re-investing dividends may or may not be that simple as fractional shares could be a problem since those 3 shares aren't likely to have enough of a dividend to equal another share being bought with the proceeds. If you want the flexibility of stop and limit orders then the ETF may make more sense while the open-end fund is simply to invest whole dollar amounts that then lead to fractional shares. Don't forget to factor in minimums and other stuff as VFIAX may have a bit of a minimum to it as well as possible fees that could be annoying as I remember VFINX having some account maintenance fees that were a bit irksome back in the day that may still be around in some cases so be sure to read the fine print on things. |
Is the stock market too risky for long term retirement funds? Why should a 20- or 30-something person invest in stocks? | Look. Here's a graph of the S&P 500. It's up 1200% since the start of the 70's, our late recession notwithstanding. You're not going to get that kind of return on bonds or commodities or savings accounts. (Maybe real estate stands a chance, if your real estate wasn't in, say, Detroit. It's not as easy to diversify real estate...) People in their 20's who have plenty of time before they need to spend their retirement money invest in the stock market exactly because they're long-term and can withstand these dips just by waiting them out, and earn a ton of money. People approaching their 60's transition their portfolio to bonds so that a market crash won't wipe them out. |
Why do people always talk about stocks that pay high dividends? | Technically, the difference between dividends and growth ought to be that dividends can be reinvested in stocks other than the one that paid them, which is a definite advantage if you actually have a strategy. Dividend -paying stocks used to be preferred for exactly that reason, back in the days when fewer people were directly playing in the market and more knew what they were doing. Unfortunately, getting a periodic dividend from a stock whose price is relatively steady isn't as exciting a game as watching your stock's value bounce around and (hopefully) creep upward on a second-by-second basis. Those who are thinking in gambling terms rather than investment terms -- or who think they can beat the pros at high frequency trading, comment withheld -- want the latter, and have been putting a lot of pressure on companies to operate in the latter mode. That doesn't make it better -- certainly not for the longer-term investors -- just more fashionable. And fashion often means getting stuck with something impractical because everyone else is doing it. On this, I second Scrooge: Humbug! |
Is www.onetwotrade.com a scam? | OneTwoTrade is a binary option seller, and they are officially licensed by the Malta Gaming Authority. They are not in any way licensed or regulated as an investment, because they don't do actual investing. Is your money safe? If you mean will they take your money and run off with it, then no they probably won't just take your deposit and refuse to return any money to you for nothing - that would be a terrible way to make money for the long-term. If you mean "will I lose my money?" - oh yeah, you probably will! Binary options - outside of special sophisticate financial applications - are for people who think day trading has too little risk, or who would prefer online poker with a thin veneer of "it's an investment!" In the words of Forbes, Don't Gamble On Binary Options: If people want to gamble, that’s their choice. But let’s not confuse that with investing. Binary options are a crapshoot, pure and simple. These kinds of businesses run like a casino - there's a built-in house advantage, you are playing odds (which are against you), and the fundamental product is trying to bet on short-term volatility in financial markets. This is often ridiculously short-terms, measured in minutes. It's often called "all or nothing options", because if you bet wrong you lose almost everything - they give you a little bit of the money you bet back (so you will bet again, preferably with more of your own money). If you bet correctly you get a pay-out, just like in craps or roulette. If you are looking to gamble online, this is one method to do it. But this isn't investing, you are as mathematically likely to lose your money and/or become addicted as any other form of money-based gambling, and absolutely treat it the same way you would a casino: decide how much money you are willing to spend on the adventure before you start, and expect you'll likely not get much or any of that money back. However, I will moralize on this point - I really hate being lied to. Casinos, sports betting, and poker all generally have the common decency to call it what it is - a game where you are playing/betting. These sorts of "investment" providers are woefully dishonest: they say it's an exciting financial market, a new type of investment, investors are moving to this to secure their futures, etc. It's utterly deceptive and vile, and it's all about as up-front and honest as penny auction websites. If you are going to gamble, I'd urge you to do it with people who have the decency to to call it gambling and not lie to you and ask for a "minimum investment". |
What's the fuss about Credit Score / History? | Since we seem to be discussing credit score and credit history interchangeably, if I can add credit report as the third part of the puzzle, I have another point. Your credit score and credit report can be effective tools to notice identity theft or fraud in your name. Keeping track of your report will allow you to not only protect your good name (which is apparently in dispute here) but also those businesses who ultimately end up paying for the stolen goods or services. |
(Almost) no credit unions in New York City, why? | There are 2 credit unions in the Metro NY area that are open to everyone: You might also want to check out aSmarterChoice.org to see if there are other credit union options based on where you live, work, worship & more. |
Avoiding timing traps with long term index investing | It's amusing that despite all the evidence that "you can't time the market", everyone still wants to try. Of course I understand your fear. If you invest all your money in the stock market today and it suddenly falls tomorrow you will feel very bad. There are a few things you can do to reduce your risk with respect to timing, however: Don't plop all your money down on the same day. Invest in the market over time, perhaps a few hundred dollars per month worth (depending on your appetite). This averages your purchase cost to ensure you aren't buying at the time when prices are highest. The down side is of course that if you leave cash sitting around, you might also not be buying when the prices are lowest either and will probably miss out on some gains. Still, if risk is your concern, this is a sound strategy. Invest in various markets overseas. This will expose you to some currency risk, but lower your timing risk, as even with globalization markets don't rise and fall in tandem. Even with both of the above, you can still be just plain unlucky (or lucky). I would recommend that you invest only money that you don't need to take out in the near future (in order to reduce the chance that the money will have lost value since you put it in!), and that you don't watch the markets since it makes a lot of people nervous and tends to prod them into doing exactly the wrong thing at exactly the wrong time. |
