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How accurate is Implied Volatility in predicting future moves? | A change in implied volatility tells us something about what investors are thinking (or fearing) about the volatility going forward for the life of the associated option contracts (which may be short or long-lived). IV does a good job of summarizing the information available to investors, which includes information about the past and the present. However, whether these investor views actually translate into what happens in the future is a topic of debate in the finance literature--investors do not generally know the future--there are conflicting results available. There have been papers that show that implied volatility has predictive power in some situations, time periods, and horizons (though it is also biased) and other papers that show that it does not have statistically significant predictive power at all. The consensus last time I checked was that implied volatility is no worse than historical volatility (including methods that use trends in historical volatility to forecast where it is going) at predicting future volatility. Whether it is significantly better and whether either reliably predicts the future is something that is not agreed on. I take this lack of consensus as evidence that if it does predict future volatility, it does so poorly. Somewhat dated FAJ survey on the subject |
How do I know if my mutual fund is compounded? | When we talk about compounding, we usually think about interest payments. If you have a deposit in a savings account that is earning compound interest, then each time an interest payment is made to your account, your deposit gets larger, and the amount of your next interest payment is larger than the last. There are compound interest formulas that you can use to calculate your future earnings using the interest rate and the compounding interval. However, your mutual fund is not earning interest, so you have to think of it differently. When you own a stock (and your mutual fund is simply a collection of stocks), the value of the stock (hopefully) grows. Let's say, for example, that you have $1000 invested, and the value goes up 10% the first year. The total value of your investment has increased by $100, and your total investment is worth $1100. If it grows by another 10% the following year, your investment is then $1210, having gained $110. In this way, your investment grows in a similar way to compound interest. As your investment pays off, it causes the value of the investment to grow, allowing for even higher earnings in the future. So in that sense, it is compounding. However, because it is not earning a fixed, predictable amount of interest as a savings account would, you can't use the compound interest formula to calculate precisely how much you will have in the future, as there is no fixed compounding interval. If you want to use the formula to estimate how much you might have in the future, you have to make an assumption on the growth of your investment, and that growth assumption will have a time period associated with it. For example, you might assume a growth rate of 10% per year. Or you might assume a growth rate of 1% per month. This is what you could use in a compound interest formula for your mutual fund investment. By reinvesting your dividends and capital gains (and not taking them out in cash), you are maximizing your "compounding" by allowing those earnings to cause your investment to grow. |
What are the best software tools for personal finance? | I'm a big fan of buxfer.com |
Does the P/E ratio not apply to bond ETFs? | The simple answer is technically bonds don't have earnings, hence no P/E. What I think the OP is really asking how do I compare stock and bond ETFs. Some mature stocks exhibit very similar characteristics to bonds, so at the margin if you are considering investing between 2 such investments that provide stable income in the form of dividends, you might want to use the dividend/price ratio (D/P) of the stock and compare it to the dividend yield of the bond. If you go down to the basics, both the bond and the stock can be considered the present value of all future expected cashflows. The cash that accrues to the owner of the stock is future dividends and for the bond is the coupon payments. If a company were to pay out 100% of its earnings, then the dividend yield D/P would be conveniently E/P. For a company with P/E of 20 that paid out it's entire earnings, one would expect D/P = 1/20 = 5% This serves as a decent yard stick in the short term ~ 1 year to compare mature stock etfs with stable prospects vs bond funds since the former will have very little expected price growth (think utilities), hence they both compete on the cashflows they throw off to the investor. This comparison stops being useful for stock ETFs with higher growth prospects since expected future cashflows are much more volatile. This comparison is also not valid in the long term since bond ETFs are highly sensitive to the yield curve (interest rate risk) and they can move substantially from where they are now. |
Would I qualify for a USDA loan? | All the above advices plus this: For you first house, you should start smaller. Buy a 100k or less condo if possible, then grow from there. You sell every 5 years or so when the market is favorable and you will slowly get to that nice 250k house. |
What is a negotiable security and how are they related to derivatives? | As Dheer pointed out, Wikipedia has a good definition of what a negotiable instrument is. A security is an instrument or certificate that signifies an ownership interest in something tangible. 1 share of IBM represents some small fraction of a company. You always have the ability to choose a price you are willing to pay -- which may or may not be the price that you get. A derivative is a level of abstraction linked by a contract to a security... if you purchase a "Put" contract on IBM stock, you have a contractural right to sell IBM shares at a specific price on a specific date. When you "own" a derivative, you own a contract -- not the actual security. |
On claiming mileage and home office deductions | Can she claim deductions for her driving to and from work? Considering most people use their cars mostly to commute to/from work, there must be limits to what you can consider "claimable" and what you can't, otherwise everyone would claim back 80% of their mileage. No, she can't. But if she's driving from one work site to another, that's deductible whether or not either of the work sites is her home office. Can she claim deductions for her home office? There's a specific set of IRS tests you have to meet. If she meets them, she can. If you're self-employed, reasonably need an office, and have a place in your house dedicated to that purpose, you will likely meet all the tests. Can I claim deductions for my home office, even though I have an official work place that is not in my home? It's very hard to do so. The use of your home office has to benefit your employer, not just you. Can we claim deductions for our home internet service? If the business or home office uses them, they should be a deductible home office expense in some percentage. Usually for generic utilities that benefit the whole house, you deduct at the same percentage as the home office is of the entire house. But you can use other fractions if more appropriate. For example, if you have lots of computers in the home office, you can deduct more of the electricity if you can justify the ratio you use. Run through the rules at the IRS web page. |
I file 83(b) election, but did't include a copy of it in that year’s tax return | It matters because that is the requirement for the 83(b) selection to be valid. Since the context is 83(b) election, I assume you got stocks/options as compensation and didn't pay for them the FMV, thus it should have been included in your income for that year. If you didn't include the election letter - I can only guess that you also didn't include the income. Hence - you lost your election. If you did include the income and paid the tax accordingly, or if no tax was due (you actually paid the FMV), you may try amending the return and attaching the letter, but I'd suggest talking to a professional before doing it on your own. Make sure to keep a proof (USPS certified mailing receipt) of mailing the letter within the 30 days window. |
Are services provided to Google employees taxed as income or in any way? | (1). Is this right? Pretty much, though this is a really rudimentary way to think about it. (2). If it is, why is it that extensive services are provided by high margin companies competing for talent, rather then lower margin businesses looking to boost their profits by reducing their expenditures on employees (by cutting out the government)? It's the polar opposite of that. Google (and companies like that) do things like have a day care center on premises. The company staffs a day care center which has costs, then lets employees use it for free. This is a business expense for Google, and in relative terms, a considerably large business expense that a lower margin business could no afford. Employer healthcare is a tax protected expense for employees via section 125 of the tax code. The company portion of the healthcare costs are a deductible business expense to the company, as expected. Healthcare is different than most other expenses because the employee can forego income before it's effectively received which negates it from taxable income. This doesn't work for something like food purchased at a cafe on a Google complex. If employee money is being spent at a corporate cafe, it's taxable income being spent (though the cost of running the cafe is a tax deductible business expense to the company). There have been discussions in congress to assess a value as income to employees for services like on site child care and no cost employee cafeterias. To address your new example: For example, suppose John Doe makes $100,000 a year taxed at a rate of 20%, for a take home pay of $80,000. He spends $10,000 on food. His employer Corporation decides to give him all of his food and deduct it as a business expense - costing them $10,000. But now they can pay John Doe an amount so his take home pay will be reduced by $10,000 - $87,500 The company is now spending $97500 employing John Doe, for a savings of $2500$. This would be an audit prone administrative nightmare. Either You need John to submit receipts for reimbursement up to the $10,000 agreed upon amount which would require some kind of administrative staff, or After a very short period of time John forgets the abstract value of the food cost arrangement, that is only really benefiting the employer in the form of lower payroll expense, and is enticed away for more pay somewhere else anyway. The company may be saving $2,500, though again there will be an additional administrative expense of some sort, but John is only saving $500 ($97,500 * 0.20 - $100,000 * 0.20). |
How to get the lowest mortgage rate on a new purchase? | Purchase loans tend to be more challenging to get the best possible rate, because you have to balance closing the loan and getting the contract. So there isn't as much time to shop around as when you do a refinance. I disagree with the sentiment to go with your local bank. Nothing wrong with asking at your local bank and using their numbers as a baseline, but chances are they won't be competitive. There are many reputable online mortgage originators that will show accurate fees and rates upfront assuming you provide accurate information. In the past there were a lot of issue with Good Faith Estimates being pretty much worthless. There were a fair number of horror stories about people showing up to closing and finding out fee or rates had increased dramatically. There was a law passed after the housing debacle that severely limits the shenanigans that lenders can do at closing and so there is less risk when going with a lesser known lender. In fact I would say the only real risk with a lender now days is choosing one that happens to be overloaded and or just has poor customer service in general. Personally I have found the most competitive rates from Zillow's mortgage service and the now defunct Google mortgage. The lenders tend to be smaller, but highly efficient. They are very much dependent on their online reputations. I have heard good things about a number of larger online lenders, but I don't have personal experience so I will leave them off. I personally wouldn't worry much about whether the loan is sold or not. Outside of refinancing I don't think I have ever talked to the bank servicing my mortgage about my mortgage. There just isn't much need to talk to them. |
