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Buying puts without owning underlying | Yes, it's completely normal to buy (and sell) puts and other options without holding the underlying. However, every (US) brokerage I know of only permits this within a margin account. I don't know why...probably a legal reason. You don't actually have to use the margin in a margin account. If you want to trade options, though, you will need a margin account. |
Not paying cash for a house | You could use the money to buy a couple of other (smaller) properties. Part of the rent of these properties would be used to cover the mortgage and the rest is income. |
What options do I have at 26 years old, with 1.2 million USD? | Others have given a lot of advice about how to invest, but as a former expat I wanted to throw this in: US citizens living and investing overseas can VERY easily run afoul of the IRS. Laws and regulations designed to prevent offshore tax havens can also make it very difficult for expats to do effective investing and estate planning. Among other things, watch out for: US citizens owe US income tax on world income regardless of where they live or earn money FBAR reporting requirements affect foreign accounts valued over $10k The IRS penalizes (often heavily) certain types of financial accounts. Tax-sheltered accounts (for education, retirement, etc.) are in the crosshairs, and anything the IRS deems a "foreign-controlled trust" is especially bad. Heavy taxes on investment not purchased from a US stock exchange Some US states will demand income taxes from former residents (including expats) who cannot prove residency in a different US state. I believe California is neutral in that regard, at least. I am neither a lawyer nor an accountant nor a financial advisor, so please take the above only as a starting point so you know what sorts of questions to ask the relevant experts. |
Direct Registration System vs Brokerage Firm | You'll need to talk to your broker about registering positions you already hold. I would personally expect this will cost you a not-insignificant fee. And I don't think you'll be able to do this on any shares held in a tax-advantaged account. That said, I'd recommend you go to the Investors sections of the company's website in question. This will usually tell you who the registrar of the company's stock is, and if they offer any direct-purchase, or DRIP, programs. You should find out from these contacts and program details how the direct program works and what it's costs are. I suspect, but have no firsthand knowledge that this will be true, that you'll end up with lower costs if you just sell the shares in your brokerage, take the cash out, send the cash to the registrar and re-purchase shares that way. I say this only because I know, from inheritance situations, that de-registering stock cost me a $75 fee at my brokerage, whereas transactions at the registrar were $19.95. My answers to your direct questions: (Edited to fully answer the question with itemized answers.) |
When a publicly traded company splits into two how are common shares fairly valued, distributed? | How are shareholders sure to receive a fair percentage of each company? At the time the split occurs, each investor owns the same proportion of each new company that they owned in the first. What the investor does with it after that (selling one, for example) is irrelevant from a fairness perspective. Suppose company A splits into companies B and C. You own enough stock to have 1% of A. It splits. Now you have a bunch of shares of B and C. How much? Well, you have 1% of B and 1% of C. What if all the profitable projects are in B? Then shares of B will be worth more than those of C. But it should be the case that the value of your shares of B plus the value of your shares of C are equal to the original value of your shares of A. Completely fair. In fact, if the split was economically justified, then B + C > A. And the gains are realized proportionally by all equityholders. Remember, when a stock splits, every share splits so that everyone owns both companies in the same proportion as everyone else. Executives don't determine what the prices of the resulting companies are...that is determined by the market. A fair market will value the child companies such that together they are worth what the original was. |
Financing with two mortgages: a thing of the past? | There are a few of ways to do this: Ask the seller if they will hold a Vendor Take-Back Mortgage or VTB. They essentially hold a second mortgage on the property for a shorter amortization (1 - 5 years) with a higher interest rate than the bank-held mortgage. The upside for the seller is he makes a little money on the second mortgage. The downsides for the seller are that he doesn't get the entire purchase price of the property up-front, and that if the buyer goes bankrupt, the vendor will be second in line behind the bank to get any money from the property when it's sold for amounts owing. Look for a seller that is willing to put together a lease-to-own deal. The buyer and seller agree to a purchase price set 5 years in the future. A monthly rent is calculated such that paying it for 5 years equals a 20% down payment. At the 5 year mark you decide if you want to buy or not. If you do not, the deal is nulled. If you do, the rent you paid is counted as the down payment for the property and the sale moves forward. Find a private lender for the down payment. This is known as a "hard money" lender for a reason: they know you can't get it anywhere else. Expect to pay higher rates than a VTB. Ask your mortgage broker and your real estate agent about these options. |
Is the stock market a zero-sum game? | No, the stock market and investing in general is not a zero sum game. Some types of trades are zero sum because of the nature of the trade. But someone isn't necessarily losing when you gain in the sale of a stock or other security. I'm not going to type out a technical thesis for your question. But the main failure of the idea that investing is zero sum is the fact the a company does not participate in the transacting of its stock in the secondary market nor does it set the price. This is materially different from the trading of options contracts. Options contracts are the trading of risk, one side of the contract wins and one side of the contract loses. If you want to run down the economic theory that if Jenny bought her shares from Bob someone else is missing out on Jenny's money you're free to do that. But that would mean that literally every transaction in the entire economy is part of a zero sum game (and really misses the definition of zero sum game). Poker is a zero sum game. All players bet in to the game in equal amounts, one player takes all the money. And hell, I've played poker and lost but still sometimes feel that received value in the form of entertainment. |
Employer 401K thru Fidelity - Investment options | The best predictor of mutual fund performance is low expense ratio, as reported by Morningstar despite the fact that it produces the star ratings you cite. Most of the funds you list are actively managed and thus have high expense ratios. Even if you believe there are mutual fund managers out there that can pick investments intelligently enough to offset the costs versus a passive index fund, do you trust that you will be able to select such a manager? Most people that aren't trying to sell you something will advise that your best bet is to stick with low-cost, passive index funds. I only see one of these in your options, which is FUSVX (Fidelity Spartan 500 Index Fund Fidelity Advantage Class) with an exceptionally low expense ratio of 0.05%. Do you have other investment accounts with more choices, like an IRA? If so you might consider putting a major chunk of your 401(k) money into FUSVX, and use your IRA to balance your overall porfolio with small- and medium-cap domestic stock, international stock, and bond funds. As an aside, I remember seeing a funny comment on this site once that is applicable here, something along the lines of "don't take investment advice from coworkers unless they're Warren Buffett or Bill Gross". |
Can I trust the Motley Fool? | The Motley Fool is generally regarded as relatively legit, at least in that they're not likely to do anything outright fraudulent and they definitely have reasonably in-depth content to provide you. The Motley Fool makes a fair amount of money off the subscriptions, though, and they do hawk them quite violently. If I didn't have a generally good opinion of them to begin with, I'd have been completely put off as well. It's pretty shameful. I don't think it's worth hundreds of dollars a year, but then again, I don't look at investing as a second career like the Fool likes to suggest, either. |
Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? | The time to have looked into this is before you bought the condo, not now. You are presumably an adult. Your parents have apparently made it possible for you to have a roof of your own over your head for what is probably below rental rates (but I don't know your area, so can't say). From their point of view, they may have been doing you a favor, while giving themselves an investment opportunity. What would they be doing with that money otherwise, and at a higher or lower rate of return, and with greater or lesser risk? Where and how would you be living otherwise? More Importantly, if you can't talk to them about this you have bigger problems than money. |
Are variable rate loans ever a good idea? | It all has to do with risk and reward. The risk is that interest rates will rise. To entice you to go with the variable, they make it so it is cheaper if interest rates never rise. Your job is to guess whether interest rates are likely to go up or not. In a first approximation, you should go fixed. The bank employs very smart people whose entire job is to know whether interest rates will go up or not. Those people chose the price difference between the two, and it's sure to favour the bank. That is, the risk of extra payments you'll make on the variable is probably more than the enticement. But, some people can't sleep at night if their payments (or more realistically, the interest part of their payments) might double. If that's you, go fixed. If that's not you, understand that the enticement actually has to be turned up a bit, to get more people to go variable, because of the sleeping-at-night feature. Think long and hard about your budget and what would happen if your payment jumped. If you could handle it, variable might be the better choice. Personally, I have been taking "variable" on my mortgage for decades (and now I don't have one) and never once regretted it. I also counselled my oldest child to take variable on her mortgage. Over this century so far, if rates ticked up, they didn't tick up to the level the fixed was offered at. Mostly they have sat flat. But if ever there was a world in which "past performance does not predict future results" it would be interest rate trends. Do your own research. |
Can anybody explain “cut their exposure to equities” and “fat and flat range” for me, please? | Someone's (or, a bank's) "exposure to equities" refers to the amount of value which has a risk that fluctuates with the equities market (ie: the stock market). In very broad terms, I think it might make sense to say that exposure to equities could mean, for example, owning many rental properties, if the rental market was "highly correlated" with the equities market. That is - if house prices go down when the equities market goes down, and if that relationship is very strong, then owning a house means you are exposed to the equities market. However, in the sense it is used there, it seems to mean direct exposure to equities - ie: owning stocks and stock-based funds. |
