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In the stock market, why is the “open” price value never the same as previous day's “close”? | A stock's price does not move in a completely continuous fashion. It moves in discrete steps depending on who is buying/selling at given prices. I'm guessing that by opening bell the price for buying/selling a particular stock has changed based on information obtained overnight. A company's stock closes at $40. Overnight, news breaks that the company's top selling product has a massive defect. The next morning the market opens. Are there any buyers of the stock at $40? Probably not. The first trade of the stock takes place at $30 and is thus, not the same as the previous day's close. |
What do do with traditional IRA if I'm maxing out contributions to employer 401k and want to open a Roth | You have many options, and there is no one-size-fits-all recommendation. You can contribute to your IRA in addition to your 401(k), but because you have that 401(k), it is not tax-deductable. So there is little advantage in putting money in the IRA compared to saving it in a personal investment account, where you keep full control over it. It does, however, open the option to do a backdoor-rollover from that IRA to a Roth IRA, which is a good idea to have; you will not pay any taxes if you do that conversion, if the money in the IRA was not tax deducted (which it isn't as you have the 401(k)). You can also contribute to a Roth IRA directly, if you are under the income limits for that (193k$ for married, I think, not sure for single). If this is the case, you don't need to take the detour through the IRA with the backdoor-rollover. Main advantage for Roth is that gains are tax free. There are many other answers here that give details on where to save if you have more money to save. In a nutshell, In between is 'pay off all high-interest debt', I think right after 1. - if you have any. 'High-Interest' means anything that costs more interest than you can expect when investing. |
Why would a restaurant offer a very large cash discount? | Why would such a large discount make business sense to the restaurant? The legit reasons could be; Or can I assume that the restaurant is trying to avoid leaving a paper trail so that they could avoid paying tax? The illegal reasons could be; |
Should I invest in real estate to rent, real estate to live in, or just stocks and bonds to earn 10-15%? | That your asking is a good first step towards taking control of your future. But truly, you must seek the advice of a personal consultant that is much more in tune with your finances that anyone out here in the public will be. You can get this type of advice locally, or if you want something online, I suggest oDesk or something similar to find a large pool of people and to efficiently find the right person for suited for your situation. |
Interactive Brokers Margin Accounts | Scenario 1 - When you sell the shares in a margin account, you will see your buying power go up, but your "amount available to withdraw" stays the same until settlement. Yes, you can reallocate the same day, no need to wait until settlement. There is no margin interest for this scenario. Scenario 2 - If that stock is marginable to 50%, and all you have is $10,000 in that stock, you can buy another $10,000. Once done, you are at 50% margin, exactly. |
Why is Google's current nasdaq market cap almost twice the current share price * the No. of shares outstanding? | For each class A share (GOOGL) there's a class C share (GOOG), hence the missing half in your calculation. The almost comes from the slightly higher market price of the class A shares (due to them having voting powers) over class C (which have no voting powers). There's also class B share which is owned by the founders (Larry, Sergei, Eric and perhaps some to Stanford University and others) and differs from class A by the voting power. These are not publicly traded. |
If I own x% of company A, and A buys company B, do I own x% of B? | Ok, so imagine I own x% of Facebook and Facebook buys WhatsApp, does this mean I own x% of WhatsApp? Yea definitely , you own x% of Whatsapp assuming Facebook buys 100% of WhatApps which is in this case How much shares of FaceBook do I need to own to have access to WhatsApp's books? As WhatsApp is a privately held company by Facebook , Facebook is not obliged to reveal the books of WhatsApp , though some not all of the books of WhatsApp may appear in Facebook financial report , it really depends on Facebook Accounting policy. |
What does a CFP do? | A Certified Financial Planner has passed a licensing exam and will advise you and help you reach your financial goals. A good CFP can help you a lot, especially if you are unsure how to set up your insurance, investment, savings, and financial plans on your own. You do not need a CFP to get a life insurance policy. If you do get a CFP, he or she should help you above and beyond life insurance -- i.e. retirement planning, investment advice, education planning, etc. It's advantageous to you to pay a fixed price for services instead of a percentage or commission. Negotiate fees up front. For life insurance, in most cases a term policy will fit your needs. Whole life, universal life, etc., combine investments and life insurance into a single product and are big commission makers for the salesman. They make it sound like the best thing ever, so be aware. One of my rules of thumb is that, generally speaking, the larger the commission is for the salesperson, the worse the product is for the consumer. Welcome to life insurance pitches. Term life is far less expensive and provides a death benefit and nothing else. If you just had a baby and need to protect your family, for example, term life is often a good solution, easy to buy, and inexpensive. As you stated, any of the major providers will do just fine. |