Should one invest in smaller valued shares in higher amounts, or higher valued shares in smaller amounts? | Short answer: No, it only matters if you want to use covered calls strategies. The price of a share is not important. Some companies make stock splits from time to time so that the price of their shares is more affordable to small investors. It is a decision of the company's board to keep the price high or low. More important is the capitalization for these shares. If you have lots of money to invest, the best is to divide and invest a fixed pourcentage of your portfolio in each company you choose. The only difference is if you eventually decide to use covered call strategies. To have a buy write on Google will cost you a lot of money and you will only be able to sell 1 option for every 100 shares. Bottom line: the price is not important, capitalization and estimated earnings are. Hope this answers your question. |
How do I get into investing in stocks? | The best way I know of is to join an investment club. They club will act like a mutual fund, investing in stocks researched and selected by the group. Taking part in research and presenting results to the group for peer review is an excellent way to learn. You'll learn what is a good reason to invest and what isn't. You'll probably pick both winners and losers. The goal of participation is education. Some people learn how to invest and continue happily doing so. Others learn how to invest in single stocks and learn it is not for them. |
Need something more basic than a financial advisor or planner | You know how when people called in on the Car Talk radio show (Click and Clack, I miss those guys), and while the caller asked a question about his car, really he needed marital advice? And the hosts would pounce on the part about the disagreement with family member and provide an unexpected answer ("Yeah, the trick to a using a clutch is [...], but really, if you want to learn to drive a stick shift, get your dad out of the car!") So I'm pouncing on the part about the spouse. It sounds like you and your spouse don't always agree on saving and spending, and you want to find a way to agree on saving and spending. If you can find a coach or planner or counselor that you both like and both trust, then go for it. You're looking more for the right personality than a precise job description. Start with exploring what you do agree on: we agree we need to save money, we agree we need to have a spending plan and budget, etc. The right coach will help you get to more agreement -- the job title is less important. |
What evidence or research suggests that mid- or small-capitalization stocks should perform better than large caps? | Efficient Frontier has an article from years ago about the small-cap and value premiums out there that would be worth noting here using the Fama and French data. Eugene Fama and Kenneth French (F/F) have shown that one can explain almost all of the returns of equity portfolios based on only three factors: market exposure, market capitalization (size), and price-to-book (value). Wikipedia link to the factor model which was the result of the F/F research. |
How to help a financially self destructive person? | I learned this from a business book on managing people, but I think it applies equally well here. You can't put in what God left out of people. I know several people with this mentality about money and you simply have to make your sculpture out of the clay you have. In this case, however, it seems that ship has sailed, considering it is your ex and you aren't on speaking terms. That would make it even harder, and it is debatable about whether it is your prerogative to even try. Just focus on the kids and make it clear to your wife that she needs to be providing the basics (food, shelter, heat, etc.) and don't escalate that unless it becomes a danger to the kids. In a non-judgmental way (towards your wife) I'd use it as an opportunity to teach your kids about financial responsibility and the dangers of overspending and get-rich quick schemes. It sounds like they have an example in their lives of the consequences of two very different ways of managing one's finances. |
Evidence for/against negative correlation between commodity futures, stocks | The correlation I heard most about in economics/finance was that stock prices and bond yields were negatively correlated; as the stock market does better, bond yields fall (company's doing well as evidenced by stocks, so it's a good credit risk, so YTM of its bonds on the market goes down). The correlation, if any, between the stock and futures market should be visible in the actual price histories. Index prices may be useful, but what's more likely is that various future prices have correlation with various companies' stocks. Where the future reflects the price of a raw material that is a significant cost of goods sold for a company, you'll see these two move inversely to each other in the short term. I think that if there is a causative relationship here, its that futures prices influence stock prices, not the other way around. The futures market generally represents the cost side of a consumer goods producer's bottom line. The stock market represents its profits. As futures go up, profit expectations go down, putting pressure on stock prices. Industries that deal in services, or in other types of goods, can still be affected because a rise in the cost of something consumers need will cause them to spend less on other things which affects margins in those other areas. So, in the short and medium term, when the futures market goes up the stock market sees a dip, and vice versa. However, companies adapt; they can put upward pressure on prices for their goods to restore their desired margins, usually by slowly increasing them to prevent sticker shock (though elasticity of demand plays a part; the more we need something no matter what it costs, the faster prices can increase). To maintain costs, they can make things cheaper using less expensive materials (more plastic, less steel). They can restructure production processes (translated: move factories offshore, or at least to "right-to-work" states with less union strength) to save costs elsewhere. All of these reduce costs and thus increase profits, but take time to implement. Many of these things reduce direct costs, reducing demand for the commodity and causing the futures prices to go back down. So, over the long term, these differences even out, and it's down to the things that affect the entire market (inflation, consumer/investor confidence, monetary policy). |
Can my employer limit my maximum 401k contribution amount (below the IRS limit)? | On thing the questioner should do is review the Summary Plan Description (SPD) for the 401(k) plan. This MAY have details on any plan imposed limits on salary deferrals. If the SPD does not have sufficient detail, the questioner should request a complete copy of current plan document and then review this with someone who knows how to read plan documents. The document for a 401(k) plan CAN specify a maximum percentage of compensation that a participant in the 401(k) plan can defer REGARDLESS of the maximum dollar deferral limit in Internal Revenue Code Section 402(g). For example, the document for a 401(k) plan can provide that participants can elect to defer any amount of their compensation (salary) BUT not to exceed ten percent (10%). Thus, someone whose salary is $50,000 per year will effectively be limited to deferring, at most, $5,000. Someone making $150,000 will effectively be limited to deferring, at most, $15,000. This is true regardless of the fact that the 2013 dollar limit on salary deferrals is $17,500. This is also true regardless of whether or not a participant may want to defer more than ten percent (10%) of compensation. This "plan imposed" limit on salary deferral contributions is permissible assuming it is applied in a nondiscriminatory manner. This plan imposed limit is entirely separate from any other rules or restrictions on salary deferral amounts that might be as a result of things like the average deferral percentage test. |
Does “income” include capital gains? | For example, if I have an income of $100,000 from my job and I also realize a $350,000 in long-term capital gains from a stock sale, will I pay 20% on the $350K or 15%? You'll pay 20% assuming filing single and no major offsets to taxable income. Capital gains count towards your income for determining tax bracket. They're on line 13 of the 1040 which is in the "income" section and aren't adjusted out/excluded from your taxable income, but since they are taxed at a different rate make sure to follow the instructions for line 44 when calculating your tax due. |
What does this diagram from Robert Kiyosaki about corporations mean? | It looks like RK is encouraging tax fraud. Suggesting that one have their business cover personal expenses sounds like the advice that got Leona Helmsley in hot water. |
Precedent and models for 100% equity available via initial offering? | Specifically I was wondering, how can the founder determine an appropriate valuation and distribution of shares; ie- the amount of equity to make available for public vs how much to reserve for him/herself. This is an art more than science. If markets believe it to be worth x; one will get. This is not a direct correlation of the revenue a start up makes. It is more an estimated revenue it would make in some point in time in future. There are investment firms that can size up the opportunity and advise; however it is based on their experience and may not always be true reflection of value. |
Canceling credit cards - insurance rate increase? | You can't ask insurers to use a particular score -- they have a state-approved underwriting model that they must follow consistently. Insurance companies make money by not paying claims, and poor credit score (including limit access to credit) increases the probability that you will file a small claim. Why? If you get into a minor accident (say $750 of damage) and have a $500 deductible, you are much less likely to file a claim to get $250 if you have access to a cash or credit lines to make the repairs yourself. If you feel that you are going to be penalized for closing credit card accounts, the solution is simple -- don't close them. Other than an event where you need to sever a relationship with a co-owner of an account (ie, you break up with your significant other, dissolve a business, etc) or avoid paying an annual fee, there is no advantage to you closing a revolving credit account, ever. If you cannot control your spending, throw the card in the shredder. Eventually, the credit card company will close your account for inactivity, which affects your credit to a lesser degree. (The big exception is if you carry sufficient balances on other cards, your credit utilization ratio goes up materially.) |
Do “Instant Approved” credit card inquires appear on credit report? | Businesses you are already established with may do a soft pull to pre-qualify you for an offer. They store the information and if you accept, may instantly setup and account. You may also see language to the effect that they may do an inquiry (hard pull) - I guess if their data is old. When you went outside of Amazon to Chase, they did a hard pull on their side which is what you saw. |
