Question stringlengths 14 166 | Answer stringlengths 3 13.1k |
|---|---|
Why does the biotechnology industry have such a high PE ratio? | I want to elaborate on some of the general points made in the other answers, since there is a lot that is special or unique to the biotech industry. By definition, a high P/E ratio for an industry can stem from 1) high prices/demand for companies in the industry, and/or 2) low earnings in the industry. On average, the biotech industry exhibits both high demand (and therefore high prices) and low earnings, hence its average P/E ratio. My answer is somewhat US-specific (mainly the parts about the FDA) but the rest of the information is relevant elsewhere. The biotech industry is a high-priced industry because for several reasons, some investors consider it an industry with significant growth potential. Also, bringing a drug to market requires a great deal of investment over several years, at minimum. A new drug may turn out to be highly profitable in the future, but the earliest the company could begin earning this profit is after the drug nears completion of Phase III clinical trials and passes the FDA approval process. Young, small-cap biotech companies may therefore have low or negative earnings for extended periods because they face high R&D costs throughout the lengthy process of bringing their first drug (or later drugs) to market. This process can be on the order of decades. These depressed earnings, along with high demand for the companies, either through early investors, mergers and acquisitions, etc. can lead to high P/E ratios. I addressed in detail several of the reasons why biotech companies are in demand now in another answer, but I want to add some information about the role of venture capital in the biotech industry that doesn't necessarily fit into the other answer. Venture capital is most prevalent in tech industries because of their high upfront capital requirements, and it's even more important for young biotech companies because they require sophisticated computing and laboratory equipment and highly-trained staff before they can even begin their research. These capital requirement are only expected to rise as subfields like genetic engineering become more widespread in the industry; when half the staff of a young company have PhD's in bioinformatics and they need high-end computing power to evaluate their models, you can see why the initial costs can be quite high. To put this in perspective, in 2010, "venture capitalists invested approximately $22 billion into nearly 2,749 companies." That comes out to roughly $7.8M per company. The same year (I've lost the article that mentioned this, unfortunately), the average venture capital investment in the biotech industry was almost double that, at $15M. Since many years can elapse between initial investment in a biotech company and the earliest potential for earnings, these companies may require large amounts of early investment to get them through this period. It's also important to understand why the biotech industry, as a whole, may exhibit low earnings for a long period after the initial investment. Much of this has to do with the drug development process and the phases of clinical trials. The biotech industry isn't 100% dedicated to pharmaceutical development, but the overlap is so significant that the following information is more than applicable. Drug development usually goes through three phases: Drug discovery - This is the first research stage, where companies look for new chemical compounds that might have pharmaceutical applications. Compounds that pass this stage are those that are found to be effective against some biological target, although their effects on humans may not be known. Pre-clinical testing - In this stage, the company tests the drug for toxicity to major organs and potential side effects on other parts of the body. Through laboratory and animal testing, the company determines that the drug, in certain doses, is likely safe for use in humans. Once a drug passes the tests in this stage, the company submits an Investigational New Drug (IND) application to the FDA. This application contains results from the animal/laboratory tests, details of the manufacturing process, and detailed proposals for human clinical trials should the FDA approve the company's IND application. Clinical trials - If the FDA approves the IND application, the company moves forward with clinical trials in human, which are themselves divided into several stages. "Post-clinical phase" / ongoing trials - This stage is sometimes considered Phase IV of the clinical trials stage. Once the drug has been approved by the FDA or other regulatory agency, the company can ramp up its marketing efforts to physicians and consumers. The company will likely continue conducting clinical trials, as well as monitoring data on the widespread use of the drug, to both watch for unforeseen side effects or opportunities for off-label use. I included such detailed information on the drug development process because it's vitally important to realize that each and every step in this process has a cost, both in time and money. Most biopharm companies won't begin to realize profits from a successful drug until near the end of Phase III clinical trials. The vast R&D costs, in both time and money, required to bring an effective drug through all of these steps and into the marketplace can easily depress earnings for many years. Also, keep in mind that most of the compounds identified in the drug discovery stage won't become profitable pharmaceutical products. A company may identify 5,000 compounds that show promise in the drug discovery stage. On average, less than ten of these compounds will qualify for human tests. These ten drugs may start human trials, but only around 20% of them will actually pass Phase III clinical trials and be submitted for FDA approval. The pre-clinical testing stage alone takes an average of 10 years to complete for a single drug. All this time, the company isn't earning profit on that drug. The linked article also goes into detail about recruitment delays in human trials, scheduling problems, and attrition rates for each phase of the drug development process. All of these items add both temporal and financial costs to the process and have the potential to further depress earnings. And finally, a drug could be withdrawn from the market even after it passes the drug development process. When this occurs, however, it's usually the fault of the company for poor trial design or suppression of data (as in the case of Vioxx). I want to make one final point to keep in mind when looking at financial statistics like the P/E ratio, as well as performance and risk metrics. Different biotech funds don't necessarily represent the industry in the same way, since not all of these funds invest in the same firms. For example, the manager of Fidelity's Select Biotechnology Portfolio (FBIOX) has stated that he prefers to weight his fund towards medium to large cap companies that already have established cash flows. Like all biopharm companies, these firms face the R&D costs associated with the drug development process, but the cost to their bottom line isn't as steep because they already have existing cash flows to sustain their business and accumulated human capital that should (ideally) make the development process more efficient for newer drugs. You can also see differences in composition between funds with similar strategies. The ishares Nasdaq Biotech Index Fund (IBB) also contains medium to large cap companies, but the composition of its top 10 holdings is slightly different from that of FBIOX. These differences can affect any metric (although some might not be present for FBIOX, since it's a mutual fund) as well as performance. For example, FBIOX includes Ironwood Pharmaceuticals (IRWD) in its top 10 holdings, while IBB doesn't. Although IBB does include IRWD because it's a major NASDAQ biotech stock, the difference in holdings is important for an industry where investors' perception of a stock can hinge on a single drug approval. This is a factor even for established companies. In general, I want to emphasize that a) funds that invest more heavily in small-cap biotech stocks may exhibit higher P/E ratios for the reasons stated above, and b) even funds with similar mixes of stocks may have somewhat different performance because of the nature of risk in the biotech industry. There are also funds like Vanguard's Healthcare ETF (VHT) that have significant exposure to the biotech industry, including small-cap firms, but also to major players in the pharmaceutical market like Pfizer, Johnson and Johnson, etc. Since buyouts of small-cap companies by large players are a major factor in the biotech industry, these funds may exhibit different financial statistics because they reflect both the high prices/low earnings of young companies and the more standard prices/established earnings of larger companies. Don't interpret anything I stated above as investment advice; I don't want anything I say to be construed as any form of investment recommendation, since I'm not making one. |
Do mutual fund companies deliberately “censor” their portfolios/funds? | There is a survivorship bias in the mutual fund industry. It's not about individual stocks in which those funds invest. Rather, it's in which funds and fund companies/families are still around. The underperforming funds get closed or merged into other funds. Thus they are no longer reported, since they no longer exist. This makes a single company's mutual funds appear to have a better history, on average, than they actually did. Similarly, fund companies that underperform, will go out of business. This could make the mutual fund industry's overall history appear to be better than it actually was. Most companies don't do this to deliberately game the numbers. It's rational on the part of fund companies to close underperforming funds. When a fund has a below average history, investors will likely not invest in it, and will remove their existing money. The fund will shrink while the overhead remains the same, making the fund unprofitable for the company to run. |
How dividend payout happens | As the record date is 7th August, you need to hold stocks on the 7th August closing. You need not hold it till 2nd Sept. The list as taken on 7th August would be processed and instructions given to Bank and the dividends credited by 1st Sept. Edit: To Clarify Victor's comment Typically from the time one sells the stocks to the time it actually gets transferred has a clearing cycle. Most stock exchanges have 2 or 3 days cycles. i.e. if I sell the stock today, it is still in my name. The money is still with the buyer. On Day 1, the positions are arrived at. On Day 2 the stock gets credited to the buyer and the funds gets credit to seller. As the question was specific whether to hold the stock till 7th or 22nd Sept, my initial answer was simple. The illustration by Victor is more accurate. |
Is refinancing my auto loan just to avoid dealing with the lender that issued it a crazy idea? | What are the fees associated with changing the new loan? Are those fees worth the peace of mind? If so, than it is not "crazy". The decision really boils down to that: is it worth the money that you will spend refinancing the loan to not have to deal with the original bank that financed your loan, assuming that you find an institution that will be more amenable to your financial expectations. |
Why not pay in full upfront for a car? | In general I'd say, yeah, if you can pay cash, pay cash. If you pay cash, then by definition you pay zero interest. If you get a loan, you'll pay interest. Most people get a loan to buy a car because they don't have the cash. Possible reasons not to pay cash when you could: One: Technically you can pay cash, but if you did, you would have little or no reserve for emergencies. Like if the car costs, say, $20,000.00, and you have $20,010.00 in your bank account, then technically you could afford to pay cash, but you probably shouldn't, because you don't want to have just $10 left. What if tomorrow something comes up? Two: Arguably, you have a place to invest money that pays more than the interest on the loan. Like say you can get a car loan for, whatever the going rate is today, say 6%. And you know a place to invest your money that is very safe and almost guaranteed to pay 10%. It would make sense to borrow to buy the car, invest the cash, and then withdraw money from the investment to make the payments on the car. You'd end up 4% ahead. There are a lot of catches to that strategy, though. The biggest is that the more the investment pays, the more likely that it is risky. If you thought the investment would pay 10% but it ends up paying only 4%, then you will lose money by this strategy. Also, there's the psychological element: Many people SAY and fully INTEND to invest their money, but then find other things they want to buy and so spend it instead. If you pay cash, you're committed. |
Any good software for value investment? | As @littleadv and @DumbCoder point out in their comments above, Bloomberg Terminal is expensive for individual investors. If you are looking for a free solution I would recommend Yahoo and Google Finance. On the other side, if you need more financial metrics regarding historic statements and consensus estimates, you should look at the iPad solution from Worldcap, which is not free, but significantly cheaper then Bloomberg and Reuters. Disclosure: I am affiliated with WorldCap. |