Are the stocks of competitor companies negatively correlated? | It is important to first understand that true causation of share price may not relate to historical correlation. Just like with scientific experiments, correlation does not imply causation. But we use stock price correlation to attempt to infer causation, where it is reasonable to do so. And to do that you need to understand that prices change for many reasons; some company specific, some industry specific, some market specific. Companies in the same industry may correlate when that industry goes up or down; companies with the same market may correlate when that market goes up or down. In general, in most industries, it is reasonable to assume that competitor companies have stocks which strongly correlate (positively) with each-other to the extent that they do the same thing. For a simple example, consider three resource companies: "Oil Ltd." [100% of its assets relate to Oil]; "Oil and Iron Inc." [50% of its value relates to Oil, 50% to Iron]; and "Iron and Copper Ltd." [50% of its value relates to Iron, 50% to Copper]. For each of these companies, there are many things which affect value, but one could naively simplify things by saying "value of a resource company is defined by the expected future volume of goods mined/drilled * the expected resource price, less all fixed and variable costs". So, one major thing that impacts resource companies is simply the current & projected price of those resources. This means that if the price of Oil goes up or down, it will partially affect the value of the two Oil companies above - but how much it affects each company will depend on the volume of Oil it drills, and the timeline that it expects to get that Oil. For example, maybe Oil and Iron Ltd. has no currently producing Oil rigs, but it has just made massive investments which expect to drill Oil in 2 years - and the market expects Oil prices to return to a high value in 2 years. In that case, a drop in Oil would impact Oil Inc. severely, but perhaps it wouldn't impact Oil and Iron Ltd. as much. In this case, for the particular share price movement related to the price of Oil, the two companies would not be correlated. Iron and Copper Ltd. would be unaffected by the price of Oil [this is a simplification; Oil prices impact many areas of the economy], and therefore there would be no correlation at all between this company's shares. It is also likely that competitors face similar markets. If consumer spending goes down, then perhaps the stock of most consumer product companies would go down as well. There would be outliers, because specific companies may still succeed in a falling market, but in generally, there would be a lot of correlation between two companies with the same market. In the case that you list, Sony vs Samsung, there would be some factors that correlate positively, and some that correlate negatively. A clean example would be Blackberry stock vs Apple stock - because Apple's success had specifically negative ramifications for Blackberry. And yet, other tech company competitors also succeeded in the same time period, meaning they did not correlate negatively with Apple. |
Did the New York Stock Exchange ever close on a weekday so they could file paperwork? | Yes, from June 1968 until December 1968, they closed the NYSE every Wednesday so they could catch up on paperwork representing billions of dollars in unprocessed transactions. Even after the NYSE re-opened on Wednesdays in January 1969, they still had to close it early at 2pm for seven more months. Forbes has a description of this: Not to be forgotten, though, is the Paperwork Crunch. In a day of email and the Cloud and trading completed in microseconds, the idea that Wall Street needed Wednesdays off in the late 1960′s to catch up on back-office tasks seems especially quaint. Yet, in 1968, the NYSE found itself sitting on more than $4 billion in unprocessed transactions. Trading had risen to 21 million shares daily; by contrast, even in the heavy volume days in 1929, trading never went above 16 million shares. Papers stacked on desks. A (now old) joke formed: If a fan blew the wrong way in a Wall Street office, visitors below could expect a ticker-tape parade. “Everybody agreed that the securities-processing system had virtually broken down, and the only major point of dispute was who was more responsible for the mess: the back offices of the brokerage firms of the stock-transfer agents,” Securities and Exchange Commission Commissioner Ray Garrett, Jr. said in 1974. Some 100 broker-dealers failed, crumbling under the pressure of fulfilling those back-orders. The fix: an organization akin to the FDIC, the Securities Investor Protection Corporation. Wall Street would stick to the shortened weeks from June to December; in January, Wednesday trading resumed, though it ended early at 2 for another seven months. |
What are the advantages and disadvantages of leasing out a property or part of a property (such as a basement apartment)? | The obvious advantage is turning your biggest liability into an income-generating asset. The downside are: (1), you have to find tenants (postings, time to show the place, credit/background check, and etc) (2), you have to deal with tenants (collection of rent, repairs of things that broke by itself, complaints from neighbors, termination, and etc) (3), you have to deal with the repairs In many ways, it's no different from running another (small) business, so it all boils down to how much time you are willing to invest and how handy you are in doing reno's and/or small repairs around the house. For profitability/ROI analysis, you want to assume collection of 11 months of rent per year (i.e. assume tenant doesn't renew after year, so you have the worst case scenario) and factor in all the associated expense (be honest). Renting out a second property is a bit tricky as you often have to deal with a large operating expense (i.e. mortgage), and renting a basement apartment is not bad financially and you will have to get used to have "strangers" downstairs. |
How should I pay off my private student loans that have a lot of restrictions? | It's definitely NOT a good idea to pay off one of the smaller loans in your case - a $4k payment split across all the loans would be better than repaying the 5% / $4k loan completely, as it's the most beneficial of your loans and thus is last priority for repayment. A payment that splits across all the loans equally is, in effect, a partial repayment on a loan with an interest rate of 6.82% (weighed average rate of all your loans). It's not as good as repaying a 7% loan, but almost as good. It might be an option to save up until you can repay one of your 7% loans, but it depends - if it takes a lot of time, then you would've paid unneccessary interest during that time. |
Property Trust - who or what is the Owner? | I am not a lawyer, and I am assuming trusts in the UK work similar to the way they work in the US... A trust is a legally recognized entity that can act in business transactions much the same way as a person would (own real property, a business, insurance, investments, etc.). The short answer is the trust is the owner of the property. The trust is established by a Grantor who "funds" the trust by transferring ownership of items from him or herself (or itself, if another trust or business entity like a corporation) to the trust. A Trustee is appointed (usually by the Grantor) to manage the trust according to the conditions and terms specified in the trust. A Trustee would be failing in their responsibility (their fiduciary duty) if they do not act in accordance with the purposes of the trust. (Some trusts are written better than others, and there may or may not be room for broad interpretation of the purposes of the trust.) The trust is established to provide some benefit to the Beneficiary. The beneficiary can be anyone or anything, including another trust. In the US, a living trust is commonly used as an estate planning tool, where the Grantor, Trustee, and Beneficiary are the same person(s). At some point, due to health or other reasons, a new trustee can be appointed. Since the trust is a separate entity from the grantor and trustee, and it owns the assets, it can survive the death of the grantor, which makes it an attractive way to avoid having to probate the entire estate. A good living trust will have instructions for the Trustee on what to do with the assets upon the death of the Grantor(s). |
Should I pay myself a dividend or a salary? | In cases like this you should be aware that tax treaties may exist and that countries are generally willing to enter into them. Their purpose is to help prevent double taxation. Tax treaties often times give you a better tax rate than even being a resident of the countries in question! (For instance, the Italy to US tax rate is lower than simply doing business in many United States) This should guide your google search, here is something I found for Germany/Spain http://tmagazine.ey.com/wp-content/uploads/2011/03/2011G_CM2300_Spain-Germany-sign-new-tax-treaty.pdf It appears that the dividend tax rate under that treaty is 5% , to my understanding, the income tax rates are often multiples higher! I read that spain's income tax rate is 18% So what I would do is see if there is the possibility of deferring taxes in the lower tax jurisidiction and then doing a large one time dividend when conveninet. But Germany isn't really known for its low taxes, being a Federal Republic, the taxes are levied by both the states and the federal government. Look to see if your business structure can avoid being taxed as the entity level: ie. your business' earnings are always distributed to the owners - which are not germany citizens or residents - as dividends. So this way you avoid Germany's 15% federal corporate tax, and you avoid Spain's 18% income tax, and instead get Spanish dividends at 5% tax. Anyway, contact a tax attorney to help interpret the use of the regulations, but this is the frame of mind you should be thinking in. Because it looks like spain is willing to do a tax credit if you pay taxes in germany, several options here to lower your tax footprint. |
Is there any US bank that does not charge for incoming wire transfers? | Being into Business since years and having clients worldwide I receive a lot of payments via wire transfers. Some in business and some in personal checking accounts. I have never been charged by my bank for any incoming wire. And by the way I bank with HSBC and BoA in the US. Actually the charges on the account depends on the type of account you are opening/holding with the bank. With a tight competition in the finance and banking industry you can always demand the bank for the services you want and the pricing you want. The best thing to do is ask your bank if they can wave those incoming wire charges for you and if not you have a whole bunch of options. |
Why does gold have value? | I use to play marbles at school. Marbles were like gold the more you had the richer you were. They were a scarce commodity only a few in circulation. Once I secured a wealth of marbles I realized they were of little real value. They were only of illusory value. As long as we all were deceived into believe they had value they I was rich. Sure marble could be used to make marble floors ;) they were lovely to look at, and every one wanted them. Then one day, I discovered the emperor had no clothes. Wow, the day that everyone sees the true value of gold, what a stock market crash that will be. I tried to avoid gold as much as possible, but this is hard to do in todays stock market. My solace is that we will all be in the same golden (Titanic) boat, only I hope to limit my exposure as much as possible. Anyone want a gold watch for a slice of bread? |
Why do gas stations charge different amounts in the same local area? | I only have anecdotal evidence here as members of my family used to own a grocery store / gas station, but they were often time charged much more to have the gasoline delivered to than many gas stations which were just a mile or two away (up to 15% more). Also depending upon the branding of the gas station, they are required to use certain distributors (i.e. if you are an Exxon gas station you can only use a few select vendors) which gave them less control of their final cost. All in all the gasoline often had smaller margins than items in the grocery store, which are already extremely low. |
When a stock price rises, does the company get more money? | Not directly. But companies benefit in various ways from a higher stock price. One way a high stock price can hurt a company is that many companies do share buybacks when the price is too high. Economically speaking, a company should only buy back shares when those shares are undervalued. But, management may have incentives to do buybacks at irrationally high prices. |
How much percent of my salary should I use to invest in company stock? | What most respondents are forgetting, is when a company allows its employees to purchase its shares at a discount with their salary, the employee is usually required to hold the stock for a number of years before they can sell them. The reason the company is allowing or promoting its employees to purchase its shares at a discount is to give the employees a sense of ownership of the company. Being a part owner in the company, the employee will want the company to succeed and will tend to be more productive. If employees were allowed to purchase the shares at a discount and sell them straight away, it would defeat this purpose. Your best option to decide whether or not to buy the shares is to work out if the investment is a good one as per any other investment you would undertake, i.e. determine how the company is currently performing and what its future prospects are likely to be. Regarding what percentage of pay to purchase the shares with, if you do decide to buy them, you need to work that out based on your current and future budgetary needs and your savings plan for the future. |
Why are stocks having less institutional investors a “good thing”? | Its pretty much always a positive to have large institutional investors. Here's a few cases where I can see an argument against large institutional investors: In recent years, we've seen corporate raiders and institutional investors that tend to influence management in ways that are focused on short term gain. They'll often go for board seats and disrupt the existing management team. It can serve as a distraction and really hurt morale. Institutional investors also have rules in their prospectus that they are required to abide by. For example, some institutional investors will not hold on to stock below $5. This really affected major banking stocks, some of which ended up doing reverse stock splits to keep their share price high. Institutional investors will also setup specific funds that require a stock to be listed as part of an index (i.e. the SPY, DJIA etc.,). When a stock is removed from an index, big investors leave quickly and the share price suffers. In recent months, companies like Apple have made their share price more affordable to attract retail investors. It gives an opportunity for retail to feel even more connected to the company. I'm not sure how much this affects overall sales... Generally, a good stock should be able to attract both retail and institutional investors. If there's not a good mix, then its usually a sign that somethings amiss. |