Do developed country equities have a higher return than emerging market equities, when measured in the latter currency? | What you were told isn't an absolute truth, so trying to counter something fundamentally flawed won't get you anywhere. For example: chinese midcap equities are up 20% this year, even from their high of 100%. While the BSE Sensex in India is down several percentage points on the year. Your portfolio would have lost money this year taking advice from your peers. The fluctuation in the rupees and remnibi would not have changed this fact. What you are asking is a pretty common area of research, as in several people will write their dissertation on the exact same topic every year, and you should be able to find various analysis and theories on the subject. But the macroeconomic landscape changes, a lot. |
Will paying off my car early hinder my ability to build credit? | Don't fuss about your credit score when you're paying 9%. Get rid of the loan as fast as you can. Period. |
what are the downsides of rolling credit card debt in this fashion | Awesome, you are a math guy. Very good for you. In theory, what you are proposing, should work out great as the math works out great. However have you taken a economics or finance coursework? The math that they do in these class will leave a most math guys uncomfortable with the imprecision even when one is comfortable with chaos theory. Personal finance is worse. If it were about math things like reverse mortgages, payday lenders, and advances on one income tax returns would not exist. The risk derived from the situation you describe is one born out of behavior. Sometimes it is beyond control of the person attempting your scheme. Suppose one of these happen: In my opinion the market is risky enough without borrowing money in order to invest. Its one thing to not pay extra principle to a mortgage in order to put that money in play in the market, it is another thing to do what you are suggesting. While their may be late fees associated with a mortgage payment, a fixed rate mortgage will not change if you late on payment(s). On these balance transfer CC schemes they will jack your rate up for any excuse possible. I read an article that the most common way to end up with a 23%+ credit card was to start out with a 0% balance transfer. One thing that is often overlooked is that the transfer fee paid jacks up the stated rate of the card. In the end, get out of consumer debt, have an emergency fund, then start investing. Building a firm financial foundation is the best way to go about it. Without one it will be difficult to make headway. With one your net worth will increase faster then you imagined possible. |
Can the risk of investing in an asset be different for different investors? | In a perfect market, share prices are by definition a perfect reflection of the true value of a share. Hence, you always get $10 for a share that's worth that much. In reality, the market is imperfect. Prices are somewhat of an average of all different estimates, and there's a cost-of-trading margin between sales and buy prices. Hence, in a perfect market it doesn't matter whether you have a stop loss order at $9.00. That just trades your stock worth $9 for cash worth the same $9. In an imperfect market, that trade nets you less. Furthermore, is risk a linear function of money? Perhaps not, if you bought on margin, need to lend extra and your interest rate increases with the extra credit demand. |
Would it make sense to buy a rental property as an LLC and not in my own name? | Consider that there are some low-probability, high-impact risk factors involved with property management. For example, an old house has lead paint and may have illegal modifications, unknown to you, that pose some hazard. All of your "pros" are logical, and the cons are relatively minor. Just consult an attorney to look for potential landmines. |
Why do Dealers/Brokers hold Inventory in Stocks? | The difficulty is that you are thinking of a day as a natural unit of time. For some securities the inventory decisions are less than a minute, for others, it can be months. You could ask a similar question of "why would a dealer hold cash?" They are profit maximizing firms and, subject to a chosen risk level, will accept deals that are sufficiently profitable. Consider a stock that averages 1,000 shares per day, but for which there is an order for 10,000 shares. At a sufficient discount, the dealer would be crazy not to carry the order. You are also assuming all orders are idiosyncratic. Dividend reinvestment plans (DRIP) trigger planned purchases on a fixed day, usually by averaging them over a period such as 10 days. The dealer slowly accumulates a position leading up to the date whenever it appears a good discount is available and fills the DRIP orders out of their own account. The dealer tries to be careful not to disturb the market leading up to the date and allows the volume request to shift prices upward and then fills them. |
Real Estate: Please review my recent investment (with numbers from recent purchase) | Okay so I am going to break this answer into a couple sections: Okay so first things first. Did you get a good deal? This is challenging to answer for a number of reasons. First, a good deal is relative to the buyers goals. If you're attempting to buy an asset that provides passive income then maybe you met your goal and got a good deal. If you're attempting to buy an asset that provides long term growth, and you purchased above market (I'm speculating of course) then you may have made a bad deal. So how do you determine if you got a good deal? Does your "Gross Rental Multiplier" equal that or is less than that of the average GRM in your area. The lower the better. So how do you use the GRM to determine if you're getting a good deal? Divide your purchase price by the average city (or area) GRM and that will tell you what you should be getting annually in rent. You can also use the GRM to determine if a future purchase is over or under priced. Just replace purchase price with asking price. Alright, so these are the tools you can use to decide if you made a bad business deal or not. There are many ways to skin a cat so to speak. These are the tools I use BEFORE I purchase a home. Many people are penny wise and pound foolish. Take your time when making large purchases. It's OKAY to say PASS. Okay next thing is this new purchase you're looking at. The number one rule when working a franchise is you