Why does AAPL trade at such low multiples? | This is also an opinion, the iPhone makes up too much of the company's total revenue. Last quarter results were very well received because of the somewhat dramatic increase in service revenue indicating that maybe the company can shift from relying so heavily on the iPhone. As it stands, Apple is a single product company and that hinders long term prospects, hence the relatively low multiple. And the company has missed estimates, in fact one of those large dips was an earnings miss. Additionally, if you're looking at the charts another one of the recent dips was likely caused by the brexit vote because everything was clobbered for a couple of days after that. |
Am I responsible for an annual fee on a credit card I never picked up? | In the end, I was not required to pay the fee. After some frustrating initial attempts, I ended up writing a letter and sending a copy to card services, customer support, complaints and the legal department. It basically said: 1 - I never signed anything. 2 - I spoke to a very aggressive person at the airport who told me that she was just taking down my information in order to send information about the card, and that I was under no obligation 3 - I never received a card, activated a card, or used a card. 4 - I want this charge canceled immediately 5 - If this ever shows up on my credit report, I will contact my lawyer regarding this unscrupulous business practice. After that I received a notice in the mail confirming that everything had been cancelled and all charges were reversed. |
Is a car loan bad debt? | Here is another way to look at it. Does this debt enable you to buy more car than you can really afford, or more car than you need? If so, it's bad debt. Let's say you don't have the price of a new car, but you can buy a used car with the cash you have. You will have to repair the car occasionally, but this is generally a lot less than the payments on a new car. The value of your time may make sitting around waiting while your car is repaired very expensive (if, like me, you can earn money in fine grained amounts anywhere between 0 and 80 hours a week, and you don't get paid when you're at the mechanic's) in which case it's possible to argue that buying the new car saves you money overall. Debt incurred to save money overall can be good: compare your interest payments to the money you save. If you're ahead, great - and the fun or joy or showoff potential of your new car is simply gravy. Now let's say you can afford a $10,000 car cash - there are new cars out there at this price - but you want a $30,000 car and you can afford the payments on it. If there was no such thing as borrowing you wouldn't be able to get the larger/flashier car, and some people suggest that this is bad debt because it is helping you to waste your money. You may be getting some benefit (such as being able to get to a job that's not served by public transit, or being able to buy a cheaper house that is further from your job, or saving time every day) from the first $10,000 of expense, but the remaining $20,000 is purely for fun or for showing off and shouldn't be spent. Certainly not by getting into debt. Well, that's a philosophical position, and it's one that may well lead to a secure retirement. Think about that and you may decide not to borrow and to buy the cheaper car. Finally, let's say the cash you have on hand is enough to pay for the car you want, and you're just trying to decide whether you should take their cheap loan or not. Generally, if you don't take the cheap loan you can push the price down. So before you decide that you can earn more interest elsewhere than you're paying here, make sure you're not paying $500 more for the car than you need to. Since your loan is from a bank rather than the car dealership, this may not apply. In addition to the money your cash could earn, consider also liquidity. If you need to repair something on your house, or deal with other emergency expenditures, and your money is all locked up in your car, you may have to borrow at a much higher rate (as much as 20% if you go to credit cards and can't get it paid off the same month) which will wipe out all this careful math about how you should just buy the car and not pay that 1.5% interest. More important than whether you borrow or not is not buying too much car. If the loan is letting you talk yourself into the more expensive car, I'd say it's a bad thing. Otherwise, it probably isn't. |
Why does a company's stock price affect its ability to raise debt? | As JB hints, it is likely due to superior or improving, fundamentals. If the fundamentals of a company improve then its ability to repay loans improves. If its ability to repay improves then more sources of cash become willing to lend to the company. Also if fundamentals are improving then more sources are willing to buy and/or hold the stock. |
Has anyone compared an in-person Tax Advisor to software like Turbo Tax? | A CPA or Enrolled Agent can be helpful, especially if you have a complicated situation such as owning your own business. The people at a lot of tax-prep places don't have many qualifications (they are not accountants or enrolled agents or certified financial planners or anything else). They are just trained to enter stuff into the computer. In that case, you can measure their value according to how much you prefer talking to typing. But don't expect them to get it right if your taxes involve any judgment calls or tricky stuff. I think a good strategy is to try TurboTax (or whatever program) and if you get stuck on any of the questions, find a pro to help. |
Is CFD a viable option for long-term trading? | Something really does seem seedy that if I invest $2500, that I'll make above 50k if the stock doubles. Is it really that easy? You only buy or sell on margin. Think of when the stock moves in the opposite direction. You will loose 50k. You probably didn't look into that. Investment will vanish and then you will have debt to repay. Holding for long term in CFD accounts are charged per day. Charges depends on different service providers. CFD isn't and should not be used for long term. It is primarily for trading in the short term, maybe a week at the maximum. Have a look at the wikipedia entry and educate yourself. |
Simple and safe way to manage a lot of cash | You can move most or all of those financial products into a single account at one institution, but I wouldn't go with a "mutual fund account" like Vanguard. The big online brokerages should offer: Consolidating everything into one statement can vastly simplify your record keeping. With a balance of $250k, you should be able to get a paper statement without a fee. Depending on where the accounts are currently held (e.g. if the stocks are at a full-service broker), you may also be able to save on fees. |
Income Tax form in India for freelancing | ITR1 or ITR2 needs to be filed. Declare the income through freelancing in the section "income from other sources" |
What is the meaning of “short selling” or “going short” a stock? | This is a gross simplification as there are a few different ways to do this. The principle overall is the same though. To short a stock, you borrow X shares from a third party and sell them at the current price. You now owe the lender X shares but have the proceeds from the sale. If the share price falls you can buy back those shares at the new lower price, return them to the lender and pocket the difference. The risk comes when the share price goes the other way, you now owe the lender the new value of the shares, so have to find some way to cover the difference. This happened a while back when Porsche made a fortune buying shares in Volkswagen from short sellers, and the price unexpectedly rose. |
What are some pre-tax programs similar to FSA that I can take advantage of? | 2014 Limit: $2,500 Notes 2014 Limit: $3,300 individual, $6,550 family Notes 2014 Limit: $5,000 Notes 2014 Limit: $2,500 Notes 2014 Limit: $250/month Notes 2014 Limit: $130/month Notes |
What is the difference between hedging and diversification? How does each reduce risk? | The difference is in the interrelation between the varied investments you make. Hedging is about specifically offsetting a possible loss in an investment by making another related investment that will increase in value for the same reasons that the original investment would lose value. Gold, for instance, is often regarded as the ultimate hedge. Its value is typically inversely correlated to the rest of the market as a whole, because its status as a material, durable store of value makes it a preferred "safe haven" to move money into in times of economic downturn, when stock prices, bond yields and similar investments are losing value. That specific behavior makes investing in gold alongside stocks and bonds a "hedge"; the increase in value of gold as stock prices and bond yields fall limits losses in those other areas. Investment of cash in gold is also specifically a hedge against currency inflation; paper money, account balances, and even debt instruments like bonds and CDs can lose real value over time in a "hot" economy where there's more money than things to buy with it. By keeping a store of value in something other than currency, the price of that good will rise as the currencies used to buy it decrease in real value, maintaining your level of real wealth. Other hedges are more localized. One might, for example, trade oil futures as a hedge on a position in transportation stocks; when oil prices rise, trucking and airline companies suffer in the short term as their margins get squeezed due to fuel costs. Currency futures are another popular hedge; a company in international business will often trade options on the currencies of the companies it does business in, to limit the "jitters" seen in the FOREX spot market caused by speculation and other transient changes in market demand. Diversification, by contrast, is about choosing multiple unrelated investments, the idea being to limit losses due to a localized change in the market. Companies' stocks gain and lose value every day, and those companies can also go out of business without bringing the entire economy to its knees. By spreading your wealth among investments in multiple industries and companies of various sizes and global locations, you insulate yourself against the risk that any one of them will fail. If, tomorrow, Kroger grocery stores went bankrupt and shuttered all its stores, people in the regions it serves might be inconvenienced, but the market as a whole will move on. You, however, would have lost everything if you'd bet your retirement on that one stock. Nobody does that in the real world; instead, you put some of your money in Kroger, some in Microsoft, some in Home Depot, some in ALCOA, some in PG&E, etc etc. By investing in stocks that would be more or less unaffected by a downturn in another, if Kroger went bankrupt tomorrow you would still have, say, 95% of your investment next egg still alive, well and continuing to pay you dividends. The flip side is that if tomorrow, Kroger announced an exclusive deal with the Girl Scouts to sell their cookies, making them the only place in the country you can get them, you would miss out on the full possible amount of gains you'd get from the price spike if you had bet everything on Kroger. Hindsight's always 20/20; I could have spent some beer money to buy Bitcoins when they were changing hands for pennies apiece, and I'd be a multi-millionaire right now. You can't think that way when investing, because it's "survivor bias"; you see the successes topping the index charts, not the failures. You could just as easily have invested in any of the hundreds of Internet startups that don't last a year. |
Saving up for an expensive car | I've read online that 20% is a reasonable amount to pay for a car each month - Don't believe everything you read on the internet. But, let me ask, does your current car have zero expense? No fuel, no oil change, no repairs, no insurance? If the 20% is true, you are already spending a good chunk of it each month. My car just celebrated her 8th birthday. And at 125,000 miles, needed $3000 worth of maintenance repairs. The issue isn't with buying the expensive car, you can buy whatever you can afford, that's a personal preference. It's how you propose to budget for it that seems to be bad math. Other members here have already pointed out that this financial decision might not be so wise. |
Should you keep your stocks if you are too late to sell? | The standard answer on any long term stock is hold on during the rough times. You have not lost anything until you sell. If your concern is just that you are not certain where the stock price is headed, unless you need the money now and can not afford to hold on to the stock then I would hold it. |