Do I not have a credit score? | Generally, if you have a loan, you have a credit score. But since you have never had a loan before, then it is likely that you do not have a credit score. You should not be worried if you aren't planning on applying for credit and/or loans. If you are wanting to purchase a house, car, or even just having a credit card, you should work on obtaining a secure loan so then you can establish history. Most of the time you have to pay to view your credit score. By law, you can obtain a free copy of your credit report, which it sounds like you have at annualcreditreport.com, which only shows your payment history, but in order to view your credit score, you generally have to pay for it. |
Is short selling a good hedging strategy during overzealous market conditions? | I saw that an answer hasn't been accepted for this yet: Being bearish is a good hedging strategy. But being hedged is a better hedging strategy. The point being that not everything in investments is so binary (up, and down). A lot of effective hedges can have many more variables than simply "stock go up, stock go down" As such, there are many ways to be bearish and profit from a decline in market values without subjecting yourself to the unlimited risk of short selling. Buying puts against your long equity position is one example. Being long an ETF that is based on short positions is another example. |
Good habits pertaining to personal finance for someone just getting started? | nan |
If gold's price implodes then what goes up? | It seems that you're interested in an asset which you can hold that would go up when the gold price went down. It seems like a good place to start would be an index fund, which invests in the general stock market. When the gold market falls, this would mainly affect gold mining companies. These do not make up a sizable portion of any index fund, which is invested broadly in the market. Unfortunately, in order to act on this, you would also have to believe that the stock market was a good investment. To test this theory, I looked at an ETF index fund which tracks the S&P 500, and compared it to an ETF which invests in gold. I found that the daily price movements of the stock market were positively correlated with the price of gold. This result was statistically significant. The weekly price movements of the stock market were also correlated with the price of gold. This result was also statistically significant. When the holding period was stretched to one month, there was still a positive relationship between the stock market's price moves and the price of gold. This result was not statistically significant. When the holding period was stretched to one year, there was a negative relationship between the price changes in the stock market and the price of gold. This result was not statistically significant, either. |
Will ADR owner enjoy same benefit as common shares holders | The essential difference b/n ADR and a common share is that ADR do not have Voting rights. Common share has. There are some ADR that would in certain conditions get converted to common stock, but by and large most ADR's would remain ADR's without any voting rights. If you are an individual investor, this difference should not matter as rarely one would hold such a large number of shares to vote on General meeting on various issues. The other difference is that since many countries have regulations on who can buy common shares, for example in India an Non Resident cannot directly buy any share, hence he would buy ADR. Thus ADR would be priced more in the respective market if there is demand. For example Infosys Technologies, an India Company has ADR on NYSE. This is more expensive around 1.5 times the price of the common share available in India (at current exchange rate). Thus if you are able to invest with equal ease in HK (have broker / trading account etc), consider the taxation of the gains in HK as well the tax treatment in US for overseas gains then its recommended that you go for Common Stock in HK. Else it would make sense to buy in US. |
Is investing in an ETF generally your best option after establishing a Roth IRA? | When investing small amounts, you should consider the substantial toll that commissions will take on your investment. In your case, $800 placed in just one ETF will incur commissions of about $8 each way, or a total of 2% of your investment. I suggest you wait until you have at least $5000 to invest in stocks or ETFs. Since this is in a IRA, your options are limited, but perhaps you may qualify for a Vanguard mutual fund, which will not charge commissions and will have annual expenses only a trivial amount higher than the corresponding ETF. it should probably go in a mixed allocation fund, and since you are young, it should be a relatively aggressive one. Mutual funds will also allow you to contribute small amounts over time without incurring any extra fees. |
Is inflation a good or bad thing? Why do governments want some inflation? | In general the consensus is that a small amount of inflation (usually 1.5-2% per year) is desirable. That is why the Federal Reserve sets its inflation target in that range. The reasons why are quite complex though. One reason is "wage stickiness" - ie., the observed phenomenon that employers don't like to cut wages. Having a small rate of inflation means that when wages are steady in nominal terms, they are actually falling in real terms. This gives employers more flexibility. |
RRP/list price/retail price and cars? | The retailer can sell for whatever price they like, with the caveats that if they consistently sell at a loss they will go out of business and if they set the price too high they will not sell anything! As you mentioned, RRP is only a recommended price, the manufacturer cannot enfore it at all for legal reasons. Having said that I used to work in retail (not cars) and if we discounted a certain manufacturers products and they found out about it, we would find they had suddenly run out of stock when we tried to order more. So manufacturers do have some control over this type of thing depending on how "underhand" they want to be about it. My background is in retail management but not selling cars, but my understanding is the law regards RRP is the same. |
are there any special procedures for managing non-petty cash? | You manage this account just as any other account. "Petty cash" refers to accounts where the cash money is intended for ad-hoc purchases, where you store an amount of cash in your drawer and take it out as needed. However, other than naming it "petty cash", there's nothing petty about it - it's an account just as any other. Many choose to just "deduct" the amount transferred to "Petty Cash" account and not manage it at all. Here the amount matters - some smaller amounts can fall under "de minimis" rules of the appropriate regulatory authority. Since you told nothing about where you are and what your business is - we can't tell you what the rules are in your case. If you track the usage of this account (and from your description it sounds like you are) - then the name "Petty Cash" is meaningless. It's an account just like any other. Since you have an employee dealing with this cash you should establish some internal audit procedures to ensure that there's no embezzlement and everything is accounted for. You will probably want to reconcile this account more often than others and check more thoroughly on what's going on with it. Since its a "personal finance" forum, I'm assuming you're a sole proprietor or a very small business, and SEC/SOX rules don't apply to you. If they do - you should have a licensed accountant (CPA or whatever public accountancy designation is regulated in your area) to help you with this. |
Will paying off my car early hinder my ability to build credit? | No. Credit scores are primarily built by doing the following: To build credit, get a few major credit cards and a couple of store cards. Use one of them to make routine purchases like gas and groceries. Pay them on time every month. You're good to go. I would hate to sell stocks to pay off a loan -- try finding a better loan. If you financed through the dealer, try joining a credit union and see if you can get a better rate. |
Why was S&P 500 PE Ratio so high on May 2009 | Asking why the p/e was so high is best answered "because reported earnings were so low". Recall that the S&P500 bottomed in early March 2009 when the panic of the financial crisis reached exhaustion. As noted on the page you have linked, the reported p/e ratios are computed using reported earnings from the trailing twelve months. During those twelve months the banks were writing down all of the bad debt associated with the mortgage backed securities that has lost so much value. This meant that the banks were reporting negative earnings. Since the financial sector is a large part of the S&P500, this alone had an enormous effect on the index p/e. However, the problem was compounded by a general collapse in earnings across the economy as consumers reacted to the resulting uncertainty. The same site reports earnings for the previous years at $17.11 for the S&P500, compared to $76.17 for the year prior to 2008. That is a collapse of about 78% in earnings. Although the S&P500 has suffered badly during this time, stock market investors being forward looking were starting to price in improved earnings by May 2009. Indeed, the S&P500 was up about 33% in just two months, from its low in March2009 to mid May2009. Thus, by May of 2009 prices were not suffering to the same extent as reported trailing earnings. This would account for the anomalous p/e value reporting in May2009. |
Is paying off your mortage a #1 personal finance priority? | For some people, it should be a top priority. For others, there are higher priorities. What it should be for you depends on a number of things, including your overall financial situation (both your current finances and how stable you expect them to be over time), your level of financial "education", the costs of your mortgage, the alternative investments available to you, your investing goals, and your tolerance for risk. Your #1 priority should be to ensure that your basic needs (including making the required monthly payment on your mortgage) are met, both now and in the near future, which includes paying off high-interest (i.e. credit card) debt and building up an emergency fund in a savings or money-market account or some other low-risk and liquid account. If you haven't done those things, do not pass Go, do not collect $200, and do not consider making advance payments on your mortgage. Mason Wheeler's statements that the bank can't take your house if you've paid it off are correct, but it's going to be a long time till you get there and they can take it if you're partway to paying it off early and then something bad happens to you and you start missing payments. (If you're not underwater, you should be able to get some of your money back by selling - possibly at a loss - before it gets to the point of foreclosure, but you'll still have to move, which can be costly and unappealing.) So make sure you've got what you need to handle your basic needs even if you hit a rough patch, and make sure you're not financing the paying off of your house by taking a loan from Visa at 27% annually. Once you've gotten through all of those more-important things, you finally get to decide what else to invest your extra money in. Different investments will provide different rewards, both financial and emotional (and Mason Wheeler has clearly demonstrated that he gets a strong emotional payoff from not having a mortgage, which may or may not be how you feel about it). On the financial side of any potential investment, you'll want to consider things like the expected rate of return, the risk it carries (both on its own and whether it balances out or unbalances the overall risk profile of all your investments in total), its expected costs (including its - and your - tax rate and any preferred tax treatment), and any other potential factors (such as an employer match on 401(k) contributions, which are basically free money to you). Then you weigh the pros and cons (financial and emotional) of each option against your imperfect forecast of what the future holds, take your best guess, and then keep adjusting as you go through life and things change. But I want to come back to one of the factors I mentioned in the first paragraph. Which options you should even be considering is in part influenced by the degree to which you understand your finances and the wide variety of options available to you as well as all the subtleties of how different things can make them more or less advantageous than one another. The fact that you're posting this question here indicates that you're still early in the process of learning those things, and although it's great that you're educating yourself on them (and keep doing it!), it means that you're probably not ready to worry about some of the things other posters have talked about, such as Cost of Capital and ROI. So keep reading blog posts and articles online (there's no shortage of them), and keep developing your understanding of the options available to you and their pros and cons, and wait to tackle the full suite of investment options till you fully understand them. However, there's still the question of what to do between now and then. Paying the mortgage down isn't an unreasonable thing for you to do for now, since it's a guaranteed rate of return that also provides some degree of emotional payoff. But I'd say the higher priority should be getting money into a tax-advantaged retirement account (a 401(k)/403(b)/IRA), because the tax-advantaged growth of those accounts makes their long-term return far greater than whatever you're paying on your mortgage, and they provide more benefit (tax-advantaged growth) the earlier you invest in them, so doing that now instead of paying off the house quicker is probably going to be better for you financially, even if it doesn't provide the emotional payoff. If your employer will match your contributions into that account, then it's a no-brainer, but it's probably still a better idea than the mortgage unless the emotional payoff is very very important to you or unless you're nearing retirement age (so the tax-free growth period is small). If you're not sure what to invest in, just choose something that's broad-market and low-cost (total-market index funds are a great choice), and you can diversify into other things as you gain more savvy as an investor; what matters more is that you start investing in something now, not exactly what it is. Disclaimer: I'm not a personal advisor, and this does not constitute investing advice. Understand your choices and make your own decisions. |