don't open a second store until you have a perfect working model to go off of. If you've never had to file a tax return for your current rental. Then you need to wait. If you've never read your local and state rental laws. Then you need to WAIT. If you've never had to leave an event early, wake up in the middle of the night, or get a text while you're on a date from one of your tenants. THEN YOU NEED TO WAIT. Give it a year or two. Just learn the unknown about rental properties. Use your first as your test bed. It's WAY more cheaper then if you make a bad mistake and roll it over multiple properties. Finally I will leave you with this. No one on this site, myself included, knows everything there is to know about real estate. Anyone that claims they do, send their ass packing. This is a complex COMPLEX business. There is always something to learn and if you don't have the passion to continue learning then hand it off to someone who does. There is tax law, rental law, city repair law, contract law and this doesn't even include the stuff that makes you money, like knowing how to leverage low or no money down loans. Please take some time and go out and learn. Good luck! -AR |
Is there any downside snapping a picture (or scanning a copy) of every check one writes vs. using a duplicate check? | For me, the main benefit of using duplicate checks is that the copy is created automatically. If I had to take an extra step, whether taking a photo or writing on a stub, I would probably not always remember to do it. There is also the issue that you might need to write a check when you don't have your smartphone with you, or it is broken or has a dead battery, etc. There are various pros and cons of having an electronic record versus a paper record. A paper copy of a check is more vulnerable to physical loss or intrusion, but an electronic record is more vulnerable to hacking. You also have to keep the images organized somehow, and take care of data security and backups for the images. You'll have to evaluate which is the greater concern for you. A minor side point is that check duplicates often omit the account number and obscure your signature. A photo of the original check would include both of these. As far as "evidence", it seems to me they're both equally good evidence that you wrote the check - but that's not really that useful. In most sorts of disputes, what you would need to prove is that you actually delivered the check to the intended recipient, and neither the photo nor the paper copy is evidence of that. You could have written the check, taken your photo / copy, and then torn it up. |
What are the contents of fixed annuities? | This is really two questions about yield and contents. Content As others have noted, an annuity is a contractual obligation, not a portfolio contained within an investment product per se. The primary difference between whether an annuity is fixed or variable is what the issuer is guaranteeing and how much risk/reward you are sharing in. Generally speaking, the holdings of an issuer are influenced by the average "duration" of the payments. However, you can ascertain the assets that "back" that promise by looking at, for example, the holdings of a large insurance or securities firm. That is why issuers are generally rated as to their financial strength and ability to meet their obligations. A number of the market failures you mentioned were in part caused by the failure of these ratings to represent the true financial strength of the firm. Yield As to the second question of how they can offer a competitive rate, there are at least several reasons (I am assuming an immediate annuity) : 1) Return/Depletion of Principal The 7% you are being quoted is the percent of your principal that will be returned to you each year, not the rate of return being earned by the issuer. If you invest $100 in the market personally and get a 5% return, you have $105. However, the annuity's issuer is also returning part of your principal to you each year in your payment, as they don't return your principal when you eventually die. Because of this, they can offer you more each year than they really make in the market. What makes a Ponzi scheme different is that they are also paying out your principal (usually to others), but lie to you by telling you it's still in your account. :) 2) The Time Value of Money A promise to pay you $500 tomorrow costs less than $500 today A fixed annuity promises to pay you a certain amount of money each year. This can be represented as a rate of return calculated based on how much you have to pay to get that annual payment, but it is important to remember that the first payment will be worth substantially more in real purchasing power than the last payment you get. The longer you live, the less your fixed payment is worth in real terms due to inflation! In short, the rate of return has to be discounted for inflation, it is not a "real" rate of return. In other words, if you give me $500 today and I promise to pay you $100 for the next 5 years, I am making money not only because I can invest the money between now and then, but also because $100 will be worth less five years from now than it is today. With annuities, if you want your payment to rise in step with inflation, you have to pay more for that (a LOT more!). These are the two main reasons - here are a few smaller ones: 3) A very long Time Horizon If the stock market or another asset class is performing well/poorly, the issuer can often afford to wait much longer to buy or sell than an individual, and can take better advantage of historical highs and lows over the long term. 4) "Big Boy" investing A large, financially sound issuer can afford to take risks that an individual cannot, such as in very large or illiquid assets, such as a private company (a la Warren Buffet). 5) Efficiencies of scale Institutional investors have a number of legal advantages over individuals, which I won't discuss in detail here. However, they exist. Large issuers are also often in related business (insurance, mutual funds) such that they can deal in large volumes and form an internal clearinghouse (i.e. if I want to buy Facebook and you want to sell it, they can just move the stock around without doing any trading), with the result that their costs of trading are lower than those of an individual. Hope that helps! |