Is it true that more than 99% of active traders cannot beat the index? | Obviously, these numbers can never be absolute simply because not all the information is public. Any statistic will most likely be biased. I can tell you the following from my own experience that might get you closer in your answer: Hence, even though I cannot give you exact numbers, I fully agree that traders cannot beat the index long term. If you add the invested time and effort that is necessary to follow an active strategy, then the equation looks even worse. Mind you, active trading and active asset allocation (AAA) are two very different things. AAA can have a significant impact on your portfolio performance. |
Does reading financial statements (quarterly or annual reports) really help investing? | Wow, I cannot believe this is a question. Of course reading the 10Ks and 10Qs from the SEC are incredibly beneficial. Especially if you are a follower of the investing gurus such as Warren Buffett, Peter Lynch, Shelby Davis. Personally I only read the 10K's I copy the pertinent numbers over to my spreadsheets so I can compare multiple companies that I am invested in. I'm sure there are easier ways to obtain the data. I'm a particular user of the discounted free cash flow methodology and buying/selling in thirds. I feel like management that says what they are going to do and does it (over a period of years) is something that cannot be underestimated in investing. yes, there are slipups, but those tend to be well documented in the 10Qs. I totally disagree in the efficient market stuff. I tend to love using methodologies like Hewitt Heisermans " It's Earnings that Count" you cannot do his power-staircase without digging into the 10Qs. by using his methodology I have several 5 baggers over the last 5 years and I'm confident that I'll have more. I think it is an interesting factoid as well that the books most recommended for investing in stocks on Amazon all advocate reading and getting information from 10Ks. The other book to read is Peter Lynch's one-up-wall-street. The fact is money manager's hands are tied when it comes to investing, especially in small companies and learning over the last 6 years how to invest on my own has given me that much more of my investing money back rather than paying it to some money manager doing more trades than they should to get commision fees. |
Merchant dispute with airline over missed flight, and which credit cards offer protection? | EDIT To answer what I think you question is: I do not know of anything other than trip cancellation insurance. And you must be very careful that the policy you purchase for your trip covers the circumstance you described. Essentially, you opted not to take the flight. Not all trip cancellation policies will cover that. How to Find Trip Cancellation Insurance Getting Your Money Back Now This is an Act of God in the insurance world. You cannot reasonably expect the airline to know the future weather pattern anymore than you could, and therefore, since the plane did fly, you owe them the money based on the ticket you bought. You didn't just buy a ticket, there is a contract with rules about refunds and transferring and such. It is a bummer situation, and I understand you point of view, but this isn't the airline's fault. If anybody is to blame for you missing your flight, and therefore not getting a refund, it is your employer. Their requirements for you be in one city and then another are the cause. While your employer cannot predict the weather, they are ultimately the ones who could give you the okay to be late. If you absolutely cannot be late, and it was critical that you drive out and miss your flight, then your company gets to pay for the flight AND the car. That is the cost of doing business for them. This is also why, when flying for business, that you pay the higher price and get the refundable / transferable ticket. They cost more, but situations like these illustrate they are worth it for the company. |
Money Saved on finance charges | Avoiding a cost (interest) isn't quite the same as income. There is no entry, nothing for you to consider for this avoided interest. What you do have is an expense that's no longer there, and you can decide to use that money elsewhere each month. |
Transfer money from a real estate sale in India to the US | If you are using the money to invest in a property (even abroad) then you can claim tax exemption. while some people will tell you that the reinvestment should be in India only, it have been ruled that the property can be purchased abroad too.. |
What will happen to my shares if company delisted | If they own enough shares to vote to sell, you will be paid the offer price quoted to you. At that point if you do not wish to sell your only recourse will be to file a lawsuit. This is a common tactic for significant shareholders who have a minority stake and cannot block the sale because they have insufficient voting rights. What usually happens then is that they either settle the lawsuit out of court by paying a little more to the holdouts or the lawsuit is thrown out and they take the original offer from the buyer. Rarely does a lawsuit from a buyout go to trial. |
Tax implications of having some self-employment income? | Havoc P's answer is good (+1). Also don't forget the other aspects of business income: state filing fees, county/city filing fees, business licenses, etc. Are there any taxes you have to collect from your customers? If you expect to make more this year, then you should make estimated quarterly tax payments. The first one for 2011 is due around the same time as your federal income tax filing. |
What are good games to play to teach young children about saving money? | I also saw a lot of reference to Mutual Mania Board Game, which is geared towards kids 11yrs+ and helps them learn about spending, saving, profit and loss. |
SBI term deposit versus SBI bonds | I wrote one to check against the N3 to N6 bonds: http://capitalmind.in/2011/03/sbi-bond-yield-calculator/ Things to note: |
Which Benjamin Graham book should I read first: Security Analysis or Intelligent Investor? | First The Intelligent Investor and then the 1962 edition Security Analysis - which is out of print, you can get it on Amazon.com used or ebay. Then you can read the edition backward but the 1962 edition is the best - IMHO. And don't forget The Rediscovered Benjamin Graham and Benjamin Graham on Value Investing by Jane Lowe |
What is a good 5-year plan for a college student with $15k in the bank? | Fifteen thousand dollars is not a whole lot of cash. It should probably be kept liquid. To that end, savings accounts and certificates of deposit (CDs) are typically used. (There are also money market funds, but I am not sure that makes sense once trading costs are figured into the equation.) I would set some of that money aside, for an emergency fund. (Start with at least 6 months of realistic living expenses and also consider a fund for unforeseen emergencies.) I would consider using 2-3 thousand to setup a retirement account. The rest, I would place into CD ladders, so that it is somewhat accessible. |
Small withdrawals from IRA | First - Welcome to Money.SE. You gave a lot of detail, and it's tough to parse out the single question. Actually, you have multiple issues. $1300 is what you need to pay the tax? In the 25% bracket plus 10% penalty, you have a 65% net amount. $1300/.65 = Exactly $2000. You withdraw $2000, have them (the IRA holder) withhold $700 in federal tax, and you're done. All that said, don't do it. Nathan's answer - payment plan with IRS - is the way to go. You've shared with us a important issue. Your budget is running too tight. We have a post here, "the correct order of investing" which provides a great guideline that applies to most visitors. You are missing the part that requires a decent sized emergency fund. In your case, calling it that, may be a misnomer, as the tax bill isn't an unexpected emergency, but something that should have been foreseeable. We have had a number of posts here that advocate the paid in full house. And I always respond that the emergency fund comes first. With $70K of income, you should have $35K or so of liquidity, money readily available. Tax due in April shouldn't be causing you this grief. Please read that post I linked and others here to help you with the budgeting issue. Last - You are in an enviable position, A half million dollars, no mortgage, mid 40s. Easily doing better than most. So, please forgive the soapbox tone of the above, it was just my "see, that's what I'm talking about" moment from my tenure here. |
Does the Fed keeping interest rates low stimulate investment in the stock market and other investments? | Investopedia has this note where you'd want the contrapositive point: The interest rate, commonly bandied about by the media, has a wide and varied impact upon the economy. When it is raised, the general effect is a lessening of the amount of money in circulation, which works to keep inflation low. It also makes borrowing money more expensive, which affects how consumers and businesses spend their money; this increases expenses for companies, lowering earnings somewhat for those with debt to pay. Finally, it tends to make the stock market a slightly less attractive place to investment. As for evidence, I'd question that anyone could really take out all the other possible economic influences to prove a direct co-relation between the Federal Funds rate and the stock market returns. For example, of the dozens of indices that are stock related, which ones would you want that evidence: Total market, large-cap, small-cap, value stocks, growth stocks, industrials, tech, utilities, REITs, etc. This is without considering other possible investment choices such as direct Real Estate holdings, compared to REITs that is, precious metals and collectibles that could also be used. |
Is there a legal deadline for when your bank/brokerage has to send your tax forms to you? | Many of the custodians (ie. Schwab) file for an extension on 1099s. They file for an extension as many of their accounts have positions with foreign income which creates tax reporting issues. If they did not file for extension they would have to send out 1099s at the end of January and then send out corrected forms. Obviously sending out one 1099 is cheaper and less confusing to all. Hope that helps, |
How to evaluate stocks? e.g. Whether some stock is cheap or expensive? | I look at the following ratios and how these ratios developed over time, for instance how did valuation come down in a recession, what was the trough multiple during the Lehman crisis in 2008, how did a recession or good economy affect profitability of the company. Valuation metrics: Enterprise value / EBIT (EBIT = operating income) Enterprise value / sales (for fast growing companies as their operating profit is expected to be realized later in time) and P/E Profitability: Operating margin, which is EBIT / sales Cashflow / sales Business model stability and news flow |
Taxes on selling stock | You can keep the cash in your account as long as you want, but you have to pay a tax on what's called capital gains. To quote from Wikipedia: A capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor.[1] Conversely, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price. Thus, buying/selling stock counts as investment income which would be a capital gain/loss. When you are filing taxes, you have to report net capital gain/loss. So you don't pay taxes on an individual stock sale or purchase - you pay tax on the sum of all your transactions. Note: You do not pay any tax if you have a net capital loss. Taxes are only on capital gains. The amount you are taxed depends on your tax bracket and your holding period. A short term capital gain is gain on an investment held for less than one year. These gains are taxed at your ordinary income tax rate. A long term capital gain is gain on an investment held for more than one year. These gains are taxed at a special rate: If your income tax rate is 10 or 15%, then long term gains are taxed at 0% i.e. no tax, otherwise the tax rate is 15%. So you're not taxed on specific stock sales - you're taxed on your total gain. There is no tax for a capital loss, and investors sometimes take profits from good investments and take losses from bad investments to lower their total capital gain so they won't be taxed as much. The tax rate is expected to change in 2013, but the current ratios could be extended. Until then, however, the rate is as is. Of course, this all applies if you live in the United States. Other countries have different measures. Hope it helps! Wikipedia has a great chart to refer to: http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States. |