Huge return on investment, I feel like im doing the math wrong | And now it is at about $3. Many times "skeletons" are bought and inflated for various reasons. Some are legitimate (for example a private business merging into a defunct but public corporation to avoid wasting resources on going public), some are not (mainly pump-and-dump scams that are using "skeletons"). I don't know what was the case here (probably speculation based on the new marijuana laws in the US), but clearly the inflated price was completely unjustified since it went crashing down. |
How do public-company buyouts work? | As a TL;DR version of JAGAnalyst's excellent answer: the buying company doesn't need every last share; all they need is to get 51% of the voting bloc to agree to the merger, and to vote that way at a shareholder meeting. Or, if they can get a supermajority (90% in the US), they don't even need a vote. Usually, a buying company's first option is a "friendly merger"; they approach the board of directors (or the direct owners of a private company) and make a "tender offer" to buy the company by purchasing their controlling interest. The board, if they find the offer attractive enough, will agree, and usually their support (or the outright sale of shares) will get the company the 51% they need. Failing the first option, the buying company's next strategy is to make the same tender offer on the open market. This must be a public declaration and there must be time for the market to absorb the news before the company can begin purchasing shares on the open market. The goal is to acquire 51% of the total shares in existence. Not 51% of market cap; that's the number (or value) of shares offered for public trading. You could buy 100% of Facebook's market cap and not be anywhere close to a majority holding (Zuckerberg himself owns 51% of the company, and other VCs still have closely-held shares not available for public trading). That means that a company that doesn't have 51% of its shares on the open market is pretty much un-buyable without getting at least some of those private shareholders to cash out. But, that's actually pretty rare; some of your larger multinationals may have as little as 10% of their equity in the hands of the upper management who would be trying to resist such a takeover. At this point, the company being bought is probably treating this as a "hostile takeover". They have options, such as: However, for companies that are at risk of a takeover, unless management still controls enough of the company that an overruling public stockholder decision would have to be unanimous, the shareholder voting body will often reject efforts to activate these measures, because the takeover is often viewed as a good thing for them; if the company's vulnerable, that's usually because it has under-performing profits (or losses), which depresses its stock prices, and the buying company will typically make a tender offer well above the current stock value. Should the buying company succeed in approving the merger, any "holdouts" who did not want the merger to occur and did not sell their stock are "squeezed out"; their shares are forcibly purchased at the tender price, or exchanged for equivalent stock in the buying company (nobody deals in paper certificates anymore, and as of the dissolution of the purchased company's AOI such certs would be worthless), and they either move forward as shareholders in the new company or take their cash and go home. |
Yahoo Finance not showing detailed information for foreign stocks | The cause of incomplete/inaccurate financial data's appearing on free sites is that it is both complicated and expensive to obtain and parse these data. Even within a single country, different pieces of financial data are handled by different authorities. In the US, for example, there is one generally recognized authority for stock prices and volumes (CQS), but a completely different authority for corporate earnings data (SEC). For futures and options data the only authority is each individual exchange. Each of these sources might have a vastly different interface to their data; some may have websites, others may have FTPs, others may have TCP datastreams to which you must subscribe, etc. Now throw in the rest of the world and all their exchanges and regulatory agencies, and you can see how it's a difficult job to gather all this information, parse it on a daily (or more frequent) basis, and check it all for errors. There are some companies (e.g. Bloomberg) whose entire business model is to do the above. They spend tens of millions of dollars per year to support the infrastructure and manpower required to keep such a complex system working, and they charge their consumers a pretty penny in return. Do Google/Yahoo pay for Bloomberg data access just to display information that we then consume for free? Maybe. Maybe they pay for some less expensive reduced data set. Or a data set that is less rigorously checked for errors. Even if they pay for the best data available, there's no guarantee that a company's last earnings report didn't have a glitch in it, or that Bloomberg's latest download from the Canadian Agency for Corporate Dividends and Moose Census-Taking didn't get cut off in the middle, or that the folks at Yahoo built a robust system that can handle a particular file's not arriving on time. Bloomberg has dozens or even hundreds of employees focused on just this one task; Yahoo probably has 5. Moral: If you really need the best available data you must go to the source(s), or you must pay a provider to whom you can then complain when something is wrong. With free data you get what you pay for. |
Separate bank account for security deposit from tenant | In Massachusetts, we have a similar law. Each tenant fills out a W9 and the account is in their name. You need to find a bank willing to do this at no cost, else fees can be problematic. With today's rates, any fee at all will exceed interest earned. |