Supply & Demand - How Price Changes, Buy Orders vs Sell Orders [duplicate] | That is mostly true, in most situations when there are more buy orders than sell orders (higher buy volume orders than sell volume orders), the price will generally move upwards and vice versa, when there are more sell orders than buy orders (higher sell volume orders than buy volume orders), the price will generally move downwards. Note that this does not always happen, but usually it does. You are also correct that for a trade to take place a buyer has to be matched with a seller (or the buy volume matched with the sell volume). But not all orders get executed as trades. Say there are 50 buy orders in the order book with a total volume of 100,000 shares and the highest buy order is currently at $10.00. On the other side there are only 10 sell orders in the order book with total volume of 10,000 shares and the lowest sell order is currently $10.05. At the moment there won't be a trade unless a new buyer or seller enters the market to match the opposing side, or an existing order gets amended upper or lower to match the opposing side. With more demand than supply in the order books what will be the most likely direction that this stock moves in? Most likely the price will move upwards. If a new buyer sees the price moving higher and then looks at the market depth, they would most likely place an order closer to the lowest sell order than the current highest buy order, say $10.01, to be first in line in case a market sell order is placed on the market. As new buy orders enter the market it drives the price higher and higher until the buy orders dry up. |
What is this fund? | SMID CAP FUND is Fidelity's way of saying SMALL to MID CAP FUND. Small to Medium is self explanatory. Cap is capitalization, and it basically means how much the sum of all the existing shares of the company are worth. Fidelity names the funds inside their 401k plans according to who provides the fund. They also provide management resources for funds chosen by your employer. There should be more available about the fund you're interested in on your Fidelity 401(k) site. |
Is buying a lottery ticket considered an investment? | Why must terms must be mutually exclusive? This (false) dichotomy is what seems to cause the most debate. It is the SINGLE EVENT OUTCOME that defines gambling. Gambling will involve an aleatory contract. That is, the outcome is specifically tied to a single event that determines profit/loss. This could be the outcome of a race or the roll of a dice, but should involve chance. This is why gambling is often in the context of a game, but I would make the argument that some investment tools fall into this category - The price of a stock at a certain date, for example. This may also be called "betting", which opens up a whole other discussion. Investing has no such implication, and as such it is the broader term. Investing is to put something (money) to work to return a profit. Some forms of gambling could fall under this umbrella. Some would say that is a "bad investment" and even if they are right, it may still be the desire and intent of the investor to make a profit. Not all gambling falls under investing. You can gamble for pleasure. The profit/loss of most investments are not contractually tied to a specific event or outcome (e.g. the price of a stock over 10 years is the result of many events affecting its market value). Such an investment would not be considered gambling. |
How long should I keep my bills? | In normal cases you don't need it beyond 3-6 months. Beyond this destroy it. However in certain cases its required to be kept; For example if you need to prove that you are legally occupying a place/property and do not have relevant documents, the utility receipts can play a role in establishing that you were occupying a place and using it. In case you are not originaly a resident by birth, and your citizenship is at dispute, these records help. More so if the records are not maintained properly by the utitlity companies themsleves as in most developing countries. In India, these help for many individual who are occupying goverment properties for decades and then resolution is passed that people staying for past 25 yrs now own it, other become illegal and are evicted. For such cases, you could keep a history record say one per year, for past 5 years, and then one for every 5 year of a particular month ... basically in a systematic way. Other than that, just junk them. |
Is there a candlestick pattern that guarantees any kind of future profit? | I love technical analysis, and use candlesticks as part of my technical analysis system for trading mutual funds in my 401K. However, I would never use a candlestick chart on its own. I use combination of candlesticks, 2 different EMAs, MACD, bollinger bands, RSI and hand drawn trend lines that I constantly tweak. That's about as much data input as I can handle, but it is possible to graph it all at once and see it at a glance if you have the right trading platform. My approach is very personal, not very aggressive, and took me years to develop. But it's fairly effective - 90% + of my trades are winners. The big advantage of technical analysis is that it forces you to create repeatable rules around which you base your trading. A lot of the time I have little attention at all on what fund I am trading or why it is doing well in that particular market condition. It's basically irrelevant as the technical system tells when to buy and sell, and stops you trying to second guess whether housing, chemicals, gold or asian tigers are is doing well right now. If you don't keep to your own rules, you have only yourself to blame. This keeps you from blaming the market, which is completely out of your control. I explain many of my trades with anotated graphs at http://neurotrade.blogspot.com/ |
United States Treasury Not Endorsing Checks | 1.Why is there no "United States Treasury" endorsement? Why should there be, and what do you think it would look like? Some person at Treasury sitting at a desk all day signing "Uncle Sam"? At most you would expect to see some stamp, because it's clear that no person is going to sign all of these checks. 2.Can I have the check returned for proper endorsement? No, this is none of your business unless you have some serious reason to believe that someone other than the treasury cashed your check. (If that were really your concern, then you'd have a bigger issue than the endorsement.) 3.If I am required to endorse checks made out to me, why isn't the US Treasury? As others have noted, an endorsement is often not required as long as the name on the check matches a name on the account to which it is deposited. Individual banks may have stricter rules, but that's between you and your bank. |
Where to start with personal finance? | The Money Girl (Quick and Dirty Tips for a richer life) Podcast is a pretty good source for this type of information. Some Recent Topics: |
How can I find out the credit rating of a company | You can view Standard & Poor's credit ratings here: http://www.standardandpoors.com/ratings/en/us/ You have to register with S&P to access the ratings. |
Are there any consequences for investing in Vanguard's Admiral Shares funds instead of ETF's in a Roth IRA? | The mutual fund will price at day's end, while the ETF trades during the day, like a stock. If you decide at 10am, that some event will occur during the day that will send the market up, the ETF is preferable. Aside from that, the expenses are identical, a low .14%. No real difference especially in a Roth. |
Why is the breakdown of a loan repayment into principal and interest of any importance? | It's important because it shows that the amount you owe does not decrease linearly with each payment, and you gain equity as a correspondingly slower rate at the beginning of the loan and faster at the end. This has to be figured in when considering refinancing, or when you sell the place and pay off the mortgage. It also shows why making extra payments toward principal (if your loan permits doing so) is so advantageous -- unlike a normal payment that lowers the whole curve by a notch, reducing the length of time over which interest is due and thus saving you money in the long run. (Modulo possible lost-opportnity costs, of course.) |
Is 'days to cover' a useful metric in identifying the potential for a short squeeze? | SeekingAlpha has an article about short squeezes that states: The higher the number of days to cover means the possibility for a short squeeze is greater, and the potential size of the short squeeze is also greater Logically, this makes sense. A short squeeze occurs when a lack of supply meets excess demand for a stock, so the potential for a squeeze increases when supply and demand begin to get out of equilibrium. Think of two things that would cause the days to cover to increase and what effect they would have on supply and demand. The current short interest (numerator) increases. This implies that if some event triggers short sellers to cover their position, there are a higher number of short sellers who will need to do so. This heightens the chances that demand will exceed supply. The average daily volume (denominator) decreases. This implies that fewer investors are trading the stock, so if an event triggers short sellers to cover their positions, there might not be enough traders in the market willing to sell their shares. (Obviously, if a short-squeeze occurs, volume may increase because traders who were unwilling to sell their shares become willing). |
Is there a more flexible stock chart service, e.g. permitting choice of colours when comparing multiple stocks? | I don't think there are any web based tools that would allow you to do this. The efforts required to build vs the perceived benefit to users is less. All the web providers want the data display as simple as possible; giving more features at times confuses the average user. |
Is inflation a good or bad thing? Why do governments want some inflation? | Although there are some good points made here as to the cause of inflation (mostly related to supply and demand), azcoastal does head in a different direction, one which I myself was going to take. Let me give a different angle, however. Another cause of inflation is the printing of money by the government (not simply replacing old money with new, but adding to the total money in circulation). If the government doubles the amount of currency in circulation (for the sake of argument and easy math), the value of all money decreases by a factor of 2. That's inflation, and the way G. Edward Griffin in The Creature From Jekyll Island puts it, it's really tantamount to a hidden tax. In a nutshell, the federal government wants to buy some cool stuff like new tanks or planes, or they want to give a bunch of food stamps to poor people, or they want to fly their private jets around, but they don't have enough money from taxes. So, they print money and spend it and buy their stuff. Because they've just increased the money in circulation, however, money loses its value. For example, your savings has dropped in value by half, despite the fact that the same number of dollars is in your savings account. This is just a way the government can tax you without taxing you. They buy stuff and you now have less money (i.e., your retirement is worth less) and you don't even know you just got taxed. Makes me sick that we let our "leaders" get away with this. |
What are the typical repayment plans for Credit Cards in the United States? | In the U.S., when you receive your credit card bill each month there's a "minimum payment amount." That minimum payment is usually the greater of $25 or 1% of the new balance on the card plus new interest and fees. As long as you pay the minimum payment amount, you can pay as much as you want each month. Note, in your example, you would be required to pay more than $1000 to pay off the balance, as interest would accrue each month on the unpaid principal. How much more is dependent on the interest rate of the card. |