What is a rule of thumb for accruing debt on a rental property? | To start, I hope you are aware that the properties' basis gets stepped up to market value on inheritance. The new basis is the start for the depreciation that must be applied each year after being placed in service as rental units. This is not optional. Upon selling the units, depreciation is recaptured whether it's taken each year or not. There is no rule of thumb for such matters. Some owners would simply collect the rent, keep a reserve for expenses or empty units, and pocket the difference. Others would refinance to take cash out and leverage to buy more property. The banker is not your friend, by the way. He is a salesman looking to get his cut. The market has had a good recent run, doubling from its lows. Right now, I'm not rushing to prepay my 3.5% mortgage sooner than it's due, nor am I looking to pull out $500K to throw into the market. Your proposal may very well work if the market sees a return higher than the mortgage rate. On the flip side I'm compelled to ask - if the market drops 40% right after you buy in, will you lose sleep? And a fellow poster (@littleadv) is whispering to me - ask a pro if the tax on a rental mortgage is still deductible when used for other purposes, e.g. a stock purchase unrelated to the properties. Last, there are those who suggest that if you want to keep investing in real estate, leverage is fine as long as the numbers work. From the scenario you described, you plan to leverage into an already pretty high (in terms of PE10) and simply magnifying your risk. |
Incentive Stock Option (ISO) tax question - more specific this time | Alternatively you could exercise 12000 shares for $36000 and immediately sell 7200 shares to recover your exercise price. Then you use the remaining 4800 share to pay the exercise price of the remaining 8000 options. Both scenarios are equivalent but may have different fees associated, so it's worth checking the fine print. Tax wise: The above example is "cash neutral before taxes". The taxes associated with these transaction are substantial, so it's highly recommended to talk with a tax adviser. "cash neutral after taxes" depends highly on your specific tax situation. |
What to do with south african currency free fall | Transfer your savings to a dollar-based CD. Or even better, buy some gold on them. |
Do real nappies (reusable / cloth diapers) really save money? | I only used disposable diapers for my baby's first month. However, I now use half disposable diapers (for part-time daycare) and half cloth. My son is now 1 year and during a normal weekday, I go through 4 disposable diapers and 3-4 cloth diapers (this count includes a double thick cloth diaper for night). On the weekend, I use about 7-8 cloth diapers a day. For disposable, I buy Costco's Kirkland brand diapers which gives me about 200 diapers for $50. I tend to go through one pack every other month. For cloth, I bought FuzziBunz One-Size Diapers. These are pretty expensive diapers (about $19/each) but I wanted ones that would last over multiple children (I chose these over the BumGenius because I thought snaps would last longer than velcro). I bought 24 new cloth diapers which means I wash diapers every 2-3 days. A couple of weeks ago I totaled up my receipts for cloth and disposable diapers and determined that I will recoup my diaper costs at around 16 months of part-time use. Notes: |
Minimizing loss during two-way currency transfers involving foreign entities | The solution was to get a foreign bank in each country we do business in. Get a credit card processor there, and simply make our money and keep our money in that country, and taking quarterly gains from those accounts and bringing them to the US account. |
Trouble sticking to a budget when using credit cards for day to day transactions? | In your comment in response to this answer, you said that your biggest issue is oversight, which you can do by checking your online bank account regularly. Mint.com looks good but you're in Australia? Easy, check out getpocketbook.com. Using it and love it, helps a lot to track your tracking, and it's a god-send during tax time. |
Why do people take out life insurance on their children? Should I take out a policy on my child? | As you say life insurance is about covering the loss of income, so unless your child is an actor or musical prodigy or similar and already earning money, there is no income to cover, and in fact you would have less of a financial commitment without a child to provide for. The other angle is that child life insurance is cheap and they'll have lower premiums than an adult. I'll quote the referenced article directly to address that: Another ploy is that children's life insurance is cheap. It is inexpensive compared to adult life insurance because, plain and simply, children rarely die. While the numbers that the sales agent puts together may make children's life insurance sound like a great deal, take the time to run what you'd have if you instead invested the exact same amount used on the insurance fees into a Roth IRA and you'll find the true cost of purchasing this type of life insurance. |
If a stock doesn't pay dividends, then why is the stock worth anything? | Remember that long term appreciation has tax advantages over short-term dividends. If you buy shares of a company, never earn any dividends, and then sell the stock for a profit in 20 years, you've essentially deferred all of the capital gains taxes (and thus your money has compounded faster) for a 20 year period. For this reason, I tend to favor non-dividend stocks, because I want to maximize my long-term gain. Another example, in estate planning, is something called a step-up basis: |
What happens to an ETF if one of the companies in the ETF gets aquired? | There are a number of ways this can result. In a broad ETF, such as SPY, the S&P 500 spider, the S&P index will have 500 stocks no matter what, so a buyout would simply result in a re-shuffling of the index makeup. No buyout will happen so quickly that there's no time to choose the next stock to join the index. In your case, if the fund manager (per the terms of the prospectus) wishes to simply reallocate the index to remove the taken-over stock that's probably how he handle it. Unless of course, the prospectus dictates otherwise. In which case, a cash dividend is a possible alternative. |
I have around 60K $. Thinking about investing in Oil, how to proceed? | This is only a partial answer to your question #1. If you have a conservative approach to savings (and, actually, even if you don't), you should not invest all of your money in any single industry or product. If you want to invest some money in oil, okay, but don't overdo it. If your larger goal is to invest the money in a manner that is less risky but still more lucrative than a savings account, you should read up on personal finance and investing to get a sense of what options are available. A commonly-recommended option is to invest in low-cost index funds that mirror the performance of the stock market as a whole. The question of "how should I invest" is very broad, but you can find lots of starting points in other questions on this site, by googling, or by visiting your local library. |
How best to grow my small amount of money starting at a young age? [duplicate] | I would like to add my accolades in saving $3000, it is an accomplishment that the majority of US households are unable to achieve. source While it is something, in some ways it is hardly anything. Working part time at a entry level job will earn you almost three times this amount per year, and with the same job you can earn about as much in two weeks as this investment is likely to earn, in the market in one year. All this leads to one thing: At your age you should be looking to increase your income. No matter if it is college or a high paying trade, whatever you can do to increase your life time earning potential would be the best investment for this money. I would advocate a more patient approach. Stick the money in the bank until you complete your education enough for an "adult job". Use it, if needed, for training to get that adult job. Get a car, a place of your own, and a sufficient enough wardrobe. Save an emergency fund. Then invest with impunity. Imagine two versions of yourself. One with basic education, a average to below average salary, that uses this money to invest in the stock market. Eventually that money will be needed and it will probably be pulled out of the market at an in opportune time. It might worth less than the original 3K! Now imagine a second version of yourself that has an above average salary due to some good education or training. Perhaps that 3K was used to help provide that education. However, this second version will probably earn 25,000 to 75,000 per year then the first version. Which one do you want to be? Which one do you think will be wealthier? Better educated people not only earn more, they are out of work less. You may want to look at this chart. |
Expensive agenda book/organizer. Office expense or fixed asset? | If your business pays taxes, it is in your best interest to expense it. Even if you don't pay taxes, setting your capitalization policy low enough to capitalize an office organizer (even a nice one) will give you headaches when your business grows larger. |
Evaluating an endowment policy for its fairness against other tax saving options in India such as PPF, EPF and even FDs | Or am missing something? Yes. The rate of 8.53 is illustration. There is no guarantee that the rate will be applicable. My yearly premium is Rs. 26289. On this amount I will save tax of Rs. 7887. So net premium is Rs. 18402. The other way to look at this is invest Rs 26289 [or actually less of Eq Term Deposit premium]. If you invest into Eq Term Deposit [lock-in for 6 years] with tax benefits, your numbers are going to be very different and definitely better than LIC returns. Edits: |
What are my options to deal with Student Loan debt collectors? | Never speak to a debt collector. Ask them to stop calling you and STOP talking to them. Communicate only via postal mail. Do not react in an emotional way, do not use foul language, etc. If they call you and attempt to harass or intimidate you, note the date/time, name of the caller and nature of the call. Ask them to cease communications via phone and hang up. You're missing alot of detail here. You need to understand: The key to these things is to fully understand the situation you are in and find out what your legal obligations are. |
What should I be aware of as a young investor? | I'm 39 and have been investing since my very early 20's, and the advice I'd like to go back and give myself is the following: 1) Time is your friend. Compounding interest is a powerful force and is probably the most important factor to how much money you are going to wind up with in the end. Save as much as you possibly can as early as you can. You have to run twice as hard to catch up if you start late, and you will still probably wind up with less in the end for the extra effort. 2) Don't invest 100% of your investment money It always bugged me to let my cash sit idle in an investment account because the niggling notion of inflation eating up my money and I felt I was wasting opportunity cost by not being fully invested in something. However, not having enough investable cash around to buy into the fire-sale dips in the market made me miss out on opportunities. 3) Diversify The dot.com bubble taught me this in a big, hairy painful way. I had this idea that as a technologist I really understood the tech bubble and fearlessly over-invested in Tech stocks. I just knew that I was on top of things as an "industry insider" and would know when to jump. Yeah. That didn't work out so well. I lost more than 6 figures, at least on paper. Diversification will attenuate the ups and downs somewhat and make the market a lot less scary in the long run. 4) Mind your expenses It took me years of paying huge full-service broker fees to realize that those clowns don't seem to do any better than anyone else at picking stocks. Even when they do, the transaction costs are a lead weight on your returns. The same holds true for mutual funds/ETFs. Shop for low expense ratios aggressively. It is really hard for a fund manager to consistently beat the indexes especially when you burden the returns with expense ratios that skim an extra 1% or so off the top. The expense ratio/broker fees are among the very few things that you can predict reliably when it comes to investments, take advantage of this knowledge. 5) Have an exit strategy for every investment People are emotional creatures. It is hard to be logical when you have skin in the game and most people aren't disciplined enough to just admit when they have a loser and bail out while they are in the red or conversely admit when they have a winner and take profits before the party is over. It helps to counteract this instinct to have an exit strategy for each investment you buy. That is, you will get out if it drops by x% or grows by y%. In fact, it is probably a good idea to just enter those sell limit orders right after you buy the investment so you don't have to convince yourself to press the eject button in the heat of a big move in the price of that investment. Don't try to predict tops or bottoms. They are extremely hard to guess and things often turn so fast that you can't act on them in time anyway. Get out of an investment when it has met your goal or is going to far in the wrong direction. If you find yourself saying "It has to come back eventually", slap yourself. When you are trying to decide whether to stay in the investment or bail, the most important question is "If I had the current cash value of the stock instead of shares, would I buy it today?" because essentially that is what you are doing when you stick with an investment. 6) Don't invest in fads When you are investing you become acutely sensitive to everyone's opinions on what investment is hot and what is not. If everyone is talking about a particular investment, avoid it. The more enthusiastic people are about it (even experts) the MORE you should avoid it. When everyone starts forming investment clubs at work and the stock market seems to be the preferred topic of conversation at every party you go to. Get out! I'm a big fan of contrarian investing. Take profits when it feels like all the momentum is going into the market, and buy in when everyone seems to be running for the doors. |