Why Demat/Stock Market Brokers don't support Credit Card Payin | Most credit cards allow you to take "cash advances", but the fees and limits for cash advances are different than for regular purchases. You can buy stock after taking a cash advance from your credit card. When you make a cash advance, you normally pay the credit card company a fee. When you make a regular purchase, the merchant (ie, the stockbroker) pays a fee. Additionally, credit card companies can make merchants wait up to 3 months to actually receive the money, in case the transaction is disputed. Your stockbroker is unlikely to want to pay the fee, accept the delay in receiving the funds, and risking that you will dispute the transaction. Having said that, many FOREX brokers will accept credit card deposits (treated as purchases), although FOREX can be considerably riskier than the stock market. Of course, if you max out your credit cards and lose all your money, you can normally negotiate to pay back the debt for less than the original amount, especially since it's unsecured debt. |
What is street-side booking? | This is a technical term referring to the "double entry"-styled book keeping of trades by brokers. Suppose a client executes a buy order with their broker. The broker's accounting for this "trade" will be recorded as two different "deals" : One "deal" showing the client as buyer and the broker as seller, and a second "deal" showing the broker as buyer and the clearing house as seller. The net result of these two deals is that the broker has no net position while the client has a net buy and the clearing house has a net sell with respect to this broker's account as accounted for internally by the broker. (And the same methods apply for a client sell order.) The client/broker "deal" record - i.e., the client side of the trade - is called the "client side booking", while the broker/clearing house "deal" record is called the "street side booking". |
Is it unreasonable to double your investment year over year? | Yes, because you cannot have an exponential growth rate that is faster than the rate at which the economy grows on the long term. 100% growth is much more than the few percent at which the economy grows, so your share in the World economy would approximately double every year. Today the value of all the assets in the World economy is about $200 trillion. If you start with an investment of just $1000 and this doubles every year, then you'll own all the World's assets in 37.5 years, assuming this doesn't grow. You can, of course, take into account that it does grow, this will yield a slightly larger time before you own the entire World. |
How do I get into investing in stocks? | Read "The intelligent Investor" book before you do anything. I started when I really didn't understand anything about stocks. I bought an internet stock for $150 per share which sold at 75cents a year later. I sold it for a profit but would've been a disaster. |
Why do people use mortgages, when they could just pay for the house in full? | The advantage of using a mortgage is that you pay for a house at TODAY's price, using TOMORROW's money. Your question suggests that you rightly observed that it was not a good idea around 2006 (the last peak in housing). That was when prices were at their maximum, and had nowhere to go but down. Some experts think that house prices STILL have further to go on the downside. Meanwhile, wages have been going nowhere during that time. This phenomenon seems to happen about every 40 years or so, the 1930s, the 1970s, and around 2010. At MOST other times, say the 1980s, houses are likely to go up for the "foreseeable" future. At those times, you want to buy the house at "today's" price, then pay for it in future dollars when you are earning more money. The irony is that what most people observe as teenagers is usually the wrong thing to do when they are, say, forty. In 2035, it will probably make sense to have a large mortgage in a bull housing market, which is the opposite of what you observed around 2010. So a better rule is to do at age 40 what made sense about the time you were born (in your case, perhaps the 1990s). Whereas the people born in the early 1970s that got "caught" recently, observed the bull market of the 1980s and 1990s in THEIR teens and twenties, rather than the bear market of the 1970s that took place about the time they were born. |
Why do governments borrow money instead of printing it? | My answer is that when confronted with the obvious, the most common human reaction is to seek reasons for it, because things have to be right. They have to have a reason. We don't like it when things suck. So when finding out that you are being ripped off every day of your life, your reaction is "There must be a logical reason that perfectly explain why this is. After all, the world is fair, governments are working in our best interest and if they do it this way, they must have a very good reason for it." Sorry, but that not the case. You have the facts. You are just not looking at them. Economics, as a subject, is the proper management of resources and production. Now, forget the fancy theories, the elaborate nonsense about stocks and bonds and currencies and pay attention to the actual situation. On our planet, most people earn $2,000 per year. Clean water is not available for a very sizable percent of the world's population. Admittedly, 90% of the world's wealth is concentrated in the hands of the most wealthy 10%. A Chinese engineer earns a fraction of what a similarly qualified engineer earns in the States. Most people, even in rich countries, have a negative net value. They have mortgages that run for a third of their lifetimes, credit card debts, loans... do the balance. Most people are broke. Does this strike you as the logical result of a fair and balanced economic system? Does this look like a random happenstance? The dominant theory is "It just happened, it's nobody's fault and nobody designed it that way and to think otherwise is very bad because it makes you a conspiracy theorist, and conspiracy theorists are nuts. You are not nuts are you?" Look at the facts already in your possession. It didn't just happen. The system is rigged. When a suit typing a few numbers in a computer can make more money in 5 minutes than an average Joe can make in 100 lifetimes of honest, productive work, you don't have a fair economic system, you have a scam machine. When you look at a system as broken as the one we have, you shouldn't be asking yourself "what makes this system right?" What you