How do you translate a per year salary into a part-time per hour job? | It's difficult to quantify the intangible benefits, so I would recommend that you begin by quantifying the financials and then determine whether the difference between the pay of the two jobs justifies the value of the intangible benefits to you. Some Explainations You are making $55,000 per year, but your employer is also paying for a number of benefits that do not come free as a contractor. Begin by writing down everything they are providing you that you would like to continue to have. This may include: You also need to account for the FICA tax that you need to pay completely as a part time employee (normally a company pays half of it for you). This usually amounts to 7.8% of your income. Quantification Start by researching the cost for providing each item in the list above to yourself. For health insurance get quotes from providers. For bonuses average your yearly bonuses for your work history with the company. Items like stock options you need to make your best guess on. Calculations Now lets call your original salary S. Add up all of the costs of the list items mentioned above and call them B. This formula will tell you your real current annual compensation (RAC): Now you want to break your part time job into hours per year, not hours per month, as months have differing numbers of working days. Assuming no vacations that is 52 weeks per year multiplied by 20 hours, or 1040 hours (780 if working 15 hours per week). So to earn the same at the new job as the old you would need to earn an hourly wage of: The full equation for 20 hours per week works out to be: Assumptions DO NOT TAKE THIS SECTION AS REPRESENTATIVE OF YOUR SITUATION; ONLY A BALLPARK ESTIMATE You must do the math yourself. I recommend a little spreadsheet to simplify things and play what-if scenarios. However, we can ballpark your situation and show how the math works with a few assumptions. When I got quoted for health insurance for myself and my partner it was $700 per month, or $8400 per year. If we assume the same for you, then add 3% 401k matching that we'll assume you're taking advantage of ($1650), the equation becomes: Other Considerations Keep in mind that there are other considerations that could offset these calculations. Variable hours are a big risk, as is your status as a 'temporary' employee. Though on the flip side you don't need to pay taxes out of each check, allowing you to invest that money throughout the year until taxes are due. Also, if you are considered a private contractor you can write off many expenses that you cannot as a full time employee. |
Why does quantitative easing negatively affect stocks? | Can you isolate the market impact to just the Fed's quantitative easing? Can you rule out the future economic predictions of low growth and that there are reasons why the Fed has kept rates low and is trying its best to stimulate the economy? Just something to consider here. The key is to understand what is the greater picture here as well as the question of which stock market index are you looking at that has done so badly. Some stocks may be down and others may be up so it isn't necessarily bad for all equally. |
Most effective Fundamental Analysis indicators for market entry | Fundamental Analysis can be used to help you determine what to buy, but they won't give you an entry signal for when to buy. Technical Analysis can be used to help you determine when to buy, and can give you entry signals for when to buy. There are many Technical Indicator which can be used as an entry signal, from as simple as the price crossing above a moving average line and then selling when the price crosses back below the moving average line, to as complicated as using a combination of indicators to all line up for an entry signal to be valid. You need to find the entry signals that would suit your investing or trading and incorporate them as part of your trading plan. If you want to learn more about entry signals you are better off learning more about Technical Analysis. |
How to share income after marriage and kids? | You currently have 5400€ between you and 2600€ expenses leaving you 2800€. You currently keep 1900€ and she keeps 900€ at the end of each month splitting 68/32. If you marry and have a child, your combined income will go down to 4900€ while your expenses will increase by 300€ to 2900€ leaving 2000€. You could continue to split 68/32 leaving you 1360€ and her 640€. If you use this split you will lose 540€ and she will lose 260€. That's a 28% loss for you and a 28% loss for her from your end of month take home. So far it sounds reasonably fair. What about the future? For each raise, the person getting the raise keeps 66% of their raises. If you get the majority of the raises, you keep the majority of the benefit, but both benefit from the increase. Any future increases in expenses can be split as negotiated based on who benefits from those increases. That's basically what you are doing now considering that adding a child will cost a lot of her time, not just your money. |
Are there any caveats to withdrawing funds from brokerage? | Assuming a USA taxable account: Withdrawing funds from a brokerage account has nothing to do with taxes. Taxes are owed on the profit when you sell a stock, no matter what you do with the funds. Taxes are owed on any dividends the stock produces, no matter what you do with the dividend. The brokerage sends you a form 1099 each year that shows the amounts of dividends and profits. You have to figure out the taxes from that. |
Was this a good deal on a mortgage? | The price of the loan may be justified if you're considered a high-risk applicant for some reason (e.g. you're putting very little money in initial payment), and if it includes all the associated expenses. What is more relevant to your situation is that you're probably better off renting. Think about it: your $300'000 house will require some repairs in those 30 years (let's estimate those at $100'000). That means in 30 years you'll build $200'000 of equity spending $720'000 on it. Of course this assumes that the value of the house will remain constant. You're effectively be throwing away $520'000, or more than $1'400 a month. If you can rent a place for $1'400 a month or less, you'll build more equity by renting that place for 30 years and saving the excess money in a bank account. If you consider the interest that money in your bank account will earn you (e.g. 3% annually), you'll build more than $200'000 equity in 30 years even if you spend as much as $1'650 on your rent and save only $350 a month. |
What happens when the bid and ask are the same? | This question is impossible answer for all markets but there are 2 more possibilities in my experience: |
Are marijuana based investments promising, or just another scam? | Is there any truth to this, or is this another niche scam that's been brewing the last few years? While it may not be an outright scam, such schemes do tend to be on borderline of scams. Technically most of what is being said claimed can be true, however in reality such windfall gains never happen to the investors. Whatever gains are there will be cornered by the growers, trades, other entities in supply chain leaving very little to the investors. It is best to stay away from such investments. |
Will I always be able to get a zero-interest credit card? | No. There is no guarantee that credit card issuing banks will always use 0% introductory rates to entice anyone. |
Income tax laibility in India for Stock traded in USA as a resident Indian | my tax liabilities in India on my stock profit in US You would need to pay tax on the profit in India as well after you have become resident Indian. India and US have a double tax avoidance treaty. Hence if you have already paid tax in US, you can claim benefit and pay balance if any. For example if you US tax liability is 20 USD and Indian liability is USD 30, you just need to pay 10 USD. If the Indian tax liability is USD 20 or less you don't need to pay anything. what if in future I transfer all my US money to India? The funds you have earned in US while you were Non-Resident is tax free in India. You can bring it back any-time within a period of 7 years. |
Why don't forced buy-ins of short sold stock happen much more frequently? | Many investors don't invest for the short term and so a stock "nose-diving" in the short run will not affect their long term strategy so they will simply hold on to it until it recovers. Additionally funds that track an index have to hold on to the constituents of that index no matter what happens to its value over the period (within trading limits). Both of these kinds of investors will be able to lend stock in a company out and not trigger a forced buy-in on a short term change. If the underlying long-term health of the company changes or it is removed from indices it is likely that this will change, however. Employee stock plans and other investors who are linked directly to the company or who have a vested interest in the company other than in a financial way will also be unwilling (or unable) to sell on a down turn in the company. They will similarly be able to lend their stock in the short term. |
Is refinancing my auto loan just to avoid dealing with the lender that issued it a crazy idea? | I’d say No, it’s not crazy. I did that even for a mortgage, because the bank tended to lose my checks or let them sit for some days, and then claim I paid late. They were known on the internet for their poor processing department, so I decided to avoid that monthly hassle with calling and arguing, and refinanced. Compare the pain with the cost for refinancing, and if you think it’s worth it, change. You might even get a cheaper credit, and save on it. |
Multiple accounts stagnant after quitting job. | Adapted from an answer to a somewhat different question. Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over your 401k assets into an IRA. But I don't think that is the case here. If you had a Traditional 401k, the assets will roll over into a Traditional IRA; if it was a Roth 401k, into a Roth IRA. If you had started a little earlier, you could have considered considered converting part or all of your Traditional IRA into a Roth IRA (assuming that your 2012 taxable income will be smaller this year because you have quit your job). Of course, this may still hold true in 2013 as well. As to which custodian to choose for your Rollover IRA, I recommend investing in a low-cost index mutual fund such as VFINX which tracks the S&P 500 Index. Then, do not look at how that fund is doing for the next thirty years. This will save you from the common error made by many investors when they pull out at the first downturn and thus end up buying high and selling low. Also, do not chase after exchange-traded mutual funds or ETFs (as many will likely recommend) until you have acquired more savvy or interest in investing than you are currently exhibiting. Not knowing which company stock you have, it is hard to make a recommendation about selling or holding on. But since you are glad to have quit your job, you might want to consider making a clean break and selling the shares that you own in your ex-employer's company. Keep the $35K (less the $12K that you will use to pay off the student loan) as your emergency fund. Pay off your student loan right away since you have the cash to do it. |
Why do stock prices of retailers not surge during the holidays? | I think the question can be answered by realizing that whoever is buying the stock is buying it from someone who can do the same mathematics. Ask your son to imagine that everyone planned to buy the stock exactly one week before Christmas. Would the price still be cheap? The problem is that if everyone knows the price will go up, the people who own it already won't want to sell. If you're buying something from someone who doesn't really want to sell it, you have to pay more to get it. So the price goes up a week before Christmas, rather than after Christmas. But of course everyone else can figure this out too. So they are going to buy 2 weeks before, but that means the price goes up 2 weeks before rather than 1 week. You play this game over and over, and eventually the expected increased Christmas sales are "priced in". But of course there is a chance people are setting the price based on a mistaken belief. So the winner isn't the person who buys just before the others, but rather the one who can more accurately predict what the sales will be (this is why insider trading is so tempting even if it's illegal). The price you see right now represents what people anticipate the price will be in the future, what dividends are expected in the future, how much risk people think there is, and how that compares with other available investments. |