What typically happens to unvested stock during an acquisition? | This is a great question. I've participated in a deal like that as an employee, and I also know of friends and family who have been involved during a buyout. In short: The updated part of your question is correct: There is no single typical treatment. What happens to unvested restricted stock units (RSUs), unvested employee stock options, etc. varies from case to case. Furthermore, what exactly will happen in your case ought to have been described in the grant documentation which you (hopefully) received when you were issued restricted stock in the first place. Anyway, here are the two cases I've seen happen before: Immediate vesting of all units. Immediate vesting is often the case with RSUs or options that are granted to executives or key employees. The grant documentation usually details the cases that will have immediate vesting. One of the cases is usually a Change in/of Control (CIC or COC) provision, triggered in a buyout. Other immediate vesting cases may be when the key employee is terminated without cause, or dies. The terms vary, and are often negotiated by shrewd key employees. Conversion of the units to a new schedule. If anything is more "typical" of regular employee-level grants, I think this one would be. Generally, such RSU or option grants will be converted, at the deal price, to a new schedule with identical dates and vesting percentages, but a new number of units and dollar amount or strike price, usually so the end result would have been the same as before the deal. I'm also curious if anybody else has been through a buyout, or knows anybody who has been through a buyout, and how they were treated. |
Can I fully deduct capital losses against discounted capital gains? | The short answer is no - the CGT discount is only applied against your net capital gain. So your net capital gain would be: $25,000 - $5,000 = $20,000 Your CGT discount is $10,000 You will then pay CGT on $10,000 Of course you could sell ABC in this financial year and sell DEF next financial year. If you had no other share activities next financial year than that net capital loss can be carried forward to a future year. In that case your net capital gain this year would be $25,000 Your CGT discount is $12,500 You will then pay CGT on $12,500 Next year if oyu sell DEF, you'll have a $5000 net capital loss which you can carry forward to a future year as an offset against capital gains. Reference: https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-net-capital-gain-or-loss/ |
Is there an advantage to keeping a liquid emergency fund if one also has an untapped line of credit? | People treat an emergency fund as some kind of ace-in-the-hole when it comes to financial difficulty, but it is only one of many sources of money that you can utilize. What is an emergency? First, you have to define what an emergency is. Is it a lost job? Is it an unplanned event (pregnancy, perhaps)? Is it a medical emergency? Is it the death of you or your spouse? Also, what does it mean to be unplanned? Is being so unhappy with your job that you give a 2-week notice an emergency? Is one month of planning an emergency? Two? Only you can answer these questions for yourself, but they significantly shape your financial strategy. Planning is highly dependent on your cashflow, and, for some people, it may take them a year to build enough savings to enable them to take 3 months off work. For others, they may be able to change their spending to build up enough for 3 months in 1 month. Also, you have to consider the length of the emergency. Job-loss is rarely permanent, but it's rarely short as well. The current average is 30.7 weeks: that's 7 months! Money in an Emergency There are six main places that people get money during a financial emergency: A good emergency strategy takes all six of these into account. Some emergencies may lean more on one source than the other. However, some of these are correlated. For example, in 2008, three things happened: the stock market crashed, unsecured debt dried up, and people faced financial emergency (lost jobs, cut wages). If you were dependent on a stock portfolio and/or a line of credit, you'd be up a creek, because the value of your investments suddenly decreased, and you can't really tap your now significantly limited line of credit. However, if you had a one or more of cash savings, unemployment income, and unemployment insurance, you would probably have been OK. Budgeting for an emergency When you say "financial emergency", most people think job loss. However, the most common cause of bankruptcy in the US is medical debt. Depending on your insurance situation, this could be a serious risk, or it may not be. People say you should have 3x-6x of your monthly income in savings because it's an easy, back-of-the-envelope way to handle most financial emergency risk, but it's not necessarily the most prudent strategy for you. To properly budget for an emergency, you need to fully take into account what emergencies you are likely to face, and what sources of financing you would have access to given the likely factors that led to that emergency. Generally, having a savings account with some amount of liquid cash is an important part of a risk-mitigation strategy. But it's not a panacea for every kind of emergency. |
When is the right time to buy a car and/or a house? | My recommendation is to pay off your student loans as quickly as possible. It sounds like you're already doing this but don't incur any other large debts until you have this taken care of. I'd also recommend not buying a car, especially an expensive one, on credit or lease either. Back during the dotcom boom I and many friends bought or leased expensive cars only to lose them or struggle paying for them when the bottom dropped out. A car instantly depreciates and it's quite rare for them to ever gain value again. Stick with reliable, older, used cars that you can purchase for cash. If you do borrow for a car, shop around for the best deal and avoid 3+ year terms if at all possible. Don't lease unless you have a business structure where this might create a clear financial advantage. Avoid credit cards as much as possible although if you do plan to buy a house with a mortgage you'll need to maintain some credit history. If you have the discipline to keep your balance small and paid down you can use a credit card to build credit history. However, these things can quickly get out of hand and you'll wonder why you suddenly owe $10K, $20K or even more on them so be very careful with them. As for the house (speaking of US markets here), save up for at least a 20% down payment if you can. Based on what you said, this would be about $20-25K. This will give you a lot more flexibility to take advantage of deals that might come your way, even if you don't put it all into the house. "Stretching" to buy a house that's too expensive can quickly lead to financial ruin. As for house size, I recommend purchasing a 4 bedroom house even if you aren't planning on kids right away. It will resell better and you'll appreciate having the extra space for storage, home office, hobbies, etc. Also, life has a way of changing your plans for having kids and such. |
Is there a general guideline for what percentage of a portfolio should be in gold? | I think most financial planners or advisors would allocate zero to a gold-only fund. That's probably the mainstream view. Metals investments have a lot of issues, more elaboration here: What would be the signs of a bubble in silver? Also consider that metals (and commodities, despite a recent drop) are on a big run-up and lots of random people are saying they're the thing to get in on. Usually this is a sign that you might want to wait a bit or at least buy gradually. The more mainstream way to go might be a commodities fund or all-asset fund. Some funds you could look at (just examples, not recommendations) might include several PIMCO funds including their commodity real return and all-asset; Hussman Strategic Total Return; diversified commodities index ETFs; stuff like that has a lot of the theoretical benefits of gold but isn't as dependent on gold specifically. Another idea for you might be international bonds (or stocks), if you feel US currency in particular is at risk. Oh, and REITs often come up as an inflation-resistant asset class. I personally use diversified funds rather than gold specifically, fwiw, mostly for the same reason I'd buy a fund instead of individual stocks. 10%-ish is probably about right to put into this kind of stuff, depending on your overall portfolio and goals. Pure commodities should probably be less than funds with some bonds, stocks, or REITs, because in principle commodities only track inflation over time, they don't make money. The only way you make money on them is rebalancing out of them some when there's a run up and back in when they're down. So a portfolio with mostly commodities would suck long term. Some people feel gold's virtue is tangibility rather than being a piece of paper, in an apocalypse-ish scenario, but if making that argument I think you need physical gold in your basement, not an ETF. Plus I'd argue for guns, ammo, and food over gold in that scenario. :-) |
Dollar-cost averaging: How often should one use it? What criteria to use when choosing stocks to apply it to? | Why do people keep talking about 401K's at work? That is NOT dollar cost averaging. DCA refers to when you have a large sum of money. Do you invest it all at once or spread it out over several smaller purchases over a period of time? There really isn't a "when" should I use it. It is simply a matter of where your preferences lie on the risk/reward scpectrum. DCA has lower risk and lower reward than lump sum investing. In my opinion, I don't like it. DCA only works better than lump sum investing if the price drops. But if you think the price is going to drop, why are you buying the stock in the first place? Example: Your uncle wins the lottery and gives you $50,000. Do you buy $50,000 worth of Apple now, or do you buy $10,000 now and $10,000 a quarter for the next four quarters? If the stock goes up, you will make more with lump-sum(LS) than you will with DCA. If the stock goes down, you will lose more with LS than you will with DCA. If the stock goes up then down, you will lose more with DCA than you will with LS. If the stock goes down then up, you will make more with DCA than you will with LS. So it's a tradeoff. But, like I said, the whole point of you buying the stock is that you think it's going to go up! So why pick the strategy that performs worse in that scenario? |
Formation of S-Corp for Gambling Trade | In a sole proprietorship AND an LLC, the expenses can still be deducted against the profits or losses from the operations. The IRS does not even require that a profit seeking activity be incorporated under its own entity, hence why this is also applicable in a sole proprietorship. From what you've said, there is no reason to use a more complicated and costly corporate structure at all. In comparison, a sole proprietorship and single-member LLC will be completely pass through entities to the IRS and all of their earnings go to you. With the LLC you have the option of letting the LLC's earnings remain with the entity itself, or you can just treat it as your own and pay individual income taxes on it. This has nothing to do specifically with a gambling business and is largely a red herring to your profit seeking motives. Gambling in casino games and lotteries already enjoy favorable tax treatment in some regards. Gambling in capital markets also enjoy a myriad of favorable tax laws. A business entity related to this purpose should be able to deduct costs related to this trade (and pass an audit more convincingly than not having formed an LLC and business bank account) |
If the put is more expensive than the call, what does it mean | There are many reasons. Here are just some possibilities: The stock has a lot of negative sentiment and puts are being "bid up". The stock fell at the close and the options reflect that. The puts closed on the offer and the calls closed on the bid. The traders with big positions marked the puts up and the calls down because they are long puts and short calls. There isn't enough volume in the puts or calls to make any determination - what you are seeing is part of the randomness of a moment in time. |
What happens to my savings if my country defaults or restructures its debt? | This question is different because you are asking for actual advice vs. a more academic, "what if" scenario. The answer that I'll give will be different, and similar to another recent question on a similar vein. Basically, if you're living in a European country that's effectively in default and in need of a bailout, the range of things that can happen is difficult to predict... the fate of countries like Ireland and Greece, whatever the scenario, will be economic and social upheaval. But, this isn't the end of the world either... it's happened before and will happen again. As an individual, you need to start investing defensively in a manner appropriate for your level of wealth. Things to think about: I'd suggest reading "A Free Nation Deep in Debt: The Financial Roots of Democracy" |