should be asking yourself is more along the lines of "Why is it broken? Who benefits? Why did congress turn its monetary policy over to the Federal reserve (a group of unelected and unaccountable individuals with strong ties in the banking industry) and does not even bother to conduct audits to know how your money is actually managed? This brilliant movie, Money as debt, points to a number of outrageous bugs in our economic system. Now, you can dream up reasons why the system should be the way it is and why it is an acceptable system. Or you can look at the fact and realize that there is NO JUSTIFICATION for an economic system that perform as badly as it does. Back to basics. Money is supposed to represent production. It's in every basic textbook on the subject of economics. So, what should money creation be based on? Debt? No. Gold? No. Randomly printed by the government when they feel like it? No (although this could actually be better than the 2 previous suggestions) Money is supposed to represent production. Index money on production and you have a sound system. Why isn't it done that way? Why do you think that is? |
What assets would be valuable in a post-apocalyptic scenario? | Gold and silver are for after the crisis, not during. Gold and silver are far more likely to be able to be exchanged for things you need, since they are rare, easily divided, etc. Getting land away from where the crap is happening is also good, but it's more than that. Say you have land somewhere. How will the locals view you if you move there to hunker down only when things go bad? They won't really trust you, and you'll inherit a new set of problems. Building relationships in an off-the-beaten-path area requires a time investment. Investing in lifestyle in general is good. Lifestyle isn't just toys, but it's privacy, peace of mind, relationships with people with whom you can barter skills, as well as the skills you might think you'd need to do more than just get by in whatever scenario you envision. For the immediate crisis, you'd better have the things you'll need for a few months. Stores probably won't be supplied on any regular basis, and the shelves will be bare. Trying to use gold or silver during the crisis just makes you a target for theft. With regard to food, it's best to get acclimated to a diet of what you'd have on hand. If you get freeze-dried food, eat it now, so that it's not a shock to your system when you have to eat it. (Can you tell I've been thinking about this? :) ) |
MasterCard won't disclose who leaked my credit card details | I found a german article describing the legal situation in Germany. To summarize As outlined by the many possible reasons in the other answer, it is unclear from the information I have, whether condition 1 holds. Also condition 2 may not hold since the credit card was frozen. I suppose this makes a good argument to MasterCard and my bank, but I also suspect they will not care unless it comes with a attorney letterhead. |
What does quantitative easing 2 mean for my bank account? | IMO, QE2 will likely have no perceptible impact in the near term. Keeping all of your savings in a bank guarantees that you will lose money to inflation & taxes. I'd suggest consulting a financial advisor -- preferably someone who understands issues facing someone with assets in the US and Canada. In terms of what portion of your savings should be in USD vs. CAD, that's going to depend on your situation. I'd probably want more assets in the place that I'm living in for the next several years. |
Annuities question - Equations of value | These are the steps I'd follow: $200 today times (1.04)^10 = Cost in year 10. The 6 deposits of $20 will be one time value calculation with a resulting year 7 final value. You then must apply 10% for 3 years (1.1)^3 to get the 10th year result. You now have the shortfall. Divide that by the same (1.1)^3 to shift the present value to start of year 7. (this step might confuse you?) You are left with a problem needing 3 same deposits, a known rate, and desired FV. Solve from there. (Also, welcome from quant.SE. This site doesn't support LATEX, so I edited the image above.) |
How can I deal with a spouse who compulsively spends? | Based on the conversations in the comments, I believe a pragmatic solution would be the best immediate course of action, while still working on the long term addiction issues. The first step is to get your husband to agree to give you all of his credit cards and let you manage the money for a set period of time, say 3 months, to see how it goes. (In my experience people are more likely to agree to being uncomfortable for a finite period of time, rather than indefinitely.) Step 2 is to provide him a means for making purchases on his own, but with a limited budget. Here are some examples: Perhaps a combination of the above options would work best. Another thing to consider is to set up alerts with your bank so that you are notified of certain purchases (or all) that are made by your husband. This varies by bank, but nowadays most will allow you to receive text/email immediately when the purchase happens, and can be set to certain amounts or categories. There is a definite psychological difference between, "If I buy this, my spouse will find out at the end of the month and berate me." and "If I buy this, my spouse is going to run in here in 30 seconds and berate me." The latter might actually be a deterrent on its own, and you may likely have the opportunity to undo the purchase if you wish to. As a side note, it's important to realize that the above suggestions are still allowing for some limited amount of enabling and temptation to occur. If the addiction is such that it is hazardous to one's health (for example drugs or alcohol addiction), then I don't believe this would be the best course of action. These suggestions are based on my impression that the biggest concern at the moment is financial, and I believe these ideas help to mitigate that. Good luck. |