Apartment lease renewal - is this rate increase normal? | If it is true that for the same price, you could get a better place (or that for a lower price you could get an equivalent place), you should do some soul-searching to decide what monetary value you would place on the hassle of moving to such an alternative. You should then negotiate aggressively for a rent that is no more than the rent of the alternative place plus your hassle costs, and if the landlord does not meet your price, you should refuse to renew your lease, and instead move out to an alternative. (Of course, you might also want to double-check your research to ensure you really can get such a good alternative, and that your new landlords won't try a similar bait-and-switch and force you to move again in a year.) Barring local ordinances such as rent control laws, I don't think it's worth it to worry about whether the increase is "normal". If you can get a better deal somewhere else, then what your landlords are asking is too much. If you have a good relationship with them on a personal level you may be able to tell them this in a nice way and thus get them to make a more reasonable offer. Otherwise, the landlords will learn that their expectations are unreasonable when all their tenants move out to cheaper places. |
Non Resident Alien(Working full time on F1-OPT) new car sales tax deduction | No, if you are a nonresident alien, you cannot deduct sales tax. You can only deduct state income tax. 1040NR Schedule A (which is page 3 of 1040NR) does not contain an option for sales tax, like 1040 Schedule A does. If you are a resident alien, then you can deduct sales tax. |
Are car buying services worth it? | I went through the Costco program for the so-called "no-hassle" bargain price when I bought my Prius. According to other Prius owners that I've met on forums and TrueCar's web site, I paid "average." Lots of people in my area managed to negotiate a better price by $1-2k. So much for getting a deal. I do not plan to use Costco to buy another vehicle again. |
Is it ever logical to not deposit to a matched 401(k) account? | If your plan permits loans, deposit enough through the year to maximize the match and then take a loan from the plan. Use the loan portion to pay your student loan. Essentially you have refinanced your debt at a (presumably) lower rate and recieved the match. You pay yourself back (with interest) through your payroll. The rates are typically the prime rate + 1%. The loans are subject to a lesser of 50% vested account balance or $50,000 provision. |
Is it really possible to get rich in only a few years by investing? | To get rich in a short time, it's more likely what you want to do is go into business. You could go into a non-investment business such as opening a restaurant or starting a tech company, of course. Warren Buffett was working in investing, which is quite a bit different than just buying stocks: The three ways to get rich investing I can think of are: I think the maximum real (after-inflation) return you can really count on over a lot of years is in the 5-6% range at most, maybe less. Here's a post where David Merkel argues 3-4% (assuming cash interest is close to zero real return): http://alephblog.com/2009/07/15/the-equity-premium-is-no-longer-a-puzzle/ At that rate you can double every 10-15 years. Any higher rate is probably risking much lower returns. I often post this argument against that on investment questions: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ Agree with you that lots of people seem to think they can make up for not saving money by picking a winning investment. Lots of people also use the lottery as a retirement strategy. I'm not sure this is totally irrational, if for some reason someone just can't save. But I'm sure it will fail for almost all the people who try it. |
What to do with small dividends in brokerage account? | Don't sit on it, because the money does not work for you. Add more money to it and buy a stock or stocks of the company. |
If the U.S. defaults on its debt, what will happen to my bank money? | You must mean the current debt ceiling debacle. The meaning of it is: US government is constantly borrowing money (by issuing treasury bonds) and constantly repaying some of the bonds that come to maturity, and also has other obligations it has to meet by law all the time - such as Social Security checks, bonds interest, federal employees' salaries and pensions, etc. By law, total amount of money that can be borrowed at the same time is capped. That means, there can be situation where the government needs to borrow money to pay, say, interest on existing bonds, but can not, since the limit is reached. Such situation is called a default, since the government promised to pay the interest, but is unable to do so. That does not mean the government has no money at all and will completely collapse or couldn't raise money on the market if it were permitted by law to do so (currently, the market is completely willing to buy the debt issued by US government, and with interest that is not very high, though of course that may change). It also does not mean the economy ceases to function, dollars cease to have value or banks instantly go bankrupt. But if the government breaks its promises to investors, it has various consequences such as raising the costs of borrowing in the future. Breaking promises to other people - like Social Security recipients - would also look bad and probably hurt many of them. Going back to your bank account, most probably nothing would happen to the money you store there. Even if the bank had invested 100% of the money in US treasury bonds (which doesn't really happen) they still can be sold on the open market, even if with some discount in the event of credit rating downgrade, so most probably your account would not be affected. As stated in another answer, even if the fallout of all these calamities causes a bank to fail, there's FDIC and if your money is under insured maximums you'll be getting your money back. But if your bank is one of the big ones, nothing of the sort would happen anyway - as we have seen in the past years, government would do practically anything to not allow any big bank failures. |
Will prices really be different for cash and cards? | I think the question relates to the discussion here: http://clarkhoward.com/liveweb/shownotes/2010/10/05/19449/ It was always the case that merchants could discount purchases made with cash. What wasn't allowed is allowing the merchant to charge extra for credit card transactions (presumably to cover the fees the merchants pay). These fees usually carry a flat fee per transaction, plus around 2% of the purchase price. What also wasn't allowed was them to refuse any credit transactions. People could charge a pack of gum, even if the fees put that transaction in the red. What's allowed according to this new development is different levels of discounting for different credit cards. Somewhat related to this discussion is another development that happened this summer: merchants now have the ability to refuse credit card transactions of less than $10. Here's my feeling on all of this. I think we'll see merchants imposing minimum credit transaction amounts before we see them monkeying at the 1-2% level on pricing for different types of credit cards. My feeling is that they'd be wise not to change anything, even though they can. Refusing transactions (or charging more for others) is going to come as a unpleasant shock to enough people that they may take their business elsewhere. |
Definition of “secular” in the context of markets? | According to Wikipedia: In the finance industry, something done on a secular basis is done on a long-term basis, not a temporary or cyclical one, with a time frame of "10–50 years or more" Source |
Are credit histories/scores international? | It's not just that credit history is local; it's that it's a private business run for profit. The "big three" credit bureaus in the US are Experian, Equifax and Transunion. They collect information on debt usage and abuse from various companies in the US, and charge a fee to provide that information (and their judgement of you) to companies interested in offering you further credit. But there's nothing stopping a company from collecting international credit histories, or specialized credit histories either (for instance, there's a company called ChexSystems which focuses on retail purchase financing (mostly auto) and checking account abuse, while ignoring other types of lending). That being said, I don't know of any companies which currently collect international credit histories. Perhaps in Europe, with more nations in close geographic proximity, there would be, but not in North America. |
What are some time tested passive income streams? | There are lots of different ways to generate passive income. What is Passive Income? Basically it is income you receive without having to consistently work for it i.e. paid to do your day job or get paid by the hour; instead you do the work once and then receive ongoing payments like a recording artist getting paid royalties or a book author etc... Online Passive income Also some online business models can be great ways to generate passive income, you set up an automated system online to drive traffic and sell products either as the merchant or an affiliate and get paid regularly without having to do any more work... You just need to use SEO or PPC or media buys or online advertising to generate the automated traffic to your website which will have special landing pages and sales funnels that do the conversion and selling for you. If you are an affiliate you don't even have to handle any products, packaging, delivering etc... And if it’s a digital product like software or information products they can be sent straight to the customers automatically online then you can set up a system that can generate true passive income. Time consuming or expensive! However the above mentioned methods of generating passive income tend to require a lot of work or special skills, talent or knowledge and can be expensive or time consuming to set up. Preferred Method Therefore for many people the preferred passive income method is fully-managed hands free property investing or other types of investing for that matter. But for people who want full ownership of the income generating asset then property investing is the best as they can sell and have control over the capital invested, whereas investing in a business for example will have a lot of other variables to consider, like the business sector, the market factors, the management team and even down to individual employee performance. So in my opinion, if you have the money to invest then fully-managed hands free buy-to-let property investing is one of the best types of passive income available to us today. Some of the most popular income generating property assets today in the UK include • Student property • Care Homes • Residential buy-to-let |
Is there a bank account that allows ACH deposits but not ACH withdrawals? | Nowadays, all checks you write will not be send to your bank anymore, but instead the bank where they get deposited does an ACH from your bank. That implies that not allowing this to happen, your bank would not be able to honor any checks you wrote (without enforcing paper check delivery in the mail, but the Check21 bill does not allow such enforcing anymore). Basically, your bank would not be able to do business with anyone. The obvious conclusion is that no such bank exists. |