I've tracked my spending and have created a budget, now what do I do with it? | I'm reminded of a conversation I had regarding food. I used the word 'diet' and got pushback, as I meant it in sense of 'what one eats'. That's what a diet is, what you eat in an average week, month, year. That list has no hidden agenda unless you want it to. If your finances are in good shape, debt under control, savings growing, etc, a budget is more of an observation than a constraint. In the same way that my bookshelf tells you a lot about who I am, books on finance, math, my religion, along with some on English and humor, my budget will also tell you what my values are. Edit - In a recent speech, regarding Joe Biden, Hillary Clinton said "He has a saying: ‘Don’t tell me what you value. Show me your budget and I will tell you what you value.’ " - nearly exactly my thoughts on this. For the average person, a budget helps to reign in the areas where spending is too high. $500/mo eating out? For the couple hacking away at $30k in credit card debt, that would be an obvious place to cut back. If this brings you happiness, there's little reason to cut back. The budget becomes a reflection of your priorities, and if, at some point in the future, you need to cut back, you'll have a good understanding of where the money is going. |
How to calculate new price for bond if yield increases | The duration of a bond tells you the sensitivity of its price to its yield. There are various ways of defining it (see here for example), and it would have been preferable to have a more precise statement of the type of duration we should assume in answering this question. However, my best guess (given that the duration is stated without units) is that this is a modified duration. This is defined as the percentage decrease in the bond price for a 1% increase in the yield. So, change in price = -price x duration (as %) x change in yield (in %) For your duration of 5, this means that the bond price decreases by a relative 5% for every 1% absolute increase in its yield. Using the actual yield change in your question, 0.18%, we find: change in price = -1015 x 5% x (4.87 - 4.69) = -9.135 So the new price will be 1015 - 9.135 = £1005.865 |
As an American working in the UK, do I have to pay taxes on foreign income? | Short answer: it's complicated. The UK govt pages on foreign income are probably your best starting point: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/LeavingOrComingIntoTheUK/DG_10027480 As you can see, it depends on your precise residence status here. (There is a tax treaty between the UK and the US so you wouldn't be double taxed on the income either way. But there might still be reporting obligations). |
Average Price of a Stock | That metric is not very useful for anything other than very extremely long trading periods. Most strategies or concerned with price movement over much shorter time frames, 15 mins, 1 hr, 4 hr, daily, weekly, monthly. The MA or moving average is a trend following lagging indicator used to smooth out price fluctuations and more accurately reflect the price of trading instrument such as a stock (AAPL), commodity, or currency pair. Traders are generally concerned with current market trends and price action of the instrument they are trading. As such, an extremely long MA (average daily price, over a period of 365 days) are generally not that important. |
FHA Reduction Notices From Third-Party Companies - Scam? Or Something To Consider? | This is obviously a spam mail. Your mortgage is a public record, and mortgage brokers and insurance agents were, are and will be soliciting your business, as long as they feel they have a chance of getting it. Nothing that that particular company offers is unique to them, nothing they can offer you cannot be done by anyone else. It is my personal belief that we should not do business with spammers, and that is why I suggest you to remember the company name and never deal with them. However, it is up to you if you want to follow that advice or not. What they're offering is called refinance. Any bank, credit union or mortgage broker does that. The rates are more or less the same everywhere, but the closing fees and application fees is where the small brokers are making their money. Big banks get their money from also servicing the loans, so they're more flexible on fees. All of them can do "streamline" refinance if your mortgage is eligible. None if it isn't. Note that the ones who service your current mortgage might not be the ones who own it, thus "renegotiating the rate" is most likely not an option (FHA backed loans are sold to Fannie and Freddie, the original lenders continue servicing them - but don't own them). Refinancing - is a more likely option, and in this case the lender will not care about your rate on the old mortgage. |
What US tax laws apply to a 13 year old game developer? | 13 or 30, the only real difference is that as a minor, you are claimed as a dependent on your parent's return, so you don't have you own exemption. But you do have a standard deduction of $6300 when it comes to earned income. Yes, you'll pay taxes, federal, state, and tax for social security. There's nothing wrong with paying taxes. In fact, I hope you have to pay a small fortune in tax! That would mean you've made a large fortune, and after taxes, still got to keep a good chunk of it. If your income is minimal, you'll actually pay very little in taxes, not enough to even think about wanting to give away what you can sell. |
Over how much time should I dollar-cost-average my bonus from cash into mutual funds? | There have been studies which show that Dollar Cost Averaging (DCA) underperforms Lump Sum Investing (LSI). Vanguard, in particular, has published one such study. Of course, reading about advice in a study is one thing; acting on that advice can be something else entirely. We rolled over my wife's 401(k) to an IRA back in early 2007 and just did it as a lump sum. You know what happened after that. But our horizon was 25+ years at that time, so we didn't lose too much sleep over it (we haven't sold or gone to cash, either). |
What does it mean when my Money Market account lists both a dividend share and an APY? | The dividend is what represents your ownership in the CU. The APY is a calculated figure that will help you compare apples to apples the return of the investment from many vendors and many types. (I think you CU might have had two different people writing that portion of the website, because the comparisons pages don't make that clear, and the pages don't layout the same way.) |
Would it make sense to buy a rental property as an LLC and not in my own name? | You need to first visit the website of whatever state you're looking to rent the property in and you're going to want to form the LLC in that particular state. Find the Department of Licensing link and inquire about forming a standard LLC to register as the owner of the property and you should easily see how much it costs. If the LLC has no income history, it would be difficult for the bank to allow this without requiring you to personally guarantee the loan. The obvious benefit of protecting yourself with the LLC is that you protect any other personal assets you have in your name. Your liability would stop at the loan. The LLC would file its own taxes and be able to record the income against the losses (i.e. interest payments and other operating expenses.). This is can be beneficial depening on your current tax situation. I would definitely recommend the use of a tax accountant at that point. You need to be sure you can really afford this property in the worst case scenario and think about market leasing assumption, property taxes, maintenance and management (especially if you've moved to another state.) |
FATCA compliance for small Foreign Company. What do I need to do? | Unless you started a bank or other kind of a financial institution (brokerage, merchant processor, etc etc), the page you linked to is irrelevant. That said, there's enough in the US tax code for you to reconsider your decision of not living in the US, or at least of being a shareholder of a foreign company. Your compliance costs are going to go through the roof. If you haven't broken any US tax laws yet (which is very unlikely), you may renounce your citizenship and save yourself a lot of money and trouble. But in the more likely case of you already being a criminal with regards the US tax law, you should probably get a proper tax advice from a US-licensed CPA/EA who's also proficient in the Japanese-American tax treaty and expats' compliance issues resolution. |
Why invest for the long-term rather than buy and sell for quick, big gains? | The technical term for it is "timing the market" and if you can pull it off correctly, you will do quite well. The problem is that it is almost impossible to consistently do well. If it were that easy there would be a lot of billionaires walking around. Even Wall street experts haven't been able to predict the market that well. This idea is almost universally considered a bad idea. Consider this: When has the stock dropped low enough that you are "buying low" and let's say you do buy low and it doubles in a month. When do you get out? What if you are wrong and it doubles again? Or if it drops 10% do you keep waiting? This strategy is rife with problems. |
Does this sound like a great idea regarding being a landlord and starting a real estate empire? | BEFORE you invest in a house, make sure you account for all the returns, risks and costs, and compare them to returns, risks and costs of other investments. If you invest 20% of a house's value in another investment, you would also expect a return. You also probably will not have the cost interest for the balance (80% of ???). I have heard people say "If I have a rental property, I'm just throwing away money - I'll have nothing at the end" - if you get an interest-only loan, the same will apply, if you pay off your mortgage, you're paying a lot more - you could save/invest the extra, and then you WILL have something at the end (+interest). If you want to compare renting and owning, count the interest against the rental incoming against lost revenue (for however much actual money you've invested so far) + interest. I've done the sums here (renting vs. owning, which IS slightly different - e.g. my house will never be empty, I pay extra if I want a different house/location). Not counting for the up-front costs (real estate, mortgage establishment etc), and not accounting for house price fluctuations, I get about the same "return" on buying as investing at the bank. Houses do, of course, fluctuate, both up and down (risk!), usually up in the long term. On the other hand, many people do lose out big time - some friends of mine invested when the market was high (everyone was investing in houses), they paid off as much as they could, then the price dropped, and they panicked and sold for even less than they bought for. The same applies if, in your example, house prices drop too much, so you owe more than the house is worth - the bank may force you to sell (or offer your own house as collateral). Don't forget about the hidden costs - lawn mowing and snow shoveling were mentioned, insurance, maintenance, etc - and risks like fluctuating rental prices, bad tenants, tenants moving on (loss of incoming, cleaning expenses, tidying up the place etc).... |
What is a Master Limited Partnership (MLP) & how is it different from plain stock? | I own a few MLPs that operate oil/gas pipelines (TSE:IPL-UN, NYSE:BPT, NYSE:APL), and I'm very happy with their performance. Because they don't pay corporate tax MLPs tend to pay higher dividends than most regular stocks. I pay H&R Block to do my taxes, and they sort out all the arcane details. |