Why will the bank only loan us 80% of the value of our fully paid for home? | If you get a loan for 80% of the value of your house, that's equivalent to buying a house with a 20% down payment (assuming the appraised value is what you'd buy it for). That's the minimum down payment for Fannie Mae backed loans without PMI (mortgage insurance). See this table for more details. Freddie Mac (the other major mortgage backer) has a good fact sheet on cash out loans (which is what this is called) here. It also specifies: Maximum LTV ratio of 80 percent for 1-unit primary residences As noted in other answers, the 80% rule is to protect the bank (and ultimately, Fannie Mae and Freddie Mac, who will eventually buy most of these loans) so it is more likely to recoup the total value of the mortgage if they must foreclose on the house. |
Where can one graph portfolio performance over time? | I use Yahoo Finance to plot my portfolio value over time. Yahoo Finance uses SigFig to link accounts (I've linked to Fidelity), which then allows you to see you exact portfolio and see a plot of its historical value. I'm not sure what other websites SigFig will allow you to sync with, but it is worth a try. Here is what the plot I have looks like, although this is slightly out of date, but still gives you an idea of what to expect. |
More money towards down payment versus long-term investments | There are two components to any non-trivial financial decision: Assuming that all things remain equal, borrowing money at a low rate while investing for a higher return is a no-brainer. The problem is, all things do not remain equal. For example: I think that you need to assess your position and preferences. I'd err on the side of being in less debt. |
Should I exchange my Scottish pounds for English ones? | Scottish banknotes are promissary notes of the banks issuing them. Their value will be paid in UK legal tender any time as long as the issuing bank is in business. So they are not going to lose value unless the issuing bank goes bakrupt. Scottish notes may be refused, outside of Scotland, at least, by merchants at their discretion. So if the vote goes the wrong way, merchants in England may refuse accepting these notes even if just to make a point. English notes (those issued by the Bank of England) are the actual UK legal tender. Wether you should change or not is up to you, I believe there's no immenent danger of them becoming worthless any time soon. |
Is trading stocks easier than trading commodities? | Its the relative leverage available to retail traders between the two. In the US one can trade equities with 2:1 leverage while with commodities the leverage can go much higher. Combine this with the highly volatile nature of commodities, and it makes losing BIG too easy for the average trader. |
Option on an option possible? (Have a LEAP, put to me?) | As with most strategies there are pros and cons associated with this approach: Advantages of using LEAPS: Disadvantages of using LEAPS: Read more about it in great detail on my blog: http://www.thebluecollarinvestor.com/leaps-and-covered-call-writing-2/ |
Credit card grace period for pay, wait 1 day, charge? | This will not result in any finance charges: I wouldn't recommend cutting it quite so close, but as long as you pay the full balance as shown on each statement by the due date shown on that same statement, you won't incur a finance charge. Of course this only applies in the case of ordinary purchases that have a grace period. |
Why haven't there been personal finance apps or softwares that use regression modeling or A.I.? | Consumer facing finance is heavily regulated. You are liable for the recommendations you make; if they are based on a black box you risk problems when sued. It is difficult to explain in a court of law why a neural network came to a particular conclusion. It is much easier to provide advice (models) in the "educated counterparty" market. Not only do institutional investors in general expect to pay for a quality advice (consumers in general expect to get online advice for free) but the legal implications are different. |
Why most of apple stock price since 10years have been gained overnight? | I'll answer this question: "Why do intraday traders close their position at then end of day while most gains can be done overnight (buy just before the market close and sell just after it opens). Is this observation true for other companies or is it specific to apple ?" Intraday traders often trade shares of a company using intraday leverage provided by their firm. For every $5000 dollars they actually have, they may be trading with $100,000, 20:1 leverage as an example. Since a stock can also decrease in value, substantially, while the markets are closed, intraday traders are not allowed to keep their highly leveraged positions opened. Probabilities fail in a random walk scenario, and only one failure can bankrupt you and the firm. |
Personal finance app where I can mark transactions as “reviewed”? | On mint, you can create your own tags for transactions. So, you could create a tag called "reviewed" and tag each transaction as reviewed once you review it. I've done something similar to this called "reimbursable expense" to tag which purchases I made on behalf of someone else who is going to pay me back. |
Can saving/investing 15% of your income starting age 25, likely make you a millionaire? | As others have shown, if you assume that you can get 6% and you invest 15% of a reasonable US salary then you can hit 1 million by the time you retire. If you invest in property in a market like the UK (where I come from...) then insane house price inflation will do it for you as well. In 1968 my parents bought a house for £8000. They had a mortgage on it for about 75% of the value. They don't live there but that house is now valued at about £750,000. Okay, that's close to 60 years, but with a 55 year working life that's not so unreasonable. If you assume the property market (or the shares market) can go on rising forever... then invest in as much property as you can with your 15% as mortgage payments... and watch the million roll in. Of course, you've also got rent on your property portfolio as well in the intervening years. However, take the long view. Inflation will hit what a million is worth. In 1968, a million was a ridiculously huge amount of money. Now it's 'Pah, so what, real rich people have billions'. You'll get your million and it will not be enough to retire comfortably on! In 1968 my parents salaries as skilled people were about £2000 a year... equivalent jobs now pay closer to £50,000... 25x salary inflation in the time. Do that again, skilled professional salary in 60 years of £125000 a year... so your million is actually 4 years salary. Not being relentlessly negative... just suggesting that a financial target like 'own a million (dollars)' isn't a good strategy. 'Own something that yields a decent amount of money' is a better one. |