Do Americans really use checks that often? | There are some people that still get an old-fashioned paycheck but for the most part if you are an employee at a company you get a paystub while the money is direct deposited into your accounts. Paying for stuff at a store with a check is not very common. Most people use credit cards for that purpose. A significant percentage of the population still use checks for paying there regular bills through the mail. Although the more internet savvy people will most likely use online bill pay from their bank so they don't have to mail checks. Personally I have only written about 15 checks in 5 years. Mostly to people and not to businesses setup for receiving bill payments electronically. |
Why do credit cards have minimum limits? | I believe it's just to limit the less well-off from acquiring one. If your credit history and income do not support a $15,000 credit limit, then don't even think about applying for an Altitude Black card. If they do, then don't bother with a student card. It's primarily about market segmentation by wealth or income. |
How do I find the mappings between sedol and isin codes? | There is a relatively straightforward transformation explained on the Wikipedia page here and on the links from that page. Note that this only applies to SEDOLs for instruments listed on the London Stock Exchange (LSE). To convert SEDOL to ISIN you pad leading zeroes onto the SEDOL until you have 9 digits. Then you add the two letter country code (as defined in ISO 3166-1) to the front. Then you add a final checksum digit to the end, again as defined in the algorithm on the Wikipedia page. To convert ISIN to SEDOL you do the reverse: remove the final digit, remove the two leading letters, and strip off any leading zeroes. Example: |
What is the correct answer for percent change when the start amount is zero dollars $0? | In general, when dealing with quantities like net income that are not restricted to being positive, "percentage change" is a problematic measure. Even with small positive values it can be difficult to interpret. For example, compare these two companies: Company A: Company B: At a glance, I think most people would come away with the impression that both companies did badly in Y2, but A made a much stronger recovery. The difference between 99.7 and 99.9 looks unimportant compared to the difference between 100,000 and 40,000. But if we translate those to dollars: Company A: Y1 $100m, Y2 $0.1m, Y3 $100.1m Company B: Y1 $100m, Y2 $0.3m, Y3 $120.3m Company B has grown by a net of 20% over two years; Company A by only 1%. If you're lucky enough to know that income will always be positive after Y1 and won't drop too close to zero, then this doesn't matter very much and you can just look at year-on-year growth, leaving Y1 as undefined. If you don't have that guarantee, then you may do better to look for a different and more stable metric, the other answers are correct: Y1 growth should be left blank. If you don't have that guarantee, then it might be time to look for a more robust measure, e.g. change in net income as a percentage of turnover or of company value. |
Avoiding timing traps with long term index investing | What are the risks pertaining to timing on long term index investments? The risks are countless for any investment strategy. If you invest in US stocks, and prices revert to the long term cyclically adjusted average, you will lose a lot of money. If you invest in cash, inflation may outpace interest rates and you will lose money. If you invest in gold, the price might go down and you will lose money. It's best to study history and make a reasonable decision (i.e. invest in stocks). Here are long term returns by asset class, computed by Jeremy Siegel: $1 invested in equities in 1801 equals $15.22 today if was not invested and $8.8 million if it was invested in stocks. This is the 'magic of compound interest' and cash / bonds have not been nearly as magical as stocks historically. 2) How large are these risks? The following chart shows the largest drawdowns (decreases in the value of an asset) since 1970 (source): Asset prices decrease in value frequently. Financial assets are volatile, but historically, they have increased over time, enabling investors to earn compounded returns (exponential growth of money is how to get rich). I personally view drawdowns as an excellent time to buy - it's like going on a shopping spree when everything in the store is discounted. 3) In case I feel not prepared to take these risks, how can I avoid them? The optimal asset allocation depends on the ability to take risk and your tolerance for risk. You are young and have a long investment horizon, so if stocks go down, you will have plenty of time to wait for them to go back up (if you're smart, you'll buy more stocks when they go down because they're cheap), so your ability to bear risk is high. From your description, it seems like you have a low risk tolerance (despite a high ability to be exposed to risk). Here's the return of various asset classes and how the average investor has fared over the last 20 years (source): Get educated (read Common Sense on Mutual Funds, A Random Walk Down Wall Street, etc.) and don't be average! Closing words: Investing in a globally diversified portfolio with a dollar cost averaging strategy is the best strategy for most investors. For investors that are unable to stay rational when markets are volatile (i.e. the investor uncontrollably sells their stocks when stocks decrease 20%), a more conservative asset allocation is recommended. Due to the nature of compounded interest, a conservative portfolio is likely to have a much lower future value. |
How much (paper) cash should I keep on hand for an emergency? | Coming from an area that is hurricane prone, and seeing what happens to local businesses during evacuations/power outages/gas shortages, I think what you already have on hand should be sufficient. And it sounds like that's exactly what you're budgeting for. I'd say 2 weeks worth of fuel and food costs, with the budget for each in line with riding out a natural disaster. True "Preppers" would say keep your money in gold buried in the backyard surrounded by land mines, but that's not perhaps what you're looking for. It is not uncommon for gas stations and grocery stores to revert to cash only sales, especially if they're not big chain operations. If the internet is out, or power is spotty, they may not be able to process CCs. Again, think smaller or more rural businesses. I have seen gas stations switch to cash only during gas shortages as well to help limit how much fuel people were buying. $250 should get you through fine unless you drive a tank and need steak every night. You could probably go with less, but it's entirely dependent on your needs. As Joe rightly stated in his answer, if it's desperate enough times that you can't use a CC or debit card, cash may not even be useful to you. |
What options exist to make money in the US on a work-restricted visa? | Income generated from online sales is not considered "passive income", so you need to be authorized to work in the U.S. Those without work authorization can acquire passive income (through investments, lending, competition/contest earnings, etc.) In order to sell products on eBay (the description you've given leads me to believe that this is operated as a business), you need to be authorized to work in the U.S., and register a business. See: |
How is not paying off mortgage better in normal circumstances? | Lets do the math, using your numbers. We start off with $100K, a desire to buy a house and invest, and 30 years to do it. Scenario #1 We buy a house for $100K mortgage at 5% interest over 30 years. Monthly payment ends up being $536.82/month. We then take the $100K we still have and invest it in stocks, earning an average of 9% annually and paying 15% taxes. Scenario #2 We buy a house for our $100K cash, and then, every month, we invest the $536.82 we would have paid for the mortgage. Again, investments make 9% annually long term, and we pay 15% taxes. How would it look in 30 years? Scenario #1 Results: 30 years later we would have a paid off house and $912,895 in investments Scenario #2 Results: 30 years later we would have a paid off house and $712,745 in investments Conclusion: NOT paying off your mortgage early results in an additional $200,120 in networth after 30 years. That's 28% more. Therefore, not paying off your mortgage is the superior scenario. Caveats/Notes/Things to consider Play with the numbers yourself: |
How are investment funding valued when invested in a company before it goes public? | This is a question of how does someone value a business. Typically, it is some function of how much the company owns, how much the company owes, how risky is the company's business, and how much the company makes in profit. For example if a company (or investment) make $100/year, every year no matter what, how much would you pay for that? If you pay $1,000 you'll make 10% each year on your investment. Is that a good enough return? If you think the risk of the company requires a 20% payoff, you shouldn't pay more than $500 for the company. |
Retirement formula for annual compound interest with changing principal | I've found the systems that seem to work. Firstly, you need to find how much money is required to pay for the withdrawals after retirement, while still accruing interest. I couldn't seem to do this with an equation, but this bit of javascript worked: yearsToLast: Number of years of yearly withdrawals yearlyWithdrawal: Amount to withdraw each year interest: Decimal form of yearly compounding interest Now that we have how much is required at the beginning of the retirement, to figure out how much to add yearly to hit this mark, you'd use: amount: Previously found required amount to reach interest: Decimal form of yearly compounding interest yearsSaving: Number of years saving till amount needs to be hit I hope this helps some other poor soul, because I could find squat on how to do this. Max |
What price can *I* buy IPO shares for? | If you participate in an IPO, you specify how many shares you're willing to buy and the maximum price you're willing to pay. All the investors who are actually sold the shares get them at the same price, and the entity managing the IPO will generally try to sell the shares for the highest price they can get. Whether or not you actually get the shares is a function of how many your broker gets and how your broker distributes them - which can be completely arbitrary if your broker feels like it. The price that the market is willing to pay afterward is usually a little higher. To a certain extent, this is by design: a good deal for the shares is an incentive for the big (million/billion-dollar) financiers who will take on a good bit of risk buying very large positions in the company (which they can't flip at the higher price, because they'd flood the market with their shares and send the price down). If the stock soars 100% and sticks around that level, though, the underwriting bank isn't doing its job very well: Investors were willing to give the company a lot more money. It's not "stealing", but it's definitely giving the original owners of the company a raw deal. (Just to be clear: it's the existing company's owners who suffer, not any third party.) Of course, LinkedIn was estimated to IPO at $30 before they hiked it to $45, and plenty of people were skeptical about it pricing so high even then, so it's not like they didn't try. And there's a variety of analysis out there about why it soared so much on the first day - fewer shares offered, wild speculative bubbles, no one could get a hold of it to short-sell, et cetera. They probably could have IPO'd for more, but it's unlikely there was, say, $120/share financing available: just because one sucker will pay the price doesn't mean you can move all 7.84 million IPO shares for it. |