How to compare the value of a Masters to the cost? | I wasn't 100% on which columns of the scale you were referring to, but think I captured the correct ones in this comparison, using the scale for BA and MA (MA scale starting 2 years later, with decreased income reflected for first two years), applying a 1% cost of living increase each year to the scale or to prior year after the scale maxes out and assuming you borrow 40k and repay years 3-10, then the difference and cumulative difference between each scenario: So it would be about 16 years to start coming out ahead, but this doesn't account for the tax deduction of student loan interest. Some things in favor of borrowing for a MA, there are loan forgiveness programs for teachers, you might only make 5-years of minimum payments before having the remainder forgiven if you qualify for one of those programs. Not sure how retirement works for teachers in WA, but in some states you can get close to your maximum salary each year in retirement. Additionally, you can deduct student loan interest without itemizing your tax return, so that helps with the cost of the debt. Edit: I used a simple student loan calculator, if you financed the full 40k at 6% you'd be looking at $444 monthly payments for 10 years, or $5,328/year (not calculating the tax deduction for loan interest). |
Standard Deviation with Asset Prices? | Almost every online datasources provide historical prices on given company / index's performance; from this, you can easily calculate "standard deviation" by yourself. With that said, standard deviation presumes a fixed set of data. Most public corporations have data spanning multiple decades, during which a number of things have changed: For these reasons, I have doubts on simplistic measures, such as "standard deviation" measuring any reality on the underlying vehicle. Professional investors usually tend to more time-point data, such as P/E ratio. |
Official site to follow Warren Buffet's Berkshire Hathaway change in investment holdings? | The official source is the most recent Form 13F that Berkshire Hathaway, which is filed with the Securities & Exchange Commission on a quarterly basis . You can find it through the SEC filing search engine, using BRKA as the ticker symbol. and then looking for the filings marked 13-FR or 13-FR/A (the "/A" indicates an amended filing). As you can see by looking at the 13-F filed for the quarter ending September 30 , the document isn't pretty or necessarily easy to read, hence the popularity of sites such as those that Chad linked to. It is, though, the truly official source from which websites tracking the Berkshire Hathaway portfolio derive their information. |
Should I stockpile nickels? | Probably a big fat NO. Update re this edit: NOTE: I'm not suggesting that I melt the coins. I'm just suggesting that I hold onto the nickels and sell them later when they are worth more than 5 cents. For example, you can sell coins with silver in them for far above their face value. This is silly as an investment. Right up there with stockpiling cars. :) The increase in value will likely never be enough to make the cost/hassle of storage worth it. As MrChrister states, it is a fine idea as a collection, but not as a stockpile. Edit (from the comments): I am surprised I did not latch onto this in the previous update. Silver is considered a previous metal, nickel and copper are not. BTW, the U.S. nickel is 25% nickel and 75% copper. Also, how in the world do you plan on actually selling a stockpile of nickels? |
Is this formula accurate for weighing the difference between an S-Corp and LLC? | FICA/SE taxes are not 30%. They are at most ~15%, including the employer portion. Employer also pays FUTA tax, and has additional payroll expenses (like fees and worker compensation insurance). The employee's FICA portion is limited up to a certain level of earnings (110100 this year, IIRC). Above it you only pay medicare taxes, not social security. S-Corp earnings are not taxed at 15%, these are not dividends. They're taxed at your ordinary income rate. You don't pay SE taxes on it, that's the only difference. I hope you're talking about tax treatment decision, because there are entirely different factors to keep in mind when you're organizing a business and making a decision between being it a LLC or a corporation. I believe you should pay some money to get a real advice that would apply to you, from a EA/CPA who would be doing the number-crunching (hopefully correctly). I'm a tax practitioner, and this answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. |
Hedging against an acquisition of a stock | Firstly, going short on a stock and worrying if the price suddenly gaps up a lot due to good news is the same as being long on a stock and worrying that the price will suddenly collapse due to bad news. Secondly, an out of the money call option would be cheaper than an in the money call option, in fact the further out of the money the cheaper the premium will be, all other things being equal. So a good risk management strategy would be to set your stop orders as per your trading plan and if you wish to have added protection in case of a large gap is to buy a far out of the money call option. The premium should not be too expensive. Something you should also consider is the time until expiry for the option, if your time frame for trading is days to weeks you make consider a cheaper option that expires in about a month, but if you are planning on holding the position for more than a month you might need a longer expiry period on the option, which will increase the premium. Another option to consider, if your broker offers it, is to use a guaranteed stop loss order. You will pay a little premium for this type of order and not all brokers offer it, but if it is offered you will be protected against any price gaps past your guaranteed stop loss price. |
Should we buy a house, or wait? | Advantages of buying: With every mortgage payment you build equity, while with rent, once you sign the check the money is gone. Eventually you will own the house and can live there for free. You can redecorate or remodel to your own liking, rather than being stuck with what the landlord decides is attractive, cost-effective, etc. Here in the U.S. there are tax breaks for homeowners. I'm not sure if that's true in U.K. Advantages of renting: If you decide to move, you may be stuck paying out a lease, but the financial penalty is small. With a house, you may find it difficult to sell. You may be stuck accepting a big loss or having to pay a mortgage on the empty house while you are also paying for your new place. When there are maintenance issues, you call the landlord and it's up to him to fix it. You don't have to come up with the money to pay for repairs. You usually have less maintenance work to do: with a house you have to mow the lawn, clear snow from the driveway, etc. With a rental, usually the landlord does that for you. (Not always, depends on type of rental, but.) You can often buy a house for less than it would cost to rent an equivalent property, but this can be misleading. When you buy, you have to pay property taxes and pay for maintenance; when you rent, these things are included in the rent. How expensive a house you can afford to buy is not a question that can be answered objectively. Banks have formulas that limit how much they will loan you, but in my experience that's always been a rather high upper bound, much more than I would actually be comfortable borrowing. The biggest issue really is, How important is it to you to have a nice house? If your life-long dream is to have a big, luxurious, expensive house, then maybe it's worth it to you to pour every spare penny you have into the mortgage. Other people might prefer to spend less on their house so that they have spare cash for a nice car, concert tickets, video games, cocaine, whatever. Bear in mind that if you get a mortgage that you can just barely afford, what do you do if something goes wrong and you can't afford it any more? What if you lose your job and have to take a lower-paying job? What if some disaster strikes and you have some other huge expense? Etc. On the flip side, the burden of a mortgage usually goes down over time. Most people find that their incomes go up over time, between inflation and growing experience. But the amount of a mortgage is fixed, or if it varies it varies with interest rates, probably bouncing up and down rather than going steadily up like inflation. So it's likely -- not at all certain, but likely -- that if you can just barely afford the payment now, that in 5 or 10 years it won't be as big a burden. |