Efficient markets hypothesis and performance of IPO shares after lock-up period | That's the way the markets work in THEORY. In actual fact, markets are subject to "real world" pressures. That is, there are so many things going on in the market that the end of the "Lined In" lock up is just one of many. To produce the result you describe, traders would have to hold cash in reserve for this so-called "contingency" to buy at the end of the lock-up. In most cases, they wouldn't want to because of everything else that is going on. To use a real world analogy, would you want to wait until the last possible moment before going to the bathroom? Or would you go now while you had the chance? That's what the decision about "holding cash in reserve for a contingency" is like. |
How are mortgage interest rates determined? | One will find that the fixed 30 year mortgage rate is tightly correlated to the 10 year treasury. An adder of 2-2.5% or so, changing slightly with the rest of the economy, as money can get tight or loose independent of the rate itself. In 2011 we are witnessing low rates yet tough loan standards, this is the phenomenon I am referencing. |
Pros & cons in Hungary of investing retirement savings exclusively in silver? What better alternatives, given my concerns? | First is storage which is a big and a detrimental headache. Security is another big headache. Investing in precious metal has always been an investment opportunity in the countries in the east i.e. India and China because of cultural reason and due to absence of investment opportunities for the less fortunate ones. It isn't the case so in the West. Secondly what is the right an opportune moment is open to question. When the worlwide economy is up and running, that is probably the time to buy i.e. people would like to put money in use rather than store. The saying goes the other way when the economy is stagnating. Then there is also the case of waiting out the bad periods to sell your gold and silver. If you do want to buy precious metals then use a service like BullionVault, rather than doing those yourself. It takes care of the 2 big headaches, I mentioned earlier. |
gift is taxable but is “loan” or “debt” taxable? | If you are looking to transfer money to another person in the US, you can do do with no tax consequence. The current annual gift limit is $14k per year per person, so for example, my wife and I can gift $56k to another couple with no tax and no forms. For larger amounts, there is a lifetime exclusion that taps into your $5M+ estate tax. It requires submitting a form 709, but just paperwork, no tax would be due. This is the simplest way to gift a large sum and not have any convoluted tracking or structured loan with annual forgiveness. One form and done. (If the sum is well over $5M you should consider a professional to guide you, not a Q&A board) |
Valuing a small business to invest in | There is nothing fair / unfair in such deals. It is an art than a science. what kind of things should be considered, to work out what would be a fair percentage stake A true fair value is; take the current valuation of the company [This can be difficult if it is small and does not maintain proper records]. Divide by number of shares, that is the value of share and you should 20K worth of such shares. But then there is risk premium. You are taking a risk that an small start-up may do exceedingly well ... or it may close off. This risk premium is what is negotiated. It depends on how desperate the owner of the small company is; who all are interested in this specific deal ... if you want 30% share; someone else is ready to offer 20K for 15% of share. Or there is no one willing to lend 20K as they don't believe it will make money ... and the owner is desperate, you may even get 50%. |
How do you quantify investment risk? | I use two measures to define investment risk: What's the longest period of time over which this investment has had negative returns? What's the worst-case fall in the value of this investment (peak to trough)? I find that the former works best for long-term investments, like retirement. As a concrete example, I have most of my retirement money in equity, since the Sensex has had zero returns over as long as a decade. Since my investment time-frame is longer, equity is risk-free, by this measure. For short-term investments, like money put aside to buy a car next year, the second measure works better. For this purpose, I might choose a debt fund that isn't the safest, and has had a worst-case 8% loss over the past decade. I can afford that loss, putting in more money from my pocket to buy the car, if needed. So, I might choose this fund for this purpose, taking a slight risk to earn higher return. In any case, how much money I need for a car can only be a rough guess, so having 8% less than originally planned may turn out to be enough. Or it may turn out that the entire amount originally planned for is insufficient, in which case a further 8% shortfall may not be a big deal. These two measures I've defined are simple to explain and understand, unlike academic stuff like beta, standard deviation, information ratio or other mumbo-jumbo. And they are simple to apply to a practical problem, as I've illustrated with the two examples above. On the other hand, if someone tells me that the standard deviation of a mutual fund is 15%, I'll have no idea what that means, or how to apply that to my financial situation. All this suffers from the problem of being limited to historical data, and the future may not be like the past. But that affects any risk statistic, and you can't do better unless you have a time machine. |