Recent college grad. Down payment on a house or car? | I'd suggest buying a used car for cash, car loans are a bad idea. I bought my last car a few years ago for $8k off of craigslist, and it is still running great. Make sure you get a car checked out by a mechanic before buying (usually they'll drop it off at a mechanic you want to have take a look, or perhaps just go with you). My general rule is to not take out loans for anything which decreases in value. So a home mortgage would be fine, a car loan is not a great plan. Buy cash, and save for the next purchase. If you buy a decent used Corolla (or other small import car), you can get it for $8k, it will likely last a few years at least. That could end up costing you less than $200 per month total, or less. Much better deal in the long run. |
Why do employer contributions count against HSA limits? | Just like all employee benefits there is a focus on removing or limiting owners of businesses' ability to abuse tax preferences under the guise of an employee benefit. As you point out there is an overall plan maximum 401(k) for employer contributions and match contributions. There is a nondiscrimination test for FSA programs (there is also a nondiscrimination test for medical plans under sections 125 and 105(h)). Employer contributions are counted toward the total of HSA contributions. Why an HSA has a different maximum arrangement than 401(k) is anyone's guess. But the purpose of the limit is to prevent owners of companies from setting up plans that do little more than funnel tax free funds to themselves. An owner/employee could pay themselves a wage, contribute the maximum, then have the "employer" also match the maximum, so there are limits in place. |
Should I stockpile nickels? | You would have to collect an awful lot to make it profitable. The melting process alone will cost an arm and a leg. Go silver hunting with rolls of Half dollars. You might strike it lucky with rolls of Kennedy's. Its good fun too :) 1964 Kennedy's 90% silver 1965-1970 Kennedy's 40% silver I go looking on ebay collecting for typo errors on pre 1920's British silver coinage. Picked up a George 3rd 1816 Shilling for £3....worth £30....but even if your doing it just for the silver content, you can pick up a real bargain. Just think of how your going to offload them. Here in the UK its easy because there is a huge market for Numismatic coins. |
If the U.S. defaults on its debt, what will happen to my bank money? | In principle, a default will have no effect on your bank account. But if the US's credit rating is downgraded, the knock-on effects might cause some more bank failures, and if the debt ceiling is still in place then the FDIC insurance might not be able to pay out immediately. |
What is the median retirement savings in the United States today? | Note that the quote distinguishes between "all families" and "families with some savings" - this just means there are so many families with less than 5k that they equal all those with savings above 5k. That might be because they are young and haven't started yet, or because it is just not a priority for them compared to food and rent. Nothing about the quote suggests that anyone believes once you've saved 5k, you're done. In fact since they show savings vs age, you can immediately see many people still have decades to save more. They may have 5k or less now, but they're not retiring now. How do you survive if you get to 65 and have nothing saved? There is some government money (social security) and many people sell their houses or get a reverse mortgage. Having equity in a house is not the same as having savings. And some older people live very frugally - they stop buying clothes, they stop redecorating their houses - while others live in flat out poverty. But you can't tell if that is their future from the fact they only had 5k saved when they were 32. |
Can you beat the market by investing in double long ETFs? [duplicate] | See http://blogs.reuters.com/felix-salmon/2011/04/30/why-the-sec-should-look-at-levered-etfs/?dlvrit=60132, http://symmetricinfo.org/2011/04/are-investors-in-levered-short-treasury-etfs-a-disaster-waiting-to-happen-pt1/, and the articles linked from it: The issue with holding a levered ETF past 1 day is that investors expose themselves to path dependency in the underlying.... The reason for the difference in payouts comes from the fact that the manager of the levered ETF promises you a multiple of the daily returns of the underlying. To be able to promise you these daily returns, the ETF manager has to buy/sell some of the underlying every day to position himself to have a constant leverage ratio the next day. The short video below explains this process in detail for a 2x long ETF, but the same result holds for a 2x short ETF: the manager has to buy more of the underlying on a day when the underlying increases in value and sell more of the underlying when the underlying goes down in value . |
Effect of company issued options on share price | A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1. What country is this related to? I ask because, in the US, most people I know associate a "call" option with the instrument that is equivalent to 100 shares. So 100,000 calls would be 10,000,000 shares, which exceeds the number of shares you're saying the company has. I don't know if that means you pulled the numbers out of thin air, or whether it means you're thinking of a different type of option? Perhaps you meant incentive stock options meant to be given to employees? Each one of those is equivalent to a single share. They just aren't called "call options". In the rest of my answer, I'm going to assume you meant stock options. I assume the fact that these options exist will slow any price increases on the underlying shares due to potential dilution? I don't think the company can just create stock options without creating the underlying shares in the first place. Said another way, a more likely scenario is that company creates 200,000 shares and agrees to float 50% of them while reserving the other 50% as the pool for incentive employee stock. They then choose to give the employees options on the stock in the incentive pool, rather than outright grants of the stock, for various reasons. (One of which is being nice to the employees in regards to taxes since there is no US tax due at grant time if the strike price is the current price of the underlying stock.) An alternative scenario when the company shares are liquidly traded is that the company simply plans to buy back shares from the market in order to give employees their shares when options are exercised. In this case, the company needs the cash on hand, or cash flow to take money from, to buy those shares at current prices. Anyway, in either case, there is no dilution happening WHEN the options get exercised. Any dilution happened before or at the time the options were created. Meaning, the total number of shares in the company was already pre-set at an earlier time. As a result, the fact that the options exist in themselves will not slow price changes on the stock. However, price changes will be impacted by the total float of shares in the company, or the impact to cash flow if the company has to buy shares to redeem its option commitments. This is almost the same thing you're asking about, but it is technically different as to timing. If this is the case, can this be factored into any option pricing models like black-scholes? You're including the effect just by considering the total float of shares and net profits from cash flow when doing your modelling. |
Can I buy a new house before selling my current house? | As the other answers suggest, there are a number of ways of going about it and the correct one will be dependent on your situation (amount of equity in your current house, cashflow primarily, amount of time between purchase and sale). If you have a fair amount of equity (for example, $50K mortgage remaining on a house valued at $300K), I'll propose an option that's similar to bridge financing: Place an offer on your new house. Use some of your equity as part of the down payment (eg, $130K). Use some more of your equity as a cash buffer to allow you pay two mortgages in between the purchase and the sale (eg, $30K). The way this would be executed is that your existing mortgage would be discharged and replaced with larger mortgage. The proceeds of that mortgage would be split between the down payment and cash as you desire. Between the closing of your purchase and the closing of your sale, you'll be paying two mortgages and you'll be responsible for two properties. Not fun, but your cash buffer is there to sustain you through this. When the sale of your new home closes, you'll be breaking the mortgage on that house. When you get the proceeds of the sale, it would be a good time to use any lump sum/prepayment privileges you have on the mortgage of the new house. You'll be paying legal fees for each transaction and penalties for each mortgage you break. However, the interest rates will be lower than bridge financing. For this reason, this approach will likely be cheaper than bridge financing only if the time between the closing of the two deals is fairly long (eg, at least 6 months), and the penalties for breaking mortgages are reasonable (eg, 3 months interest). You would need the help of a good mortgage broker and a good lawyer, but you would also have to do your own due diligence - remember that brokers receive a commission for each mortgage they sell. If you won't have any problems selling your current house quickly, bridge financing is likely a better deal. If you need to hold on to it for a while because you need to fix things up or it will be harder to sell, you can consider this approach. |
Can I get my property taxes lowered? | The question is whether the assessment is in line with surrounding homes. If my 1500 sq ft house on 1/4 acre is assessed far higher than a similar sized house/land nearby, I'd have a case. +/- 10% can be for age/quality, but 25% or more, I'd investigate. mhoran is right, values for different purposes need not align. A start would be to use a service like Zillow which offers property tax information, as well as house sizes. Let us know what you discover. Welcome to Money.SE |
Would I ever need credit card if my debit card is issued by MasterCard/Visa? | I haven't had a credit card in fifteen years. I use nothing but my debit card. (I find the whole idea of credit on a micro scale loathsome.) I have yet to encounter a single problem doing so, other than a lower than usual credit score for not keeping 23(!!!) revolving lines of credit open, or that's the number CreditKarma tells me I need in order to be an optimal consumer. In an nutshell, no, you don't NEED one. There are reasons to have them, but no. |
New company doesn't allow 401k deposits for 6 months, what to do with money I used to deposit? | I would open a taxable account with the same custodian that manages your Roth IRA (e.g., Vanguard, Fidelity, etc.). Then within the taxable account I would invest the extra money in low cost, broad market index funds that are tax efficient. Unlike in your 401(k) and Roth IRA, you will now have tax implications if your funds produce dividends or realize a capital gain. That is why tax-efficient funds are important to minimize this as much as possible. The 3-fund portfolio is a popular choice for taxable accounts because of simplicity and the tax efficiency of broad market index funds that are part of the three fund portfolio. The 3-fund portfolio normally consists of Depending on your tax bracket you may want to consider municipal bonds in your taxable instead of taxable bonds if your tax bracket is 25% or higher. Another option is to forgo bonds altogether in the taxable account and just hold bonds in retirement accounts while keeping tax efficient domestic and international tock funds in your taxable account. Then adjust the bond portion upward in your retirement accounts to account for the additional stocks in your taxable accounts. This will maintain the asset allocation that you've already chosen that is appropriate for your age and goals. |
Why is day trading considered riskier than long-term trading? | But I don't see how it's any different than buying a stock at a low price and holding on to it for some months. Based on your question, I would say the difference is time. Day trading by its nature is a 6-hour endeavor. If you buy low and are planning to sell high, then you only have a few hours to make this happen. As a previous poster mentioned, there is a lot of "white noise" that occurs on a weekly/daily/hourly/min basis. Long-term investors have the time to wait it out. Although, as a side note, if you were a buy-and-hold investor from the 1960s-early 1980s, then buy and hold was not very good. Is it just the psychological/addictive aspect of it? This is the biggest reason. Day trading is stressful and stress can cause financially destructive decisions such as over-leveraging, over-trading, etc. Why is day trading stressful? Because you are managing hundreds to thousands of trades a year. When combined with the lack of time in a day to make moves, it becomes stressful. Also, many day traders do it full time. Which adds to the pressure to be correct and to be incredible at money managment. A lot of buy-and-hold investors have full time jobs and may only check their positions every month or so. |