What happens when they run out of letters? | NYSE started allowing four letter tickers around 2009. NASDAQ allows 4-5 letter tickers. I guess they'll keep increasing when / if needed. Companies are allowed to change tickers, although there are costs. Tickers in the US are assigned through a single entity. Companies that are new need to take something that's open. http://www.wsj.com/articles/SB124296050986346159 I see that you're in Australia, but, since there aren't really that many options to deal with the problem that you mentioned, I'd guess that you'll ultimately do the same. Not sure about how tickers are assigned there though. |
How do I handle taxes on a very large “gift” from my employers? | You're right about your suspicions. I'm not a professional (I suggest you talk to a real one, a one with CPA, EA or Attorney credentials and license in your State), but I would be very cautious in this case. The IRS will look at all the facts and circumstances to make a claim, but my guess would be that the initial claim would be for this to be taxable income for your husband. He'd have to prove it to be otherwise. It does seem to be related to his performance, and I doubt that had they not known him through his employment, they'd give him such a gift. I may be wrong. So may be an IRS Revenue Officer. But I'd bet he'd think the same. Did they give "gifts" like that to anyone else? If they did - was it to other employees or they gave similar gifts to all their friends and family? Did those who gave your husband a gift file a gift tax return? Had they paid the gift tax? Were they principles in the partnership or they were limited partners (i.e.: not the ones with authority to make any decision)? Was your husband instrumental in making their extraordinary profit, or his job was not related to the profits these people made? These questions are inquiring about the facts and circumstances of the transaction. Based on what he can find out, and other potential information, your husband will have to decide whether he can reasonably claim that it was a gift. Beware: unreasonable claims lead to equally unreasonable penalties and charges. IRS and your State will definitely want to know more about this transaction, its not an amount to slide under the radar. This is not a matter where you can rely on a free opinions written by amateurs who don't know the whole story. You (or, rather, your husband) are highly encouraged to hire a paid professional - a CPA, EA (enrolled agent) or tax attorney with enough experience in fighting gift vs income characterization issues against the IRS (and the State, don't forget your State). An experienced professional may be able to identify something in the facts and the circumstances of the situation that would lead to reducing the tax bill or shifting it to the partners, but it is not something you do on your own. |
How are stock buybacks not considered insider trading? | Buybacks do not increase the company's value. Cash is traded for outstanding shares. This is similar to a dividend, but instead of cash, investors receive a rising share-price. Whether an investor prefers a cash dividend or capital gains is less important than the outcome that their investment is gaining value for them. |
Is losing money in my 401K normal? | Bottom line is our system is broken. For three years running I am 0% return with over 600k in. Yet, the 401k admin institution charges us all enormous fees that most aren't even aware exist. A helpful tip is to also check out your expense ratios and learn how those work as well so you know how much you are paying in hidden fees. |
When I ask a broker to buy stock, what does the broker do? | Here are a couple of articles that can help highlight the differences between a broker and an online investment service, which seems to be part of the question that you're asking. Pay attention to the references at the end of this link. http://finance.zacks.com/online-investing-vs-personal-broker-6720.html Investopedia also highlights some of the costs and benefits of each side, broke and online investment services. http://www.investopedia.com/university/broker/ To directly answer your question, a broker may do anything from using a website to making a phone call to submitting some other form of documentation. It is unlikely that he is talking directly to someone on the trading floor, as the volume traded there is enormous. |
Buying a House and Taking Part of 20% to move initial payment date forward | In the prior PMI discussions here, it's been stated that the bank is not obligated to remove PMI until the mortgage's natural amortization puts the debt at 78% LTV. So, paying in advance like this will not automatically remove the PMI. Nor will a lump sum payment be certain to move the next payment ahead a year. If it's entered as a principal prepayment, the next month's payment is still due. In the world of coupon books, if you sent in a year's payments, you'd not benefit from the interest saved, in one year you'd owe what the amortization table tells you. There's no free lunch when it comes to mortgages or finance in general. This is why we usually caution that one should not be cash poor the day after buying a house. Best to save 30%, put down 20%, and have a cushion after the closing. |
Do common stocks and preferred stocks have any differences in terms of percentage of the company per unit they represent? | Typically, preferred shares come with one or both different benefits - a disproportionate share of votes, say 10 votes per share vs the normal 1, or a preferred dividend. The vote preference is great for the owner(s) looking to go public, but not lose control of the company. Say, I am a Walton (of Walmart fame) and when I went public, I sold 80% of the (1000 share total) company. But, in creating the share structure, 20% of shares were assigned 10 votes each. 800 shares now trade with 800 votes, 200 shares have 10 votes each or 2000 votes. So, there are still the 1000 shares but 2800 votes. The 20% of shares now have 2000/2800 or 71% of the total votes. So, my shares are just less than half ownership, but over 78% of votes. Preferred dividend is as simple as that, buy Stock A for ownership, or (same company) Stock A preferred shares which have ownership and $1/yr dividend. Edited to show a bit more math. I use a simple example to call out a total 1000 shares. The percentages would be the same for a million or billion shares if 20% were a 10 vote preferred. |
Why would a passive investor buy anything other than the market portfolio + risk free assets? | Investing is always a matter of balancing risk vs reward, with the two being fairly strongly linked. Risk-free assets generally keep up with inflation, if that; these days advice is that even in retirement you're going to want something with better eturns for at least part of your portfolio. A "whole market" strategy is a reasonable idea, but not well defined. You need to decide wheher/how to weight stocks vs bonds, for example, and short/long term. And you may want international or REIT in the mix; again the question is how much. Again, the tradeoff is trying to decide how much volatility and risk you are comfortable with and picking a mix which comes in somewhere around that point -- and noting which assets tend to move out of synch with each other (stock/bond is the classic example) to help tune that. The recommendation for higher risk/return when you have a longer horizon before you need the money comes from being able to tolerate more volatility early on when you have less at risk and more time to let the market recover. That lets you take a more aggressive position and, on average, ger higher returns. Over time, you generally want to dial that back (in the direction of lower-risk if not risk free) so a late blip doesn't cause you to lose too much of what you've already gained... but see above re "risk free". That's the theoretical answer. The practical answer is that running various strategies against both historical data and statistical simulations of what the market might do in the future suggests some specific distributions among the categories I've mentioned do seem to work better than others. (The mix I use -- which is basically a whole-market with weighting factors for the categories mentioned above -- was the result of starting with a general mix appropriate to my risk tolerance based on historical data, then checking it by running about 100 monte-carlo simulations of the market for the next 50 years.) |
Options for dummies. Can you explain how puts & calls work, simply? | So, child, your goal is to make money? This is usually achieved by selling goods (say, lemonade) at a price that exceeds their cost (say, sugar, water and, well, lemons). Options, at first, are very much same in that you can buy the right to engage in a specific future trade. You make money in this situation if the eventual returns from the scheduled trade cover the cost of purchasing the option. Otherwise you can simply opt out of the trade -- you purchased the right to trade, after all, not any type of obligation. Makes sense? Good. Because what follows is what makes options a little different. That is, if you sell that same right to engage in a specific trade the situation is seemingly reversed: you lock in your return at the outset, but the costs aren't fully realized until the trade is either consumed or declined by the owner of the option. And keep in mind that it is always the owner of the option who is in the driver's seat; they may sell the option, hold on to it and do nothing, or use it to engage in the anticipated trade. And that's really all there's to it. |
The Intelligent Investor: Northern Pacific Railway example | Without reading the source, from your description it seems that the author believes that this particular company was undervalued in the marketplace. It seems that investors were blinded by a small dividend, without considering the actual value of the company they were owners of. Remember that a shareholder has the right to their proportion of the company's net value, and that amount will be distributed both (a) in the form of dividends and (b) on liquidation of the company. Theoretically, EPS is an indication of how much value an investor's single share has increased by in the year [of course this is not accurate, because accounting income does not directly correlate with company value increase, but it is a good indicator]. This means in this example that each share had a return of $10, of which the investors only received $1. The remainder sat in the company for further investment. Considering that liquidation may never happen, particularly within the time-frame that a particular investor wants to hold a share, some investors may undervalue share return that does not come in the form of a dividend. This may or may not be legitimate, because if the company reinvests its profits in poorer performing projects, the investors would have been better off getting the dividend immediately. However some value does need to be given to the non-dividend ownership of the company. It seems the author believes that investors failing to consider value of the non-dividend part of the corporation's shares in question led to an undervaluation of the company's shares in the market. |
What are some time tested passive income streams? | Last year was a great opportunity for dividend stocks and MLPs. I have a few which are earning 6-9% of my investment basis cost. Municipal bonds are a good value now. If you have the connections, passive investments in convenience franchises or other commercial property are a good income stream. A Dunkin Donuts used to be an amazing money printing machine. |
Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? | It's a little unusual, but I don't think the financial terms are completely unreasonable on their face. What you describe is similar to an interest-only loan, where you make payments that only cover the interest due each month, and the entire principal is due as a single "balloon payment" on a specified date (in this case, the date on which the condo is sold). Your monthly payment of $500 on a principal of $115K is equivalent to an annual interest rate of 5.22%, which at least is not completely usurious. With a traditional mortgage you might pay a rate as low as 3%, if you had sufficient income and excellent credit - but I don't know, from what you've said, whether that's the case. Did you make the current arrangement because you were unable to get a loan from a bank? The main difference here is that instead of the balloon payment being a fixed $115K, it's "75% of the gross proceeds of the sale". If the condo eventually sells for $155K, that would be $116,250, so that's slightly advantageous to them (assuming that "gross proceeds" means "before deducting commissions for either the buyers' or sellers' realtors or any other costs of the sale"), and thus slightly disadvantageous to you. If the condo appreciates in value, that's more of a win for them and more of a relative loss for you. But it's also possible that the value of the condo goes down, in which case this arrangement is better for you than a fixed balloon payment. So this deal does prevent you from getting a larger share of any gains in the value of the property, but it also helps insulate you from any losses. That's important to keep in mind. There's also the issue of needing their consent to sell. That's potentially problematic - usually in a joint ownership scheme, either owner has the right to demand to be bought out or to force a sale. I guess it depends on whether you think your parents would be likely to consent under reasonable circumstances, or to insist on holding the property against your best interests. It's true that you aren't building equity with this arrangement, and if you thought you were, you are mistaken or misled. But let's compare it with other options. If you would qualify for a traditional 30-year fixed mortgage at 3%, your monthly payment would be slightly lower ($484), and you would be building some equity because your payments would reduce the principal as well as paying the interest. But a 30-year loan builds equity very slowly at first - after 7 years you'd have only about $20,000 in principal paid down. If we assume that 5.2% represents the interest rate you'd otherwise pay based on your creditworthiness, then your monthly payment would be $631. So compared to that, you have an extra $130 per month that you can save or invest in whatever you want - you're not forced to invest it in your house. Note that in either case you'd still be paying the condo fees, property taxes, insurance, and maintenance yourself. So we might as well eliminate those from consideration. It might be a good idea to find out what other options you would have - perhaps try to get an interest rate quote on a traditional mortgage from a bank, based on your income and credit history. Then you can decide what to do, taking into account: your financial situation; how much of a monthly payment could you afford? your relationship with your parents; are they likely to be reasonable about renegotiating? Do they in general tend to respect your wishes? Would it harm your relationship if you tried to get out of the deal, and how important is that to you? To what extent do you actually want to pay for equity in this property? Do you really believe it's a good investment, and have evidence to support that? Your options include: Try to renegotiate the terms of the loan from your parents Try to "refinance" the loan, by getting a loan from a bank and paying off some agreed-upon amount of principal to your parents Try to force the sale of the condo and move to another house, financing it some other way Consult a lawyer as to whether your agreement with your parents is legally enforceable. For instance, do they have a lien on the property? |
Someone asks you to co-sign a loan. How to reject & say “no” nicely or politely? | I'm going to be buying a house / car / home theater system in the next few months, and this loan would show up on my credit report and negatively impact my score, making me unable to get the financing that I'll need. |
Is it a good idea to teach children that work is linearly related to income? | As a parent I think you absolutely have to teach them that income is related to work because (for most people at least) it's a more fundamental principle than budgeting, investments, interest, etc. Once they've learned that the primary source of income is work, then you can start teaching them what to do with it, i.e. how to budget, economise, save, invest, etc. |
How to learn about doing technical analysis? Any suggested programs or tools that teach it? | I recall the name Martin Pring. As my fundamental analysis book from grad school was the work of Graham and Dodd titled Security Analysis, Pring was the author of the books I read on technical analysis. If you've not read his work, your education has a ways to go before you hit the tools. |
If I get a bill (e.g. for internet service), is that a debt I owe? If no, what are the practical difference between a bill and a debt? | From accounting perspective, an unpaid bill for internet services, according to the Accruals Concept, is recorded as a liability under 'Current Liabilities' section of the Balance Sheet. Also as an expense on the Income Statement. So to answer your question it is both: a debt and an expense, however this is only the case at the end of the period. If you manage to pay it before the financial period ends this is simply an expense that is financed by cash or other liquid Asset on the Balance Sheet such as prepayment for example. For private persons you are generally given some time to pay the bill so it is technically a debt (Internet Provider would list you as a debtor on their accounts), but this is not something to worry about unless you are not considering to pay this bill. In which case your account may be sold as part of a factoring and you will then have a debt affecting your credit rating. |
Tenant wants to pay rent with EFT | It isn't EFT, but you might mention to your tenant, that many banks offer a Bill Pay service (example) where the bank will automatically mail a check to the right person for you. I have my rent setup this way. My bank will send a rent check directly to my landlord 5 days before it is due. |
How can I save money on a gym / fitness membership? New Year's Resolution is to get in shape - but on the cheap! | I came across an article posted at Squawkfox last week. It's particularly relevant to answering this question. See 10 Ways to Cut Your Fitness Membership Costs. Here's an excerpt: [...] If you’re in the market for a shiny new gym membership, it may be wise to read the fine print and know your rights before agreeing to a fitness club contract. No one wants to be stuck paying for a membership they can no longer use, for whatever reason. But if you’re revved and ready to burn a few calories, here are ten ways to get fitter while saving some cash on a fitness club or gym membership. Yay, fitness tips! [...] Check it out! |
When should I walk away from my mortgage? | It's a decision that only you can make. What are the chances that you'll want to take another loan (any loan - car, credit card, installment plan for new fridge, whatever else)? What are the chances that with the bad credit you'll find it hard to rent a place (and in Cali it's hard to rent a place right now, believe me, I bought a place just to save on the rent)? What are the chances that the prices will bounce and your "on-paper" loss will be recovered by the time you actually need/want to sell the house? You have to check all these and make a wise decision considering all the pros and cons in your personal case. |
What is a Master Limited Partnership (MLP) & how is it different from plain stock? | MLP stands for master limited partnership. Investors who buy into one are limited partners, rather than shareholders, and have their taxable income reported on K-1s, rather than 1099s. MLPs are engaged in businesses (e.g. real estate, natural resources) that generate a lot of cash that doesn't need to be "reinvested," or put back into the company. Because of this feature, the IRS will exempt it from corporate tax if it pays out at least 95% of its income in the form of dividends. The advantage is that you avoid the "double taxation" common to most corporations, and get a higher yield as a result. The disadvantage is that the company can't retain earnings for growth, and needs to borrow money if it wants to grow. In this regard, an MLP is much like a utility (except that a utility has to pay corporate taxes, and is otherwise heavily regulated by the Federal and/or state governments). You can look upon an MLP as an unregulated utility. This means that MLPs are most suitable for utility type investors who are more interested in current income, than capital gains. Because they are unregulated, they are riskier than utilities. |
What is a good size distribution for buying gold? | If the "crash" you worry about is a dissolution of the euro, then the main thing you should concern yourself with is liquidity. For that, purchase the most highly liquid gold ETF or futures contract, whichever is more appropriate for the total amount of money involved. Any other way and you will lose a significant chunk of your assets to transaction costs. If, on the other hand, the "crash" you were concerned about were the total collapse of the world economy, and people around the world abandon all paper currencies and resort to barter as a method of trade, then I can see buying several small pieces being a rational strategy, although then I would also question whether you were a sane individual. |
What is the opposite of Economic Bubble? | The opposite of an economic bubble is a bubble burst :p! Jokes aside though, an economic bubble occurs when the economy is in bull market mode and asset prices are growing very fast. It's usually measured by ratio's like price to earnings and the levels of various market indices. So, the opposite would be when valuations are falling very fast or are very low, and price to earnings ratios are low. This condition is usually a recession. A recession is a market slowdown, generally after a bubble bursts, and severe recessions can become depressions if they last long enough (Great Depression, 1930s). A bubble is not necessarily negative - stock prices usually rise a lot so paper wealth is greatly magnified. If you can get out in time, you're golden. Similarly, a recession isn't bad for everyone. Some investors keep large amounts of cash waiting for recessions so they can "buy low, sell high". For most people, however, recessions are negative because unemployment increases and some people get fired, and the economy slows down. Asset prices have fallen so their investments are worth less than they used to be (on paper), and people mainly have to bide it out until the market starts growing again. |
How is stock price determined? | The answer to each of your questions is no. It is important to appreciate that the "quoted" ticker price may be delayed by say 15 minutes, and thus is not "real-time." |
What market conditions favor small cap stocks over medium cap stocks? | Small cap companies are just smaller, so the risk for them to fail is higher but the potential for higher returns is also higher. |