Should I use regular or adjusted close for backtesting? | A one year period of study - Stock A trades at $100, and doesn't increase in value, but has $10 in dividends over the period. Stock B starts at $100, no dividend, and ends at $105. However you account for this, it would be incorrect to ignore stock A's 10% return over the period. To flip to a real example, MoneyChimp shows the S&P return from Jan 1980 to Dec 2012 as +3264% yet, the index only rose from 107.94 to 1426.19 or +1221%. The error expands with greater time and larger dividends involved, a good analysis won't ignore any dividends or splits. |
Why do people buy insurance even if they have the means to overcome the loss? | For a car, you're typically compelled to carry insurance, and picking up "comprehensive" coverage (fire, theft, act of god) is normally cheap. If the car was purchased with a loan, the lender will stipulate that you carry comprehensive and collision insurance. People buy insurance because it limits their liability. In the grand scheme of things, pricing in a fixed rate of loss every year (insurance premium + potential deductible) is appealing to many versus having to cover a catastrophic loss when your car is wrecked or stolen. |
Back of Check Images are Blank and not Endorsed | In general, a lack of endorsement (meaning nothing written by the receiver on the back of the check) is equivalent to it being endorsed "as deposit only" to a bank that the depositor has an account with. (See Uniform Commercial Code §4-205.) That is, the bank that receives a deposit without any endorsement promises to the banks that process the check along the line all the way back to your bank, that they properly deposited the money into the account of the entity that the check was made out to. With checks being processed with more and more automation, it's getting fairly common for there to be little writing needed on the check itself, as the digital copy gets submitted to the banking system for clearing. If you're concerned about there being some sort of fraud, that perhaps the entity that you're sending money to isn't the ones that should be getting it, or that they're not actually getting the money, or something like that, that's really an entirely different concern. I would expect that if you were saying that you paid something, and the payee said that you hadn't, that you would dispute the transaction with your bank. They should be able to follow the electronic trail to where the money went, but I suspect they only do so as part of an investigation (and possibly only in an investigation that involved law enforcement of some type). If you're just curious about what bank account number your deposit went into, then it just looks like you're the one trying to commit some sort of fraud (even if you're just being curious), and they don't have much incentive to try to help you out there. |
How much life insurance do I need? | If I remember the information in "The Wealthy Barber" correctly, he said: And as someone once said to me, "make sure you're worth more alive than dead!" :-) |
Theoretically, if I bought more than 50% of a company's stocks, will I own the company? | Owning more than 50% of a company's stock normally gives you the right to elect a majority, or even all of a company's (board of) directors. Once you have your directors in place, you can tell them who to hire and fire among managers. There are some things that may stand in the way of your doing this. First, there may be a company bylaw that says that the directors can be replaced only one "class" at a time, with three or four "classes." Then it could take you two or three years to get control of the company. Second, there may be different classes of shares with different voting rights, so if e.g. "A" shares controlled by the founding family gives them ten votes, and "B" shares owned by the other shareholders, you may have a majority of total shares and be outvoted by the "A" shares. |
Why are options created? | In general economic theory, there are always two markets created based on a need for a good; a spot market (where people who need something now can go outbid other people who need the same thing), and a futures market (where people who know they will need something later can agree to buy it for a pre-approved price, even if the good in question doesn't exist yet, like a grain crop). Options exist as a natural extension of the futures market. In a traditional future, you're obligated, by buying the contract, to execute it, for good or ill. If it turns out that you could have gotten a lower price when buying, or a higher price when selling, that's tough; you gave up the ability to say no in return for knowing, a month or three months or even a year in advance, the price you'll get to buy or sell this good that you know you need. Futures thus give both sides the ability to plan based on a known price, but that's their only risk-reduction mechanism. Enter the option. You're the Coors Brewing Company, and you want to buy 50 tons of barley grain for delivery in December in order to brew up for the Super Bowl and other assorted sports parties. A co-op bellies up to close the deal. But, since you're Coors, you compete on price with Budweiser and Miller, and if you end up paying more than the grain's really worth, perhaps because of a mild wet fall and a bumper crop that the almanac predicts, then you're going to have a real bad time of it in January. You ask for the right to say "no" when the contract falls due, if the price you negotiate now is too high based on the spot price. The co-op now has a choice; for such a large shipment, if Coors decided to leave them holding the bag on the contract and instead bought it from them anyway on a depressed spot market, they could lose big if they were counting on getting the contract price and bought equipment or facilities on credit against it. To mitigate those losses, the co-op asks for an option price; basically, this is "insurance" on the contract, and the co-op will, in return for this fee (exactly how and when it's paid is also negotiable), agree to eat any future realized losses if Coors were to back out of the contract. Like any insurance premium, the option price is nominally based on an outwardly simple formula: the probability of Coors "exercising" their option, times the losses the co-op would incur if that happened. Long-term, if these two figures are accurate, the co-op will break even by offering this price and Coors either taking the contract or exercising the option. However, coming up with accurate predictions of these two figures, such that the co-op (or anyone offering such a position) would indeed break even at least, is the stuff that keeps actuaries in business (and awake at night). |