How to account for startup costs for an LLC from personal money? | If you have a single member LLC there is no need to separate expenses in this way since it is simply treated as part of the owner's normal tax returns. This is the way I've been operating. Owner of Single-Member LLC If a single-member LLC does not elect to be treated as a corporation, the LLC is a "disregarded entity," and the LLC's activities should be reflected on its owner's federal tax return. If the owner is an individual, the activities of the LLC will generally be reflected on: Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship) (PDF) Form 1040 Schedule E, Supplemental Income or Loss (PDF) Form 1040 Schedule F, Profit or Loss from Farming (PDF) An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self employment in the same manner as a sole proprietorship. If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner's federal tax return as a division of the corporation or partnership. https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies |
Investment strategies for young adults with entrepreneurial leanings? | I talk about this subject on my blog on investing, I share everything that has worked for me personally and that makes sense. I would say the ideal investment would be to continue the entrepreneur route. Just make sure you have a clear plan and exit strategy. For me it's all about passion, I love blogging about personal experiences with life, money, and anything that affects our lives. Find something that you would talk about whether you were paid or not and create a business off of it. You'll never work a day in your life because you love it. |
How often do typical investors really lose money? | So how often do investors really lose money? The short answer is, every day. Let's first examine your assumptions: If the price of the share gets lower, the investor can just wait until it gets higher. What are the chances that it won't forever, or for years? There are many stocks whose price goes down and then down further and then to zero. The most apparent example is, of course, Enron. The stock went from about $90 per share to zero in about 18 months. For it to have been sold at $90, obviously, someone had to buy it. Almost no matter where they sold it, they lost money. If they didn't sell it, when the stock was worthless, they lost money. https://en.wikipedia.org/wiki/Enron#/media/File:EnronStockPriceAugust2000toJanuary2001.svg There are more modern examples of companies that are declining in a rapidly changing market. For example, Sears Holdings is getting beat down by Amazon and many other on-line retailers. I suspect that if you buy it today and wait for it to go higher, you will be disappointed. https://www.google.com/finance?q=NASDAQ%3ASHLD&ei=E8_fWIjWGsSGmAGx7b_IAw The more common way to lose money is to either not have a plan or not stick to the plan. Disciplined investors typically plan to buy quality stocks at a fair price and hold them long enough for increasing sales and profits to bring the stock price up. If, later, he hears a bit of bad news about his stock and decides to sell out of panic or fear and become a trader instead of keeping to the plan to remain a disciplined investor, he is likely to lose money. He will lose because no-one can predict accurately that a stock is going down and will never recover; nor can he predict accurately when a stock is going up and will never falter. The chance of bankruptcy (especially for huge companies like Apple) is really low, as I see it, but I may be wrong. Thousands of people lost billions of dollars thinking that about Enron, too. I too believe Apple is a fine stock with excellent prospects, but technology changes and markets change. Twenty or thirty years from now, it may be a different case. |
Tax: 1099 paper form | You can print them on any IRS-approved paper, you don't have to use pre-printed forms. The IRS publishes specifications for paper that is approved for use for these kinds of forms (109*, W*, etc). Here's the reason why it is important: Even the slightest deviation can result in incorrect scanning, and may affect money amounts reported for employees. Note that some portions of these forms are in different color (1099-MISC copy A). This is important, and using incorrect color will affect the IRS OCR mechanisms. Forms for individuals are less complicated with regards to technical specifications, because individuals must file them, and as such any complication will unnecessarily burden the citizenry. All the 109*, W* etc forms are not legally required to be filed by all citizens. You're only required to file them if you chose to do business, or chose to employ others. As such, using professional software and special forms is a cost of doing your business, and not a tax as it would be had it been mandatory to everyone. Mistakes in individual forms due to OCR failure or something else will be noticed by the taxpayers (less/more refund, etc) or through the internal matching and cross-check. However, forms 109* and W* feed that matching and cross-check system and are considered source of truth by it, and as such their processing must be much more reliable and precise. |
What things are important to consider when investing in one's company stock? | You really have asked two different questions here: I'm interested in putting away some money for my family Then I urge you to read up on investing. Improving your knowledge in investing is an investment that will very likely pay off in the long-term - this can't be answered here in full length, pointers to where to start are asset allocation and low-cost index funds. Read serious books, read stackexchange posts, and try avoid the Wall Street marketing machine. Also, before considering any long term investments, build an emergency fund (e.g. 6 months worth of your expenses) in case you need some liquid money (loss of job etc.), and also helps you sleep better at night. What things are important to consider before making this kind of investment? Mainly the risk (other answers already elaborate on the details). Investing in a single stock is quite risky, even more so when your income also depends on that company. Framed another way: which percentage of your portfolio should you put into a single stock? (which has been answered in this post). If after considering all things you think it's a good deal, take the offer, but don't put a too great percentage of you overall savings into it, limit it to say 10% (maybe even less). |
Why not just invest in the market? | Perhaps someone has an investment objective different than following the market. If one is investing in stocks with an intent on getting dividend income then there may be other options that make more sense than owning the whole market. Secondly, there is Slice and Dice where one may try to find a more optimal investment idea by using a combination of indices and so one may choose to invest 25% into each of large-cap value, large-cap growth, small-cap value and small-cap growth with an intent to pick up benefits that have been seen since 1927 looking at Fama and French's work. |
Next steps for (not me): a recently-divorced single mom, in California, with a 2yr-old | She should call 211. This is exactly how they help. The 2-1-1 service is run by the United Way, a nonprofit organization. The 2-1-1 service strives to be a clearinghouse for services within a local area. |
Why do credit card transactions take up to 3 days to appear, yet debit transactions are instant? | Take a look at http://en.wikipedia.org/wiki/Payment_gateway There is essentially a lead time between when the transaction is made and when it is settled, 2-3 business days is the lead time for settlement. The link explains the process step-by-step |
Can two companies own stock in each other? | I was looking at NAT and NAO, NAT owns 20% of NAO. They trade opposite each other on the price of oil, low is good for NAT, bad for NAO. In bad times the other company's stock would probably rise, so they could trim excess shares to keep a stable monetary holding. This would create cash in bad times, in good times they could buy more, creating a floor as well for the other. |
Currently a Microsoft Money user on PC, need a replacement suitable for Mac | Long time Quicken user, but I have Bootcamp on my Mac, and one reason is so I can run Quicken Windows. That's one solution. You didn't mention what version of the Mac OS you're running, but Bootcamp is one alternative if you have (or can purchase) a Windows license. Be advised, Bootcamp 4, which is available with OS 10.7 (Lion) and OS 10.8 (Mountain Lion), officially supports Windows 7 only. Quicken running under Bootcamp isn't perfect, but it's better than any Mac version, and Quicken 2013 has a mobile app that allows you to view your data & enter transactions via your mobile. The Mac Version of Quicken has been panned by users. I do use Windows for work-related stuff, so I have a reason for running Windows besides using Quicken. I've read that Intuit has a market share of more than 70% in the personal finance software sector, and at this point it seems pretty clear that they are not interested in pursuing a larger share via Mac users. So if we ever see a highly functional version of Quicken for the Mac OS, it won't be any time soon. I've not used other products, but there are many reviews out there which rank them, and some consistently come to the front. Top 10 Reviews Mac Personal Finance Software 2013; WeRockYourWeb Personal Finance Software Rankings includes many Web-based alternatives; Personally, I'm not real enthusiastic about posting my personal financial data on someone's Web site. I have nothing to hide, but I just can't get comfortable with cloud-based personal finance software providers that are combing through my data, Google-like, to generate revenue. Too, it seems an unnecessary risk giving a third party a list of all my account numbers, user names, and passwords. I know that information is out there, if one has the right sort of access, but to my way of thinking, using a cloud-based personal finance software application makes it more out there. |
Difference between GOOGL and GOOG | Source |
Replacement for mint.com with a public API? | Plaid is exactly what you are looking for! It's docs are easy to understand, and you can sign up to their API and use their free tier to get started. An example request to connect a user to Plaid and retrieve their transactions data (in JSON): |
Why does the share price tend to fall if a company's profits decrease, yet remain positive? | In a rational market, the market caps (total value of all shares of the company) should be determined by the expected future profits of the company, plus the book value (that is the value of all assets that the company holds). The share price is then calculated as market caps divided by number of shares - a company worth a billion dollar could have a million shares at $1000 each or a billion shares at $1 each or anything in between. When profits drop, every investor has to re-think what the expected future profits of the company are. If all the investors say "I thought this company would make a billion profit in the next ten years, but based on the drop in profits I changed my mind and I think they will only make 500 million", then the share price drops. On the other hand, if profits dropped because of some predictable event, then that drop was already priced into the share price. If the profits dropped less than expected, the share price might even go up. You can see the opposite effect: Share price might be very high because everyone expects huge growth in profits over the next ten years. If profits grow less than expected, the share price will drop. Share price depends on predicted future profits, not on profits today. |
What happened to GOOG-stock? Why isn't it 1.000 USD? | The stock split, it is similar to what happened to Apple a little while back. When Google split 2 to 1, it means that each share holder got 2 shares for each 1 share they had and each share was 1/2 the price. |
Best way to start investing, for a young person just starting their career? | I would personally suggest owning Mutual Funds or ETF's in a tax sheltered account, such as a 401k or an IRA, especially Roth options if available. This lets you participate in the stock market while ensuring that you have diversified portfolio, and the money is managed by an expert. The tax sheltered accounts (or tax free in the case of Roth accounts) increase your savings, and simplify your life as you don't need to worry about taxes on earnings within those accounts, as long as you leave the money in. For a great beginner's guide see Clark's Investment Guide (Easy). |
What emergencies could justify a highly liquid emergency fund? | Emergency funds are defined in terms of months of tightened-belt living -- that's according to the usual gurus such as Suze Orman, Dave Ramsey etc. They aren't for short-term emergencies like a blown transmission. Use other money for those. Why? People with bad financial habits have short-term emergencies all the time, and that emergency fund doesn't have a chance of lasting. This is just their financial habits manifesting. Here's what an emergency fund is for. Scenario: big economic bubble bursts. Stock market drops 50%. Credit dries up. This happened in 2007 by the way. The dominoes start falling boom, boom, boom: I'm exaggerating a bit here, but a lot of people lived at least half this stuff in 2007-11. Nothing starts those dominoes falling like lack of cash at a key moment. That's what an emergency fund is all about - keeping things tight-normal for long enough to get back on your feet. If you want to keep your emergency fund in something risky -- keep a lot more of it! |