Why can't you just have someone invest for you and split the profits (and losses) with him? | Give me your money. I will invest it as I see fit. A year later I will return the capital to you, plus half of any profits or losses. This means that if your capital under my management ends up turning a profit, I will keep half of those profits, but if I lose you money, I will cover half those losses. Think about incentives. If you wanted an investment where your losses were only half as bad, but your gains were only half as good, then you could just invest half your assets in a risk-free investment. So if you want this hypothetical instrument because you want a different risk profile, you don't actually need anything new to get it. And what does the fund manager get out of this arrangement? She doesn't get anything you don't: she just gets half your gains, most of which she needs to set aside to be able to pay half your losses. The discrepancy between the gains and losses she gets to keep, which is exactly equal to your gain or loss. She could just invest her own money to get the same thing. But wait -- the fund manager didn't need to provide any capital. She got to play with your money (for free!) and keep half the profits. Not a bad deal, for her, perhaps... Here's the problem: No one cares about your thousands of dollars. The costs of dealing with you: accounting for your share, talking to you on the phone, legal expenses when you get angry, the paperwork when you need to make a withdrawal for some dental work, mailing statements and so on will exceed the returns that could be earned with your thousands of dollars. And then the SEC would probably get involved with all kinds of regulations so you, with your humble means and limited experience, isn't constantly getting screwed over by the big fund. Complying with the SEC is going to cost the fund manager something. The fund manager would have to charge a small "administrative fee" to make it worthwhile. And that's called a mutual fund. But if you have millions of free capital willing to give out, people take notice. Is there an instrument where a bunch of people give a manager capital for free, and then the investors and the manager share in the gains and losses? Yes, hedge funds! And this is why only the rich and powerful can participate in them: only they have enough capital to make this arrangement beneficial for the fund manager. |
Should I Pay Off my Student Loan Debts First or Invest in an Index Fund? | You are on the right track with your math, but be wary of your assumptions. If you can borrow money at x% (and can afford to make payments on the debt), and you can get a return of > x% from investing, then you would make more money by keeping the debt and investing your savings. Another way to think of it: by paying off the debt you are getting a guaranteed 5% return because that's the rate you'd have paid if you kept the debt. Be wary of your assumption of getting a 10% return in the S&P 500. Nothing is guaranteed, even over the long term. Actual results may well be less, and you could lose money. It doesn't have to be all-or-nothing: why not pay off the higher rate debt at 5% and keep the 3% debt? That's a guaranteed 5% return by paying off the NSLSC loan. And 3% is a pretty low interest rate. If you can afford to make the payments, I see nothing wrong with investing your savings instead of paying off the loan. Make sure you have an emergency fund, too. |
Can I transfer money from a personal pension to a SIPP, while leaving the original pension open? | Just to aid your searching, note that what your employer has provided you with access to is a Group Personal Pension . Now, as to the question of whether partial transfers from a GPP to a SIPP are possible - the answer would appear to be Probably Yes; however you should contact the pension administrator at your employer (who will be able to give both the employer's and the scheme's points of view), and also the SIPP provider you are considering, to get a definitive answer. I'm basing this on the results I'm seeing googling for 'partial gpp transfer', eg Partial transfer from group pension possible? and Is it possible to transfer?. Add to that the fact that one of the largest UK SIPP providers explicitly includes a 'Partial Transfer' checkbox on their pension transfer form. |
Once stock prices are down, where to look for good stock market deals? | Keep in mind, that bargain hunting will fail you from time to time. I know a lot of guys who bought Nortel at $10, planning to hold it until the inevitable recovery. |
Buying a house, Bank or rent to own? | 'Rent to own' is not a precise, single agreement. It can be whatever the seller and you agree to. It's a unique seller that would agree to this. Keep in mind, most sellers are needing to get their money in full to buy their next house. You might find an investor willing to work with you, but only for an inflated price, interest rate, or both. The ideal seller would be underwater (owing more than the value of the home) but needing to move. In which case, they are hoping to find someone to buy them some time to get situated in their new house before moving forward with you and the bank to arrange a sale. At its simplest, you might pay a premium on your rent to fix the price, giving you the option to buy during a particular period at that price. It can be a much higher premium where you are renting and paying extra until you hit 20%, at which point you agree to finance the balance either with a bank loan or through the seller. Buying a home you will live in is a personal decision. With no numbers offered, it's not like we can tell you if it's a wise purchase. |
What's the fuss about Credit Score / History? | Your credit score, for better or worse, is increasingly about more than just getting loans. For example insurance companies can use it to some extent to determine your rates,. |
What's the difference when asked for “debit or credit” by a store when using credit and debit cards? | I'm surprised by all the pro-credit answers here, debit has some definite advantages. Most importantly, when you pay with a credit card, the merchant pays around 3% of the transaction to the credit company. In many states, they are forced to charge you the same amount, and this is frequently toted as ''consumer protection''. But consider what this means for the business: they loose money for every credit transaction, and they're legally forbidden to do anything about it. So you're taking 3% from a business and handing it over to a massive cooperation. To make matters worse, the buisness is inevitably going to have to raise their prices (albiet by a small amount), so in the end the average consumer has gained nothing. On the other hand, the credit card company wins big, and they use their profits to pay lobbyists and lawyers to keep these rules in place. To put in the worst possible light, it's essentially legal extortion, verging on corruption. As for the fraud protection offered, while it may be true that credit cards will offer a more hassle-free reimbursement (i.e. you just don't have to pay the bill) if your card is stolen, consumer protection laws also extend to debit: in many cases your bank is legally required to cut you a check for all the money you lost. |
What publicly available software do professional stock traders use for stock analysis? | Bloomberg Professional seems to be very popular. It provides any kind of data you can imagine. Analysis is a subjective interpretation of the data. |
Why don't banks allow more control over credit/debit card charges? | Actually in Finland on some bank + debit/credit card + online retailer combinations you type in your card details as you normally do, but after clicking "Buy" you get directed to your own bank's website which asks you to authenticate yourself with online banking credentials. It also displays the amount of money and to which account it is being paid to. After authentication you get directed back to the retailer's website. Cannot say why banks in US haven't implemented this. |
Why would a company issue a scrip dividend and how will this issue affect me? | Am I correct in understanding that a Scrip Dividend involves the issue of new shares instead of the purchase of existing shares? Yes. Instead of paying a cash dividend to shareholders, the company grants existing shareholders new shares at a previously determined price. This allows shareholders who join the program to obtain new shares without incurring transaction costs that would normally occur if they purchased these shares in the market. Does this mean that if I don't join this program, my existing shares will be diluted every time a Scrip Dividend is paid? Yes, because the number of shares has increased, so the relative percentage of shares in the company you hold will decrease if you opt-out of the program. The price of the existing shares will adjust so that the value of the company is essentially unchanged (similar to a stock split), but the number of outstanding shares has increased, so the relative weight of your shares declines if you opt out of the program. What is the benefit to the company of issuing Scrip Dividends? Companies may do this to conserve their cash reserves. Also, by issuing a scrip dividend, corporations could avoid the Advanced Corporation Tax (ACT) that they would normally pre-pay on their distributions. Since the abolition of the ACT in 1999, preserving cash reserves is the primary reason for a company to issue scrip dividends, as far as I know. Whether or not scrip dividends are actually a beneficial strategy for a company is debatable (this looks like a neat study, even though I've only skimmed it). The issue may be beneficial to you, however, because you might receive a tax benefit. You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend). |
What exactly is BATS Chi-X Europe? | BATS CHi-X Europe is a market maker. They provide liquidity to the order books of different kinds of equities on certain exchanges. So the London Stock Exchange lists equities and the order books show the orders of different market participants. Most of those market participants are market makers. They allow others to complete a trade of an equity closer to the price that persons wants, in a faster time period and in larger amounts, than if there were no market makers providing liquidity. |
How should I pay off my private student loans that have a lot of restrictions? | You might try to refinance some of those loans. It sounds like you are serious about minimizing interest expense, if you think you will be able to pay those loans in full within five years you might also try a loan that is fixed for five years before becoming variable. If you do not think you can repay the loans in full before that time, you should probably stick with the fixed rates that you have. It may even be profitable to refinance those loans through another lender at the exact same fixed rate because it gets around their repayment tricks that effectively increase your interest on those two smaller loans. |
Making your first million… is easy! (??) | Easy. Start with 2 millions and lose only one. Jokes aside, if you want a million USD, you should be asking yourself how you can produce products or services worth $5 millions. (expect the extra to be eaten up by taxes, marketing, sales, workforce...) If by investment you mean making risky bets on the stock market, you might have a better time going to Las Vegas. On the other hand, if by investment you mean finding something that will produce $$$ and getting involved, it's a different matter. |
Who can truly afford luxury cars? | It's all about what you value personally. I'm mid-30s and drive a $40K "luxury" sports car. I also happen to wear a $6K wristwatch every day. I purchased both of these items because I thought they were beautiful when I saw them. On the flip side, because I spent 6 years living below the poverty line, I instinctively spend almost nothing on a daily basis. My food budget is less than $50 a week, and I never go out to eat. I wear my clothes and shoes and coats until they have holes, and I drove my previous car (a Toyota) into the ground. My cell phone is 5 years old. The walls of my apartment are bare. I don't have cable TV, I don't subscribe to newspapers or magazines, and I don't own a pet. In all of these cases I don't feel like I'm "sacrificing" anything; food and clothes and cell phones and pets just don't matter to me. If you truly feel that you're missing something in your life by not having a luxury car -- that owning one would be more satisfying than owning the corresponding tens of thousands of dollars -- then go for it. Just be sure to consider all the other things that money could buy before you do. Lastly, buy in cash. Don't make monthly payments unless you enjoy giving money away to the bank! |
How do I know if refinance is beneficial enough to me? | It would help if we had numbers to walk you through the analysis. Current balance, rate, remaining term, and the new mortgage details. To echo and elaborate on part of Ben's response, the most important thing is to not confuse cash flow with savings. If you have 15 years to go, and refinance to 30 years, at the rate rate, your payment drops by 1/3. Yet your rate is identical in this example. The correct method is to take the new rate, plug it into a mortgage calculator or spreadsheet using the remaining months on the current mortgage, and see the change in payment. This savings is what you should divide into closing costs to calculate the breakeven. It's up to you whether to adjust your payments to keep the term the same after you close. With respect to keshlam, rules of thumb often fail. There are mortgages that build the closing costs into the rate. Not the amount loaned, the rate. This means that as rates dropped, moving from 5.25% to 5% made sense even though with closing costs there were 4.5% mortgages out there. Because rates were still falling, and I finally moved to a 3.5% loan. At the time I was serial refinancing, the bank said I could return to them after a year if rates were still lower. In my opinion, we are at a bottom, and the biggest question you need to answer is whether you'll remain in the house past your own breakeven time. Last - with personal finance focusing on personal, the analysis shouldn't ignore the rest of your balance sheet. Say you are paying $1500/mo with 15 years to go. Your budget is tight enough that you've chosen not to deposit to your 401(k). (assuming you are in the US or country with pretax retirement account options) In this case, holding rates constant, a shift to 30 years frees up about $500/mo. In a matched 401(k), your $6000/yr is doubled to $12K/year. Of course, if the money would just go in the market unmatched, members here would correctly admonish me for suggesting a dangerous game, in effect borrowing via mortgage to invest in the market. The matched funds, however are tough to argue against. |