Ask for credit decrease | $500 should not have a massive impact on your credit. Why not at the beginning of each month buy a $500 prepaid Visa instead of using your credit card? That way you set a hard limit, but you still have the option of using credit in an emergency. |
How does my broker (optionsXpress) calculate probabilities that the stock will hit a certain price? | This chart concerns an option contract, not a stock. The method of analysis is to assume that the price of an option contract is normally distributed around some mean which is presumably the current price of the underlying asset. As the date of expiration of the contract gets closer the variation around the mean in the possible end price for the contract will decrease. Undoubtedly the publisher has measured typical deviations from the mean as a function of time until expiration from historical data. Based on this data, the program that computes the probability has the following inputs: (1) the mean (current asset price) (2) the time until expiration (3) the expected standard deviation based on (2) With this information the probability distribution that you see is generated (the green hump). This is a "normal" or Gaussian distribution. For a normal distribution the probability of a particular event is equal to the area under the curve to the right of the value line (in the example above the value chosen is 122.49). This area can be computed with the formula: This formula is called the probability density for x, where x is the value (122.49 in the example above). Tau (T) is the reciprocal of the variance (which can be computed from the standard deviation). Mu (μ) is the mean. The main assumption such a calculation makes is that the price of the asset will not change between now and the time of expiration. Obviously that is not true in most cases because the prices of stocks and bonds constantly fluctuate. A secondary assumption is that the distribution of the option price around the mean will a normal (or Gaussian) distribution. This is obviously a crude assumption and common sense would suggest it is not the most accurate distribution. In fact, various studies have shown that the Burr Distribution is actually a more accurate model for the distribution of option contract prices. |
Question about protecting yourself from company not beating earning eastimate | The best thing to do to avoid this is not to sell as you've described. What purpose does it solve? If you're speculating, set a price at which you want to cash out and put a limit order. If you're a long term investor, then unless something fundamental has changed - why would you sell? |
Avoiding timing traps with long term index investing | 1) The risks are that you investing in financial markets and therefore should be prepared for volatility in the value of your holdings. 2) You should only ever invest in financial markets with capital that you can reasonably afford to put aside and not touch for 5-10 years (as an investor not a trader). Even then you should be prepared to write this capital off completely. No one can offer you a guarantee of what will happen in the future, only speculation from what has happened in the past. 3) Don't invest. It is simple. Keep your money in cash. However this is not without its risks. Interest rates rarely keep up with inflation so the spending power of cash investments quickly diminishes in real terms over time. So what to do? Extended your time horizon as you have mentioned to say 30 years, reinvest all dividends as these have been proven to make up the bulk of long term returns and drip feed your money into these markets over time. This will benefit you from what is known in as 'dollar cost averaging' and will negate the need for you to time the market. |
Why don't brokerages charge commissions on forex trades? | Simply because forex brokers earn money from the spread that they offer you. Spread is the difference between buyers and sellers. If the buy price is at 1.1000 and the sell price is at 1.1002 then the spread is 2 pips. Now think that this broker is getting spread from its liquidity cheaper (for example 1 pip spread). As you can understand this broker makes a profit of 1 pip for each trade you place... Now multiply 1 pip X huge volume, and then you will understand why most forex brokers don't charge commissions. |
Cashing a cheque on behalf of someone else | If the cheque is not crossed, then your friend can write "payable to [your name]" above his signature when he endorses it. If it is crossed, you'll have to deposit it into his account. Given that one can deposit cheques at ATMs, this shouldn't require his presence. Just make sure he endorses it before you leave! It also might take a few more days to clear. |
How to determine how much to charge your business for rent (in your house)? | In Canada I think you'd do it as a % of square footage. For example: Then you can count 20% of the cost of the of renting the apartment as a business expense. I expect that conventions (i.e. that what's accepted rather than challenged by the tax authorities) may vary from country to country. |
What impact does trading in a car have on your credit score? | Paying off your loan in full will most likely not help your credit score, and could potentially even hurt it. Because car loans are installment loans (and thus differ from consumer credit), lenders really only like seeing that you responsibly pay off your loans on time. They don't really care if you pay it off early--lenders like seeing open lines of credit as long as you manage them well. The hard inquiry will simply lower your credit score a few points for up to two years. So, from a credit score perspective, you're really not going to help yourself in this scenario (although it's not like you're going to be plummeting yourself either). |