Could an ex-employee of a company find themself stranded with shares they cannot sell (and a tax bill)? | they are entirely free to do whatever they want with the shares. In particular, they can sell them to whomever they choose No. Restrictions on who can sell when and to whom are a common thing with startups. "Publicly traded" companies are regulated in a much stricter way than private companies, so until the IPO the sales are limited to the OTC markets. But even that can be restricted by bylaws - for example ownership can only be limited to a group of investors approved by the board. As an employee - your grant was approved by the board, but when you come to sell, the buyer was not and the company may not agree to vet them. Bottom line is that it is not illegal to impose all kinds of restrictions on what the employees can do with their shares, as long as the shares are not listed on a public stock exchange (even after the company goes IPO with one class, other classes may remain restricted). |
What is the buy-hold-sell indication based on? | The indication is based on the average Buy-Hold-Sell rating of a group of fundamental analysts. The individual analysts provide a Buy, Hold or Sell recommendation based on where the current price of the stock is compared to the perceived value of the stock by the analyst. Note that this perceived value is based on many assumptions by the analyst and their biased view of the stock. That is why different fundamental analysts provide different values and different recommendations on the same stock. So basically if the stock's price is below the analyst's perceived value it will be given a Buy recommendation, if the price is equal with the perceived value it will be given a Hold recommendation and if the price is more than the perceived value it will be given a Sell recommendation. As the others have said this information IMHO is useless. |
Is there any way to pay online in a country with no international banking system | paypal says it works with CBE but can't seem to link my account with them, but skrill works perfectly just go to www.skrill.com sign up and you can link your bank account with your skrill account, i've had a few transactions so it should work for you too. |
Washington State tax filing extension? | Washington State doesn't have a state income tax for individuals, so unless you've got a business there's nothing to file. Find out more on their website. |
Can I use an HSA to pay financed payments for LASIK? | From HSA Resources - I understand that I can reimburse myself from my HSA for qualified medical expenses that I pay out-of-pocket but is there a time limit? Do I need to reimburse myself in the same year? You have your entire lifetime to reimburse yourself. As long as you had your HSA established at the time the expense was incurred, you save the receipt and it was not otherwise reimbursed, you can reimburse yourself for the expense from your HSA even years later. The important thing not asked or mentioned above is that the HSA must be in place before the expense occurred. In your case, should the LASIK procedure be before the HSA is established, it's not an eligible expense. |
I can make a budget, but how can I get myself to consistently follow my budget? | Do a monthly budget, unique to each month, before the month begins, spend all of your money on paper. Use envelopes to help you keep track of how much you have left for things you buy throughout the month. Have separate envelopes for things like groceries, restaurants, clothing, entertainment. Put the amount of money for each category in cash in the envelope. Only spend the money out of the correct envelope and don't mix and mingle between envelopes. Pay in cash, with real money. Don't use credit or debit cards, it's proven you spend more when you are not paying with cash. |
How to trade at Athens Stock Exchange (ASE) | Saxo Bank offers direct access to Athens Stock Exchange. Interactive Brokers is your next best bet, and as you probably already noticed, they do not have a free platform. They are open to US and non-US citizens. Although they do not currently have direct exposure to individual companies on the Athens Stock Exchange, the various european exchanges they do provide direct market access for will give a lot of exposure. There are a few Greek companies that trade on non-Greek stock exchanges, if you want exposure. There are also Greek ETFs which bundle several companies together or try to replicate Greek company indices. |
Would I ever need credit card if my debit card is issued by MasterCard/Visa? | The question should be - do you need a debit card? Other than American Express I have to tell my other credit card issuers to not make my cards dual debit/credit. Using a debit card card can be summed up easily - It creates a risk of fraud, errors, theft, over draft, and more while providing absolutely no benefit. It was simply a marketing scheme for card companies to reduce risk that has lost favor, although they are still used. That is why banks put it on credit cards by default if they can. (I am talking about logical people who can control not overspending because of debit vs. credit - as it is completely illogical that you would spend more based on what kind of card you have.) |
Can a bank hold my deposit on a closed account? | What I'm reading is that they subtracted the $85 you owe them and they're cutting you a cashier's check for the rest. Ethically speaking, you owed them the money, they subtracted it and made you a check for the rest. Once you cash that check, nobody owes anyone anything in this equation. Sounds like they're in the clear. Legally speaking, I have no idea, since I'm not a lawyer, but even if it was not legal, good luck getting the $85 back without spending far more in retaining a lawyer and fighting it in court. Even fighting it in small claims court will take more of your time than $85 is worth. If it's your time that is the problem, 12 days is not horrible in banking terms. Yes, we're spoiled now by ACH transfers and same day deposit availability, but since you're retired, I'm sure if you think back you'll remember when it used to take two business weeks to clear a check... TLDR; cancel future deposits to that bank, find a new bank, then forget this fiasco and get your revenge by enjoying your life. |
Can individuals day-trade stocks using High-Frequency Trading (HFT)? | The answer is to your question is somewhat complicated. You will be unable to compete with the firms traditionally associated with High Frequency Trading in any of their strategies. Most of these strategies which involve marketing making, latency arbitrage, and rebate collection. The amount of engineering required to build the infrastructure required to run this at scale makes it something which can only be undertaken by a team of highly skilled engineers. Indeed, the advantage of firms competing in this space such as TradeBot, TradeWorx, and Getco comes from this infrastructure as most of the strategies that are developed are necessarily simple due to the latency requirements. Now if you expand the definition of HFT to include all computerized automated trading you most certainly can build strategies that are profitable. It is not something that you probably want to tackle on your own but I know of a couple of people that did go it alone successfully for a couple of years before joining an established firm to run a book for them. In order to be successful you will most likely need to develop a unique strategies. The good news is because that you are trying to deploy a very tiny amount of capital you can engage in trades that larger firms would not because the strategies cannot hold enough capital relative to the firms capital base. I am the co-founder of a small trading firm that successfully trades the US Equities and Equity Derivatives markets. A couple of things to note is that if you want to do this you should consider building a real business. Having some more smart brains around you will help. You don't need exchange colocation for all strategies. Many firms, including ours, colocate in a data center that simply has proximity to the exchanges data centers. You will need to keep things simple to be effective. Don't except all the group think that this is impossible. It is possible although as a single individual it will be more difficult. It will require long, long hours as you climb the algorithmic trading learning curve. Good luck. |
Advantages of paying more of your mortgage while you know you won't continue to live there your whole life | It's pretty simple - the less money you owe the less interest you pay. Paying down debt gives a guaranteed return of the interest rate of the debt. So paying off your starter loan is equivalent to a 4% return. That's not a bad return in the current environment so it makes sense to do it unless you can find an investment which you think is likely to pay significantly better. (Note this is a general answer, not Netherlands-specific. There may be other considerations, around tax for example, which have to be factored into the calculation). |
Do post-IPO 'insider' stock lockup periods still apply if you separate from the company | There are quite a few regulations on "Insider Trading". Blackouts are one of the means companies adopt to comply with "Insider Trading" regulations, mandating employees to refrain from selling/buying during the notified period. Once you leave the employment: So unless there is an urgent need for you to sell/buy the options, wait for some time and then indulge in trade. |
When Employees are “Granted” Stock Options, is the Company encouraging Long-Term investments from them? | There are two things to consider: taxes - beneficial treatment for long-term holding, and for ESPP's you can get lower taxes on higher earnings. Also, depending on local laws, some share schemes allow one to avoid some or all on the income tax. For example, in the UK £2000 in shares is treated differently to 2000 in cash vesting - restricted stocks or options can only be sold/exercised years after being granted, as long as the employee keeps his part of the contract (usually - staying at the same place of works through the vesting period). This means job retention for the employees, that's why they don't really care if you exercise the same day or not, they care that you actually keep working until the day when you can exercise arrives. By then you'll get more grants you'll want to wait to vest, and so on. This would keep you at the same place of work for a long time because by quitting you'd be forfeiting the grants. |
Is the money you get from shorting a stock free to use for going long on other stocks? | You will be charged a stock borrow fee, which is inversely related to the relative supply of the stock you are shorting. IB claims to pay a rebate on the short proceeds, which would offset part or all of that fee, but it doesn't appear relevant in your case because: It is a bit strange to me that IB would not require you to keep the cash in your account, as they need the cash to collateralize the stock borrow with the lending institution. In fact, per Regulation T, the short position requires an initial margin of 150%, which includes the short proceeds. As described by Investopedia: In the first table of Figure 1, a short sale is initiated for 1,000 shares at a price of $50. The proceeds of the short sale are $50,000, and this amount is deposited into the short sale margin account. Along with the proceeds of the sale, an additional 50% margin amount of $25,000 must be deposited in the account, bringing the total margin requirement to $75,000. At this time, the proceeds of the short sale must remain in the account; they cannot be removed or used to purchase other securities. Here is a good answer to your question from The Street: Even though you might see a balance in your brokerage account after shorting a stock, you're actually looking at a false credit, according to one big brokerage firm. That money is acting as collateral for the short position. So, you won't have use of these funds for investment purposes and won't earn interest on it. And there are indeed costs associated with shorting a stock. The broker has to find stock to loan to you. That might come out of a broker's own inventory or might be borrowed from another stock lender. |
Can value from labor provided to oneself be taxed? | This is called imputed income, which is generally not taxed in the US. |
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