How do you get out of a Mutual Fund in your 401(k)? | The S&P top 5 - 401(k) usually comply with the DOL's suggestion to offer at least three distinct investment options with substantially different risk/return objectives. Typically a short term bond fund. Short term is a year or less and it will rarely have a negative year. A large cap fund, often the S&P index. A balanced fund, offering a mix. Last, the company's stock. This is a great way to put all your eggs in one basket, and when the company goes under, you have no job and no savings. My concern about your Microsoft remark is that you might not have the choice to manage you funds with such granularity. Will you get out of the S&P fund because you think this one stock or even one sector of the S&P is overvalued? And buy into what? The bond fund? If you have the skill to choose individual stocks, and the 401(k) doesn't offer a brokerage window (to trade on your own) then just invest your money outside the 401(k). But. If they offer a matching deposit, don't ignore that. |
Why is tax loss harvesting helpful for passive investing? | I wrote a detailed article on Tax Loss Harvesting to show the impact on returns. For my example, I showed a person in the 15% bracket. In years with no loss, they trade to capture gains at 0% long term rate, thus bumping their basis up. In years with losses, they tax harvest for a 15% effective 'rebate' on that loss. I showed how for the lost decade 2000-2009, a buy and hold would have returned -1% CAGR, but the tax loss harvester would have gained 1% (just 1% for the decade, not CAGR), ending the decade with no loss. As one's portfolio grows, the math changes. You can only take $3000 capital loss against ordinary income, and my example relies on the difference between taking a gain for free but using a loss to offset income. Note, the higher earner would take gains at 15%, but losses at 25%, but only for the relatively small portfolio. The benefit for them is to use loss harvesting to offset gains, less so for ordinary income. As the other answer state, Wealthfront can aid you to do this with no math on your part. |
What is the meaning of the net worth of a person? | An individual's net worth is the value of the person's assets minus his debt. To find your net worth, add up the value of everything that you own: your house, your cars, your bank accounts, your retirement investments, etc. Then subtract all of your debt: mortgage, student loans, credit card debt, car loans, etc. If you sold everything you own and paid off all your debts, you would be left with your net worth. If Bill Gates' net worth is $86 Billion, he likely does not have that much cash sitting in the bank. Much of his net worth is in the form of assets: stocks, real estate, and other investments. If he sold everything that he has and paid any debts, he would theoretically have the $86 Billion. I say "theoretically" because in the amounts of stock that he owns, he could cause a price drop by selling it all at once. |
Investment options | You are only 33, with plenty of time to generate long-term returns. A correction is an opportunity for you to buy more at a lower price. My advice: invest about half in an index fund (S&P 500, for example) and half in a target fund (pick your retirement age), keep saving regularly, and in 30 years you'll be very happy you did. 5-10K a month is fine until all of the money is invested. (You said this is a retirement account, so invest the entire amount. Keep a rainy day fund in your non-retirement savings.) You can fiddle around with how you invest the money and I'm sure you'll get variations on my answer. My above suggestions may not be the absolute best option, but they are certainly not the worst option. Given that you are very risk-averse, keep in mind that you are in this for the long term and should be investing in something where you can safely ignore short-term downswings. |
What does it mean that stocks are “memoryless”? | @jidugger mostly got it right. It basically mean that past performance of a stock, or a basket of stocks, are not at all useful when trying to predict its future. There is no proven correlation between past and future performance. If there was such a correlation, that was "proven" or known, then investors would quickly exploit this correlation by buying or selling this stock, thus nullifying the prediction. It doesn't mean the specific individuals cannot predict the future stock market - hell, if I set up 2^100 different robots, where every robots gives a different series of answers to the 100 questions "how will stock X do Y days from now" (for 1<=Y<=100), then one of those robots would be perfectly correct. The problem is that an outside observer has no way of knowing which of the predictor robots is right. To say that stock is memoryless strikes me as not quite right -- to the extent that stocks are valued based on earnings, much of what we infer about future earnings relies on past and present earnings. To put it another way - you have $1000 now, and need to decide whether to invest in a particular stock, or a stock index. The "memoryless" property means that no matter how many earning reports you view ... by the time you see them, the stock price already accounts for them, so they're not useful to you. If the earning reports are positive, the stock is already "too high" because people bought it before you did. So on average, you can't use this information to predict the stock's future performance, and are better off investing in an index fund (unless you desire extra risk that doesn't come with more profitability). |
What is a call spread and how does it work? | A bullish (or 'long') call spread is actually two separate option trades. The A/B notation is, respectively, the strike price of each trade. The first 'leg' of the strategy, corresponding to B, is the sale of a call option at a strike price of B (in this case $165). The proceeds from this sale, after transaction costs, are generally used to offset the cost of the second 'leg'. The second 'leg' of the strategy, corresponding to A, is the purchase of a call option at a strike price of A (in this case $145). Now, the important part: the payoff. You can visualize it as so. This is where it gets a teeny bit math-y. Below, P is the profit of the strategy, K1 is the strike price of the long call, K2 is the strike price of the short call, T1 is the premium paid for the long call option at the time of purchase, T2 is the premium received for the short call at the time of sale, and S is the current price of the stock. For simplicity's sake, we will assume that your position quantity is a single option contract and transaction costs are zero (which they are not). P = (T2 - max(0, S - K2)) + (max(0, S - K1) - T1) Concretely, let's plug in the strikes of the strategy Nathan proposes, and current prices (which I pulled from the screen). You have: P = (1.85 - max(0, 142.50 - 165)) - (max(0, 142.50 - 145)) = -$7.80 If the stock goes to $150, the payoff is -$2.80, which isn't quite break even -- but it may have been at the time he was speaking on TV. If the stock goes to $165, the payoff is $12.20. Please do not neglect the cost of the trades! Trading options can be pretty expensive depending on the broker. Had I done this trade (quantity 1) at many popular brokers, I still would've been net negative PnL even if NFLX went to >= $165. |
How to understand the caculation of interest for credit cards? | Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June). |
Buying shares in a company after you quit | Insider trading is when you buy or sell an investment based on material, non-public information that gives you an unfair advantage over the rest of traders in that market. Working for a company is one way that you might have such information, but whether it is insider trading is not contingent on you working there. You could use that information a long time after leaving the company. You don't even need to have worked there. If a friend/relative gave you non-public information because THEY work there, it is still insider trading. |
If you want to trade an equity that reflects changes in VIX, what is a good proxy for it? | There is no good proxy for VIX, because it is a completely made-up value. Most listed options trade on an underlying security. I can therefore choose to buy either the stock, or a future or option on that stock. In this way, the future and option are derivatives in that they derive their value (in part) based on something else, in this case the stock price as of now. VIX is a different entity altogether. It is based on the volatility of the market, using "market expectation of near term volatility conveyed by stock index option prices". But the FAQ goes on to state that they are adding factors into the formula. So right away there is no one equity/stock that you can hold that will necessarily match the VIX in any significant way, because it is not directly based on stocks, but indirectly through other options and computations. In effect, therefore, the VIX in indeed only available through its options, and is not observable (tradable) in and of itself. |
Using property to achieve financial independence | Be very careful about buying property because it has been going up quickly in recent years. There are some fundamental factors that limit the amount real-estate can appreciate over time. In a nutshell, the general real-estate market growth is supported by the entry-level property market. That is, when values are appreciating, people can sell and use the capital gains to buy more valuable property. This drives up the prices in higher value properties whose owners can use that to purchase more expensive properties and so on and so forth. At some point in a rising market, the entry-level properties start to become hard for entry-level buyers to afford. The machine of rising prices throughout the market starts grinding to a halt. This price-level can be calculated by looking at average incomes in an area. At some percentage of income, people cannot buy into the market without crazy loans and if those become popular, watch out because things can get really ugly. If you want an example, just look back to the US in 2007-2009 and the nearly apocalyptic financial crisis that ensued. As with most investing, you want to buy low and sell high. Buying into a hot market is generally not very profitable. Buying when the market is abnormally low tends to be a more effective strategy. |
Someone asks you to co-sign a loan. How to reject & say “no” nicely or politely? | My reply would be a serious, "Oh my word! I was going to ask you the same thing!....guess that's a no from you". I'd turn it back to them and let them be confused and think..gee..I guess she's not that much better off than me. Awkward but that's what I'd say. |
Will my Indian debit card work in the U.S.? | Debit cards with the Visa or Mastercard symbol on them work technically everywhere where credit cards work. There are some limitations where the respective business does not accept them, for example car rentals want a credit card for potential extra charges; but most of the time, for day-to-day shopping and dining, debit cards work fine. However, you should read up the potential risks. A credit card gives you some security by buffering incorrect/fraudulent charges from your account, and credit card companies also help you reverse incorrect charges, before you ever have to pay for it. If you use a debit card, it is your money on the line immediately - any incorrect charge, even accidential, takes your money from your account, and it is gone while you work on reversing the charge. Any theft, and your account can be cleaned out, and you will be without money while you go after the thief. Many people consider the debit card risk too high, and don't use them for this reason. However, many people do use them - it is up to you. |
Separated spouse filed for SNAP benefits as single. Does this affect ability to file taxes jointly? | The IRS isn't going to care how you filed for benefits - they're effectively the high man on the totem pole. The agency that administers the SNAP program is the one who might care. File the 1040 correctly, and then deal with SNAP as you note. Do deal with SNAP, though; otherwise they might be in trouble if SNAP notices the discrepancy in an audit of their paperwork. Further, SNAP doesn't necessarily care here either. SNAP defines a household as the people who live together in a house and share expenses; a separated couple who neither shared expenses nor lived together would not be treated as a single household, and thus one or both would separately qualify. See this Geeks on Finance article or this Federal SNAP page for more details; and ask the state program administrator. It may well be that this has no impact for him/her. The details are complicated though, particularly when it comes to joint assets (which may still be joint even if they're otherwise separated), so look it over in detail, and talk to the agency to attempt to correct any issues. Note that depending on the exact circumstances, your friend might have another option other than Married Filing Jointly. If the following are true: Then she may file as "Head of Household", and her (soon-to-be) ex would file as "Married Filing Separately", unless s/he also has dependents which would separately allow filing as Head of Household. See the IRS document on Filing Status for more details, and consider consulting a tax advisor, particularly if she qualifies to consult one for free due to lower income. |