Is it wise to have plenty of current accounts in different banks? | I don't think there's any law against having lots of bank accounts. But what are you really gaining? Every new account is a paperwork hassle. Every new account is another target for con men who might steal your information and write bad checks or make phony credit card purchases in your name. Yes, it's not unreasonable to have a credit card or two that you keep for emergencies. I'd advise anyone with running up debts while having no idea how you will pay them off. But to say that you might keep some credit available so that if you have a legitimate emergency -- like, say, your car breaks down and you don't have the cash to fix it and you can't get to work without it -- you have some a fallback. But do you really need ten credit cards for that sort of thing? And how much credit are they giving you on each card? I don't know how the banks work this, but I'd think if they're rational, they'd consider your total credit before giving you more. I have three credit cards that I use regularly -- two personal and one business. And I find that a real pain to keep track of, to make sure that I keep each one paid by the due date and to keep a handle on how much I owe and so forth. I can't imagine trying to deal with ten. I suppose you could just stuff all these cards in a drawer and only use them in case of emergency. |
How to keep control of shared expenses inside marriage? | Being new does not allow me yet to vote on your question, but what a good question it is. We share our opinion in separating finances in our very well going mariage. Currently I have found a sort of okay solution in two websites. These are http://www.yunoo.nl and http://www.moneytrackin.com/. You can actually tag spendings with multiple tags. I don't like the idea that the data is on a remote server, but since I have not found a proper local software solution, I just naively trust their promise that your data is save. Then again our financial situation is not that special. |
How to distinguish gift from payment for the service? | Most people will never need to pay federal gift taxes. The federal gift taxes start after giving away 5.34 million over the course of your life. This number is adjusted annually for inflation. There are only two states that I know of which impose state gift taxes (Connecticut and Minnesota); in Connecticut, you need to start paying taxes if the lifetime value of your gifts exceed two million. In Minnesota, it starts at 1 million. The federal tax is paid for by the person making the gift, unless other arrangements are made. There is an annual exclusion amount of approximately $14,000. You can give up to this amount to any number of recipients and it is not considered taxable. Therefore, when you give $100 to someone, it is not a taxable event. If you do make a gift to an individual in excess of 14k, you'll need to file a gift tax return (IRS Form 709). When you file form 709, you won't need to pay taxes until the 5.34 million is exceeded. Instead, you can claim an exemption. Since most people don't exceed that amount, its rare to ever pay taxes even when exceeding the annual exclusion amount. The annual exclusion amount is adjusted each year for inflation. |
Optimal balence of 401K and charitable savings | Two things I would recommend doing: I would save a minimum of 15% into retirement. By young I will assume that you are under 30. 15K/year + company match will grow into a sick amount of money by the time you are in your 60s. So you have a net worth that is north of 5 million. What kind of charitable giving can you do then? Answer: What ever you want! Also it could be quite a bit more then that. Get a will. It will cost a little bit of money, but for someone like you it is important to have your wishes known. |
What are the advantages of paying off a mortgage quickly? | The main reason for paying your mortgage off quickly is to reduce risk should a crisis happen. If you don't have a house payment, you have much higher cash flow every month, and your day-to-day living expenses are much lower, so if an illness or job loss happens, you'll be in a much better position to handle it. You should have a good emergency fund in place before throwing extra money at the mortgage so that you can cover the bigger surprises that come along. There is the argument that paying off your mortgage ties up cash that could be used for other things, but you need to be honest with yourself: would you really invest that money at a high enough rate of return to make up your mortgage interest rate after taxes? Or would you spend it on other things? If you do invest it, how certain are you of that rate of return? Paying off the mortgage saves you your mortgage interest rate guaranteed. Finally, there is the more intangible aspect of what it feels like to be completely debt free with no payments whatsoever. That feeling can be a game-changer for people, and it can free you up to do things that you could never do when you're saddled with a mortgage payment every month. |
Consumer Loans vs Mortgages | I went here: Consumer Loan Law. It seems that a consumer loan is anything other than a business loan or mortgage. However, in California it seems to include a mortgage. It's a bit weird to see that a HEL can be considered a consumer loan even if it is the primary or the only loan on a property. Getting a HEL can be a great low cost way to (re)finance a property as they tend to have low or no closing costs and lower interest rates. |