How much is inflation? | There is a thing called the consumer price index (CPI) There is a basket of goods that the people who keep the index basically shop for. It is much more detailed for the sake of accuracy, but bottom line is they shop for the same stuff each year. They measure the difference from year to year and that gives you a pretty good idea of inflation from a regular person point of view. http://www.inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx But it isn't without its faults, people bicker about the methodology and what constitutes the index. http://www.investopedia.com/articles/07/consumerpriceindex.asp?viewed=1 |
How do third-party banks issue car loans? | I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price. In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check. The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money. Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name. |
How should I be investing in bonds as part of a diversified portfolio? | Buy a fund of bonds, there are plenty and are registered on your stockbroker account as 'funds' rather than shares. Otherwise, to the individual investor, they can be considered as the same thing. Funds (of bonds, rather than funds that contain property or shares or other investments) are often high yield, low volatility. You buy the fund, and let the manager work it for you. He buys bonds in accordance to the specification of the fund (ie some funds will say 'European only', or 'global high yield' etc) and he will buy and sell the bonds regularly. You never hold to maturity as this is handled for you - in many cases, the manager will be buying and selling bonds all the time in order to give you a stable fund that returns you a dividend. Private investors can buy bonds directly, but its not common. Should you do it? Up to you. Bonds return, the company issuing a corporate bond will do so at a fixed price with a fixed yield. At the end of the term, they return the principal. So a 20-year bond with a 5% yield will return someone who invests £10k, £500 a year and at the end of the 20 years will return the £10k. The corporate doesn't care who holds the bond, so you can happily sell it to someone else, probably for £10km give or take. People say to invest in bonds because they do not move much in value. In financially difficult times, this means bonds are more attractive to investors as they are a safe place to hold money while stocks drop, but in good times the opposite applies, no-one wants a fund returning 5% when they think they can get 20% growth from a stock. |
Market percentage growth per timeframe | What you are looking for is an indicator called the "Rate of Change (Price)". It provides a rolling % change in the price over the period you have chosen. Below is an example showing a price chart over the last 6 months with a 100 day Rate of Change indicator below the price chart. |
Merrill Lynch historical stock prices - where to find? | You could try asking Merrill Lynch, (general inquiries) :- http://www.ml.com/index.asp?id=7695_114042 So far I only found a few graphics :- http://topics.nytimes.com/top/news/business/companies/merrill_lynch_and_company/ http://www.reuters.com/article/2008/01/17/us-merrilllynch-results-idUSWNAS674520080117 http://www.stocktradingtogo.com/2008/09/15/merrill-lynch-saved-by-bank-of-america-buyout/ |
Looking for an ROI formula, brain is broken today | The monthly repayments of the initial $ 300,000 loan can be calculated using this formula: source: Finance Formulas The monthly payment is It is not readily apparent how the formula works, but it is derived by induction from this summation, in which the sum of the discounted future payments are set equal to the present value of the loan: For the second part of the question, reinvestments are stopped after 9 months, after four investments of $ 26,374.77 * 3 = $ 79,124.31. And presumably each loan is repaid in 3 years, since 45 - 9 = 36 months. Calculating the repayments for these loans: The total returned for all four loans is: |
What do the points in a stock market index epresent? | The All Ords Index consists of the 500 largest companies by market capitalisation listed on the Australia Stock Exchange. Each stock in the All Ords. Index is given a weighting based on its market capitalisation. As the price of the stocks within the All Ords. Index change, so does the points on the index itself. The Index is more sensitive to changes in the larger capitalised stocks due to their larger weighting in the Index. Example: If a company has a weighting of 10% and its price goes up by 10%, and all other stocks in the Index don't go up or down, then this will cause the All Ords Index to go up by 1% (10% of 10%). |
Are Credit Cards a service to banks? | As i see it, with a debit card, they are taken kinda out of the game. They are not lending money, it seems really bad for them. Not exactly. It is true that they're not lending money, but they charge a hefty commission from the retailers for each swipe which is pure profit with almost no risk. One of the proposals considered (or maybe approved already, don't know) in Congress is to cap that hefty commission, which will really make the debit cards merely a service for the checking account holder, rather than a profit maker for the bank. On the other hand, it's definitely good for individuals. I disagree with that. Debit cards are easier to use than checks, but they provide much less protection than credit cards. Here's what I had to say on this a while ago, and seems like the community agrees. But, why do we really need a credit history to buy some of the more expensive stuff Because the system is broken. It rewards people in debt by giving them more opportunities to get into even more debts, while people who owe nothing to noone cannot get a credit when they do need one. With the current system the potential creditor can only asses the risk of someone who has debt already, they have no way of assessing risks of someone with no debts. To me, all this credit card system seems like an awfully nice way to make loads of money, backed by governments as well. Well, credit cards have nothing to do with it. It's the credit scores system that is broken. If we replace the "card" with "score" in your question - then yes, you're thinking correctly. That of course is true for the US, in other countries I have no knowledge on how the creditors assess the risks. |
Are solar cell panels and wind mills worth the money? | Solar water heaters are definitely questionable in the Northeast -- the season when you most need them is also the season when they are least effective. Solar electric isn't a huge moneymaker, but with rebates on installation and carbon-reduction credits (SRECs) -- and a group purchase discount if you can get one, either at a town level or through organizations like One Block Off The Grid -- it can definitely turn a profit. Early estimate was that my setup would pay its initial costs back in 4 years, and the panels are generally considered to be good for a decade before the cells have degraded enough that the panels should be replaced. I haven't had a negative electric bill yet, but I've gotten close, and my setup is a relatively small one (eight panels facing SSE on a 45-degree roof). Admittedly I've also been working to reduce electricity use; I don't think I have an incandescent bulb left in the house. |
Calculating the total capital of a company? | Total Capital This is a very old fashioned term that really is mostly only used in the finance industry today, like when everyone was obsessed with "bank capital". Total Capital = Preferred Equity + Common Equity + Liabilities True blue preferred shares are almost only used by financial companies, banks specifically. The more modern ones that convert to common are used by all other companies. Notes Payable This is another old fashioned term that now carries a different meaning in Generally Accepted Account Principles (GAAP). The oldest definition of a note or a promissory note is a promise to pay a fixed amount of money on a specific date. This has been modified to resemble more a bond and evolved into the zero coupon bond, a bond that makes no cash interest payments but makes one final payment that includes principal & interest. A bank note, like a One Dollar bill, is a note that pays something, in this case One Dollar, never (technically, the repayment date is simply not specified in the contract). While it pays One Dollar, it never pays it back, so it has a constant value of One Dollar. The constant nature, inflation notwithstanding, is what makes bank notes the preferred medium of exchange. GAAP has taken its' own definition to mean any debt payable within 12 months, as it is a current (<12 months) liability. |
What is the opposite of a hedge? | I guess the opposite of being hedged is being unhedged. Typically, a hedge is an additional position that you would take on in order to mitigate the potential for losses on another position. I'll give an example: Say that I purchase 100 shares of stock XYZ at $10 per share because I believe its price will increase in the future. At that point, my full investment of $1000 is at risk, so the position is not hedged. If the price of XYZ decreases to $8, then I've lost $200. If the price of XYZ increases to $12, then I've gained $200; the profit/loss curve has a linear relationship to the future stock price. Suppose that I decide to hedge my XYZ position by purchasing a put option. I purchase a single option contract (corresponding to my 100 shares) with a strike price of $10 and an expiration date in January 2013 for a price of $0.50/share. This means that until the contract expires, I can always sell my XYZ shares for a minimum of $10. Therefore, if the price of XYZ decreases to $8, then I've only lost $50 (the price of the option contract), compared to the $200 that I would have lost if the position was unhedged. Likewise, however, if the price increases to $12, then I've only gained a net total of $150 due to the money I spent on the hedge. (the details of how much money you would actually lose in the hedged scenario are simplified out above; even out-of-the-money options retain some value before expiration, but pricing of options is outside of the scope of this post) So, as a more pointed answer to your question, I would say that the hedged/unhedged status of a position can be characterized by its potential for loss. If you don't have any other assets that will increase in value to offset losses on your position of interest, I would call it unhedged. |
Will I have to pay taxes for Australia if I have an Australian bank account? | After reviewing the tax treaty between New Zealand and Australia, I think the issue is whether or not you have an interest in a "permanent establishment" in Australia where you do business. The bank is not relevant as it is merely the vehicle by which you collect payment and would only come into the picture if you had an income bearing account (which you have indicated you do not). Even if you work out of the offices of the Australian company, you do not have a financial interest in their offices and as such, would pay taxes on the income in New Zealand (see documentation below). https://www.ato.gov.au/business/international-tax-for-business/foreign-residents-doing-business-in-australia/tax-on-income-and-capital-gains/#permanentestablishment |
Is a debt collector allowed to make a hard inquiry on your credit report? | According to the Fair Credit Reporting Act: any consumer reporting agency may furnish a consumer report [...] to a person which it has reason to believe [...] intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer See p12 (section 604). The usual interpretation of this that I've heard is that a debt collection agency that owns or has been assigned a debt can make hard pulls on your credit report without your consent. This link seems to support that (and references the same part of the act, among others): According to the Fair Credit Reporting Act, [...], any business can access your credit history without your permission provided the business has a valid "permissible purpose." The FCRA notes that one such permissible purpose is to review your credit information in connection with the collection of a debt. Thus, if you owe money to a debt collector, the debt collector has the legal right to pull and review your credit report. If they haven't been assigned the debt or own it outright, I believe you have a legal right to dispute it. Consult a lawyer if this is actually a situation you face. Once use for this is if the debt collection agency has trouble locating you; since your credit report normally contains current and past addresses, this is one way to locate you. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.