Does a market maker sell (buy) at a bid or ask price? | The answer posted by Kirill Fuchs is incorrect according to my series 65 text book and practice question answers. The everyday investor buys at the ask and sells at the bid but the market maker does the opposite. THE MARKET MAKER "BUYS AT THE BID AND SELLS AT THE ASK", he makes a profit form the spread. I have posted a quiz question and the answer created by the Financial Industry Regulatory Authority (FINRA). To fill a customer buy order for 800 WXYZ shares, your firm requests a quote from a market maker. The response is "bid 15, ask 15.25." If the order is placed, the market maker must sell: A) 800 shares at $15.25 per share. B) 800 shares at $15 per share. C) 100 shares at $15.25 per share. D) 800 shares at no more than $15 per share. Your answer, sell 800 shares at $15.25 per share., was correct!. A market maker is responsible for honoring a firm quote. If no size is requested by the inquiring trader, a quote is firm for 100 shares. In this example, the trader requested an 800-share quote, so the market maker is responsible for selling 8 round lots of 100 shares at the ask price of $15.25 per share. |
Should I pay off my 50K of student loans as quickly as possible, or steadily? Why? | The definitive answer is: It Depends. What are your goals? First and foremost, you need to have at least 3 months expenses in cash or equivalent. (i.e. an investment that you can withdraw from quickly, and without penalty). The good news is that you don't have to come up with it instantly. Set a time frame - one year - for creating this safety net, and pay towards that goal. This is the single most important piece of financial advice you will receive. Now determine what you need to do. For example, you may need a car. Compare interest rates on your student loan and the car loan. Put your cash towards whichever is higher. If you don't need a car or other big ticket item, then you may consider sticking your surplus into the student loans. 50k at $1650 a month will be paid down in about 3 years, which might be a bit long to live the monastic lifestyle. I'd look at paying down the smallest loan first (assuming relatively similar rates), and freeing up that payment for yourself. So if you can pay off 1650 a month, and free up $100 of that in six months, then you can reward yourself with half that surplus, and apply the other half to the next loan. (This is different than some would suggest because you're talking about entering severe spartan mode, which is not sustainable.) Remember that life happens. You'll meet someone. You'll have an accident, your brother will get sick and you'll give him some money to help out. You've got to be prepared for these events, and for these reasons, I don't recommend living that close to the edge. Remember, you're not in default, and you do have the option of continuing to pay the minimum for a long time. |
A debt collector will not allow me to pay a debt, what steps should I take? | Send a well-documented payment to the original creditor. Do it in such a way that you would have the ability to prove that you sent a payment if they reject it. Should they reject it, demonstrate that to the credit reporting bureaus. |
Should the price of fuel in Australia at this point be so high? | Fuel prices are regulated in most countires. The way its regulated differs. Essentially the idea is once the retail prices are up, they are normally kept that level so that a buffer profit is built, now if the fuel prices increase beyond the retail price can still be kept same using the buffer built up. |
What cost basis accounting methods are applicable to virtual currencies? | The only "authoritative document" issued by the IRS to date relating to Cryptocurrencies is Notice 2014-21. It has this to say as the first Q&A: Q-1: How is virtual currency treated for federal tax purposes? A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. That is to say, it should be treated as property like any other asset. Basis reporting the same as any other property would apply, as described in IRS documentation like Publication 550, Investment Income and Expenses and Publication 551, Basis of Assets. You should be able to use the same basis tracking method as you would use for any other capital asset like stocks or bonds. Per Publication 550 "How To Figure Gain or Loss", You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Gain. If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Loss. If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. That is, the assumption with property is that you would be using specific identification. There are specific rules for mutual funds to allow for using average cost or defaulting to FIFO, but for general "property", including individual stocks and bonds, there is just Specific Identification or FIFO (and FIFO is just making an assumption about what you're choosing to sell first in the absence of any further information). You don't need to track exactly "which Bitcoin" was sold in terms of exactly how the transactions are on the Bitcoin ledger, it's just that you bought x bitcoins on date d, and when you sell a lot of up to x bitcoins you specify in your own records that the sale was of those specific bitcoins that you bought on date d and report it on your tax forms accordingly and keep track of how much of that lot is remaining. It works just like with stocks, where once you buy a share of XYZ Corp on one date and two shares on another date, you don't need to track the movement of stock certificates and ensure that you sell that exact certificate, you just identify which purchase lot is being sold at the time of sale. |
Why do people always talk about stocks that pay high dividends? | The upvoted answers fail to note that dividends are the only benefit that investors collectively receive from the companies they invest in. If you purchase a share for $100, and then later sell it for $150, you should note that there is always someone that purchases the same share for $150. So, you get $150 immediately, but somebody else has to pay $150 immediately. So, investors collectively did not receive any money from the transaction. (Yes, share repurchase can be used instead of dividends, but it can be considered really another form of paying dividends.) The fair value of a stock is the discounted value of all future dividends the stock pays. It is so simple! This shows why dividends are important. Somebody might argue that many successful companies like Berkshire Hathaway do not pay dividend. Yes, it is true that they don't pay dividend now but they will eventually have to start paying dividend. If they reinvest potential dividends continuously, they will run out of things to invest in after several hundred years has passed. So, even in this case the value of the stock is still the discounted value of all future dividends. The only difference is that the dividends are not paid now; the companies will start to pay the dividends later when they run out of things to invest in. It is true that in theory a stock could pay an unsustainable amount of dividend that requires financing it with debt. This is obviously not a good solution. If you see a company that pays dividend while at the same time obtaining more cash from taking more debt or from share issues, think twice whether you want to invest in such a company. What you need to do to valuate companies fairly is to estimate the amount of dividend that can sustain the expected growth rate. It is typically about 60% of the earnings, because a part of the earnings needs to be invested in future growth, but the exact figure may vary depending on the company. Furthermore, to valuate a company, you need the expected growth rate of dividends and the discount rate. You simply discount all future dividends, correcting them up by the expected dividend growth rate and correcting them down by the discount rate. |
What tax advantage should I keep an eye for if I am going to relocate? | Look for states that have no income tax. A lot of these states supplement their revenue with higher property taxes, but if you rent and do not own property in the state, then you will have no state tax liability. Similarly, many states treat capital gains no differently than income tax, so if you make your earnings due to a large nest egg, then way you will still incur no tax liability on the state level Look for "unincorporated" areas, as these are administrative divisions of states that do not have a municipal government, and as such do not collect local taxes. Look for economic development perks of the new jurisdiction. Many states have some kind of formal tax credit for people that start business or buy in certain areas, but MONEY TALKS and you can make an individual arrangement with any agency, municipality etc. If the secretary at city hall doesn't know about a prepackaged formal arrangement that is offered to citizens, then ask for the "expedited development package" which generally has a "processing fee" involved. This is something you make up ie. "What is the processing fee for the expedited development package, quote on quote" States like Maryland and Nevada have formalized this process, but you are generally paying off the Secretary of State for favorable treatment. You'll always be paying off someone. |
At what point should I go into credit card debt? | You're situation is actually pretty solid except for the job part. I definitely understand the existential meltdown in your 30s. Luckily you're in web design and have an in-demand job. Maybe go to a code school/design immersive to add some new skills and reinvigorate yourself. If mental health needs to be addressed above all, then definitely make that a priority. Avoid credit card debt like the plague. If you think you're stressed now, just wait. |
Can the risk of investing in an asset be different for different investors? | The other example I'd offer is the case for diversification. If one buys 10 well chosen stocks, i.e. stocks spread across different industries so their correlation to one another is low, they will have lower risk than each of the 10 folk who own one of those stocks per person. Same stocks, but lower risk when combined. |
Tracking my spending, and incoming and outgoing (i.e cashflow) | Honing in on your last question: Is there a better way? I think there is, but it would require you to change the way you handle your spending, and that may not be of interest to you. Right now you have a lot of manual work, keeping track of expenditures and then entering the, every day. The great thing about switching to a habit where you pay for everything using a debit or credit card is that you can skip the manual entry by importing your transactions from your bank. You mention that your bank doesn't allow for exporting. There's still a chance that your bank can connect with a solution like Wave Accounting (http://www.waveaccouting.com), which is free and made for small business accounting. (Full disclosure: I represent Wave.) If your current bank doesn't permit export or connections with Wave, it may be worth switching to a different bank. It's a bit of a pain to make the switch, I know, but you really will save a massive amount of time and effort over the course of the year, as well as minimize the risk of human error, compared to entering your receipts on a daily basis. In Wave, you can still enter all of your cash receipts manually if you want to continue with your current practice of cash payments. One important thing to mention, too: If you're looking for a better way of doing things, make sure it includes proper backup. There would be nothing worse than entering all that data onto a spreadsheet and then something happening to your computer and you lose it all. Wave Accounting is backed up hourly and uses bank-level security to keep your information safe. One last thing: as I mention above, Wave Accounting is free. So if it is a good match for your small business accounting needs, it will also be a nice fit for your wallet. |
Can I pay estimated taxes based on last year's taxes if I anticipate more income this year? | You're interpreting this correctly. Furthermore, if your total tax liability is less than $1000, you can not pay estimates at all, just pay at the tax day. See this safe harbor rule in the IRS publication 17: General rule. In most cases, you must pay estimated tax for 2016 if both of the following apply. You expect to owe at least $1,000 in tax for 2016, after subtracting your withholding and refundable credits. You expect your withholding plus your refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2016 tax return, or 100% of the tax shown on your 2015 tax return (but see Special rules for farmers, fishermen, and higher income taxpayers , later). Your 2015 tax return must cover all 12 months. |
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