Is giving my girlfriend money for her mortgage closing costs and down payment considered fraud? | With the standard "I am not a lawyer" disclaimer, consider this question: If you and your girlfriend split up sometime after purchasing the house but before getting married, would you expect her to repay you for the closing costs and downpayment? That is, if you write her a check for $5k, and 6 months after she signs the papers for the house one of you decides to break up with the other, would you expect her to write you a check for $5k in return? That is the difference between "a gift" and "a loan disguised as a gift". If the answer is no, you don't expect it back, then everything is fine and you're in the clear - it's perfectly legal to give someone money. If the answer is yes, you would want to be "paid back", then it's not a gift and you run the risk of running afoul of the regulations. With respect to a previous answer about "gifting money that is not taxed", in the US one person can give another up to $14,000 without worrying about gift taxes, and even in the event that you exceed that amount, the excess would simply eat into the lifetime exemption of $5,250,000. (Individual states may have different rules and exempt amounts that would apply to state taxes.) Please also consider the income issue for your "rental agreement". Your GF would be expected to declare that amount and pay income tax on it as a business. She might also declare part of that amount as expected income for purposes of securing the loan, but that may run into its own issues (you're not a roommate, and presumably the home is not a duplex or set up as apartments, and presumably she would not offer a similar deal to someone other than you). |
FSA when a retirement agreement has been put into place | There's no reason for the employer not to deduct the whole amount before you leave. The FSA salary deduction has to be periodical, but it doesn't have to be calculated over a year. It just means that an equal amount will be deducted from your every paycheck, and if the employer (and you) know that your last paycheck is on June 30th even before the year starts - there's nothing to stop the employer from calculating the periodic payments so that it will cover your full FSA amount before you leave. That is, of course, other than mere convenience (it may be easier/cheaper to just give you the extra $1275 than to deal with the special case deduction calculation). This is different from unexpected termination/resignation, where the employer couldn't have made such an assumption and thus the periodic payments were calculated over a year. See pub. 969. The selection is annual - the deductions are periodical. |
Why buy bonds in a no-arbitrage market? | For safety. If something catastrophic happens to your bank and your money is in there you will lose any not covered by FDIC. So if you have a very large amount of money you will store it in bonds as its much less likely that the US treasury will go bankrupt than your bank. I also literally just posted this in another thread: Certain rules and regulations penalize companies or institutions for holding cash, so they are shifting to bonds and bills. Fidelity, for example, is completely converting its $100 billion dollar cash fund to short term bills. Its estimated that over $2 trillion that is now in cash may be converted to bills, and that will obviously put upward preasure on the price of them. The treasury is trying to issue more short term debt to balance out the demand. read more here: http://www.wsj.com/articles/money-funds-clamor-for-short-term-treasurys-1445300813 |
What is a “fiat” currency? Are there other types of currency? | There's two types of categories at play that define currency types - but I think the first is more like what you are after. The first is there are essentially three currency types now recognised - see them described here: http://finance.mapsofworld.com/money/types/ The second is currencies can be categorised by the type of economy from which they are generated (reserve/commodity/etc) - see them described here: http://www.forextraders.com/learn-forex-trading-course/major-currency-pairs.html |
Where do large corporations store their massive amounts of cash? | You can find out the general types of investments by reading the public corporation 10-Q report that is filed with the SEC it can be accessed via the EDGAR system. It will not tell you what securities they have, but it does identify the short term and long term investments categories and their value. |
Who Can I Hire To Calculate the Value of An Estate? | Generally, it would be an accountant. Specifically in the case of very "private" (or unorganized, which is even worse) person - forensic accountant. Since there's no will - it will probably require a lawyer as well to gain access to all the accounts the accountant discovers. I would start with a good estate attorney, who in turn will hire a forensic accountant to trace the accounts. |
Lump sum annuity distribution — do I owe estate tax? | If you are the beneficiary of an annuity, you might receive a single-sum distribution when the annuity owner dies. The amount of this death benefit might be the current cash value of the annuity or some other amount based upon contract riders that the owner purchased. The tax on death benefits depends on a number of factors. Death benefits are taxed as normal income. Unlike other investments, the named beneficiary of a non-qualified annuity does not get a step-up in tax basis to the date of death. However, that doesn't mean the beneficiary will have to pay taxes on the full amount. Because the purchaser of the annuity made the investment with after-tax dollars, only the amount attributable to investment income is taxed, but it will be taxed as ordinary income and not enjoy any special capital gains treatment. When there is a death benefit that exceeds the value of the account, that additional amount is also taxed as ordinary income. Taxes on annuities depend on several circumstances: For more information on distribution of inherited annuities and taxes - go to Annuities HQ-- http://www.annuitieshq.com/articles/distribution-options-inherited-annuity/ they go into details that could help you even more. One thing that Annuities HQ points out is if you take the lump sum payout, you may be pushed into a higher tax bracket. Along with doing research I would also contact a financial advisor! |
How can I diversify $7k across ETFs and stocks? | nan |
Do I need to pay tax on the amount of savings I have in the bank? | Not for the amount in the accounts but for the interest you earn per year is taxable. But the sum of your all taxable incomes is under the limit, then you dont need to pay any income tax. The limit is available at wiki here But you should intimate your bank not to deduct TDS (Tax Deducted at Source) by submitting Form 15G/15H (which will be normally available in Bank itself), provided your total interest income for the year will not fall within overall taxable limits. You may calculate your income tax amount at Official website at here |
What do these numbers mean for the S&P? | USB is the ticker for US Bancorp. The numbers to me look like their prediction of the return for the day, I could be wrong but I think that's what it is. |
Is this Employee Stock Purchase Plan worth it when adding my student loan into the equation? | The closer the contribution is to the December 31st date, the more profitable that specific contribution is, only taking into consideration the 5% discount. On your case, the first contribution that beats your student loans interest rate is the August one, where you get about 9% annual return, the remaining contributions go up from there. |
My bank wants to lower my credit limit on my credit card. Will this impact me negatively? | Will having a lower credit limit, which I will still never reach, negatively impact my ability to get a mortgage in future? This would increase your utilization, the percentage of your total available credit that you use at any one time. Because it decreases the divisor, your total available credit, while not changing the dividend, the amount of your credit that you use. In the United States, you generally want utilization to be between 8% and 30%. So if this increases your utilization, it could hurt your credit score (or if your utilization is low enough, possibly help it). I do not know if the rule is the same in the United Kingdom or not, but this site claims that it is at least similar. 22% is an OK utilization, assuming you have no other debt. But a utilization of 17% is closer to 8% and may be better. It may be worth calling them to keep your credit limit where it is if they don't ask too much from you. |
What exactly is a “bad,” “standard,” or “good” annual raise? If I am told a hard percentage and don't get it, should I look elsewhere? | Any such number would depend on the country, the market, and the economic situation - especially inflation ratio. Generally, if you are not in a booming or a dying technology, getting a raise above the inflation ratio is 'good'; anything below is poor. |
What happens after a counterparty defaults on a derivative trade? | The answer is in your question: derivatives are contracts so are enforced in the same way as any other contract. If the counterparty refuses to pay immediately they will, in the first instance be billed by any intermediary (Prime Broker etc.) that facilitated the contract. If they still refuse to pay the contract may stipulate that a broker can "net off" any outstanding payments against it or pay out using deposited cash or posted margins. The contract will usually include the broker as an interested party and so they can, but don't need to, report a default (such that this is) to credit agencies (in some jurisdictions they are required to by law). Any parties to the trade and the courts may use a debt collection agency to collect payments or seize assets to cover payment. If there is no broker or the counterparty still has not paid the bill then the parties involved (the party to the trade and any intermediaries) can sue for breach of contract. If they win (which would be expected) the counterparty will be made to pay by the legal system including, but not limited to, seizure of assets, enforced bankruptcy, and prison terms for any contempts of court rulings. All of this holds for governments who refuse to pay derivatives losses (as Argentina did in the early 20th century) but in that case it may escalate as far as war. It has never done so for derivatives contracts as far as I know but other breaches of contract between countries have resulted in armed conflict. As well as the "hard" results of failing to pay there are soft implications including a guaranteed fall in credit ratings that will result in parties refusing to do business with the counterparty and a separate loss of reputation that will reduce business even further. Potential employees and funders will be unwilling to become involved with such a party and suppliers will be unwilling to supply on credit. The end result in almost every way would be bankruptcy and prison sentences for the party or their senior employees. Most jurisdictions allow for board members at companies in material breach of contract to be banned from running any company for a set period as well. edit: netting off cash flows netting off is a process whereby all of a party's cash flows, positive and negative, are used to pay each other off so that only the net change is reflected in account balances, for example: company 1 cash flows netting off the total outgoings are 3M + 500k = 3.5M and total incomings are 1.2M + 1.1M + 1.2M = 3.5M so the incoming cash flows can be used to pay the outgoing cash flows leaving a net payment into company1's account of 0. |
What does a contract's worth mean? | It means $400m expected revenue, likely spread out over multiple years as it gets implemented, and not entirely guaranteed to happen as they still need to fulfill the contract. The impact on the stock price is complex - it should be positive, but nowhere close to a $400m increase in market cap. If the company is expected to routinely win such contracts, it may have no significant effect on the stock price, as it's already priced in - say, if analysts expect the company to win 1.2b contracts in this fiscal year, and now they've done 1/3 of that, as expected. |
What's are the differences between “defined contribution” and “defined benefit” pension plans? | In short, defined contribution plans yield different amounts of return based on the market whereas defined benefit plans yield predetermined amounts defined based on factors such as salary and years of service. |
Is being a landlord a good idea? Is there a lot of risk? | If you are able to buy a 150K home for 50K now that would be a good deal! However, you can't you have to borrow 100K in order to make this deal happen. This dramatically increases the risk of any investment, and I would no longer classify it as passive income. The mortgage on a 150K place would be about 710/month (30 year fixed). Reasonably I would expect no more than 1200/month in rent, or 14,400. A good rule of thumb is to assume that half of rental revenue can be counted as profit before debt service. So in your case 7200, but you would have a mortgage payment of 473/month. Leaving you a profit of 1524 after debt service. This is suspiciously like 2K per year. Things, in the financial world, tend to move toward an equilibrium. The benefit of rental property you can make a lot more than the numbers suggest. For example the home could increase in value, and you can have fewer than expected repairs. So you have two ways to profit: rental revenue and asset appreciation. However, you said that you needed passive income. What happens if you have a vacancy or the tenant does not pay? What happens if you have greater than expected repairs? What happens if you get a fine from the HOA or a special assessment? Not only will you have dip into your pocket to cover the payment, you might also have to dip into your pocket to cover the actual event! In a way this would be no different than if you borrowed 100K to buy dividend paying stocks. If the fund/company does not pay out that month you would still have to make the loan payment. Where does the money come from? Your pocket. At least dividend paying companies don't collect money from their shareholders. Yes you can make more money, but you can also lose more. Leverage is a two edged sword and rental properties can be great if you are financial able to absorb the shocks that are normal with ownership. |
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