can the government or debt collectors garnish money from any bank account to which the debtor has access? | I agree with the comments so far. Access doesn't equal ownership. There are also different levels of access. E.g. your financial advisor can have access to your retirement account via power of attorney, but only ability to add or change things, not withdraw. Another consideration is when a creditor tries to garnish wages / bank accounts, it needs to find the accounts first. This could be done by running a credit report via SSN. My guess is an account with access-only rights won't show up on such a report. I suppose the court could subpoena bank information. But I'm not an attorney so please check with a professional. |
Is it possible to eliminate PMI (Personal/Private Mortgage Insurance) on a mortgage before reaching 20% down on principal? | On a 5% mortgage, after 24 months of payments on a 30 yr amortization, you will have paid 3% of the principal, so all else being equal, you have 15% equity. If the value is up, even a bit, the first step is to call the bank. If you are pretty sure it's up enough, ask them to remove PMI in exchange for you paying the appraisal fee. If they hesitate, ask them if you prepay the remaining missing 5%, if they'll pull the fee. 8% of principal is paid by the end of year 5, at which time they have no choice but to remove it. Doing so any sooner is their call. If they agree to the pre-pay deal, I'd find a way to raise the funds. It will save you over $5000 in a short period. Last, while 5% really is great, especially NPNC, shop around, you may find another no cost deal at the same or lower rate, no harm to look, and they may appraise you at 80% LTV. |
When does selling (writing) options count for tax purposes? | If you take the profit or loss next year, it counts on next year's taxes. There's no profit or loss until that happens. |
How can foreign investor (residing outside US) invest in US company stocks? | Instead of SSN, foreign person should get a ITIN from the IRS. Instead of W9 a foreigner should fill W8-BEN. Foreigner might also be required to file 1040NR/NR-EZ tax report, and depending on tax treaties also be liable for US taxes. |
Can I trust the Motley Fool? | Not sure how I came across the Motley Fool blog in the first instance, but found the writing style refreshing - then along came some free advice on ASX share prospects, then the next day and email expounding the benefits I would get by joining up for two years at 60% off if I hit the button "now", getting in at ground floor on the next technology stock rocket - I replied: "What a hard sell - why wouldn't I apply the age old adage of " If it sounds too good to be true, it probably is" Their reply was; "Thanks for your note. The honest answer is that despite people knowing they should do something to help themselves prepare for their financial futures, few actually do it. We find these messages actually work in getting people to hit 'yes', much better than an understated email that just says 'here are our results and our philosophy - let us know if you're interested', unfortunately. Yours Foolishly" So I have put some of these recommendations onto a watch list, time will tell. |
For what dates are the NYSE and U.S. stock exchanges typically closed? | All public US equity exchanges are closed on the 9 US trading holidays (see below) and open on all other days. Exchanges also close early (13:00 ET) on the Friday after Thanksgiving and on the day before Independence Day if Independence Day is being observed on a Tuesday, Wednesday, Thursday, or Friday. (Some venues have extended trading hours as a matter of course; for them an "early close" might be later than 13:00 ET.) To answer the second question, yes, if you know NASDAQ's or AMEX's holiday schedule, then you know NYSE's (modulo the timing of their early close). I'm not sure about the options exchanges; they're not regulated the same way and are a good example of exchanges with extended trading hours in the first place. The US trading holidays are as follows. Note that trading holidays are not the same as federal or bank holidays, which include Columbus Day and Veterans Day but do not include Good Friday. |
Can my accounting for Tax Basis differ from my broker's | No. If you didn't specify LIFO on account or sell by specifying the shares you wish sold, then the brokers method applies. From Publication 551 Identifying stock or bonds sold. If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Pub. 550. The trick is to identify the stock lot prior to sale. |
What does dividends passed mean in terms of stock? | A "covenant" is a solemn promise to engage in or refrain from a specified action. Every company must do a balancing act while declaring the dividends in terms of companies interest (can it use the surplus cash to generate more revenue) to shareholders' interests, giving back to them the profits that due. Many countries have regulations governing as to when and how much the dividends may be given. It also lays out the policy about declaring dividends to protect everyones' interest. For example if the company has a huge suit pending against it, the company is not supposed to distribute the surplus cash as dividends and when the suit goes against it, its left when no money to pay ... or other such examples where the interests of one or the other party is compromised. The company law board ensures that all this is adhered to in a fair manner. So essentially "these covenants include provisions about passing dividends", means that due diligence has be exercised by the company in order to arrive at the dividends that are to be paid out. |
Online Foreign Exchange Brokerages: Which ones are good & reputable for smaller trades? | I used XE trade once several years ago. I found them quite easy to use after the slightly fiddly account setup process (needed for security/anti-money laundering I think). I trusted them because I'd been using their online FX rates for a long time. I can't really comment on the specific questions you ask though as this was a long time ago and I haven't needed one since. |
Where can I open a Bank Account in Canadian dollars in the US? | Royal Bank in Canada can open an account for you in the US through RBC (the US affiliate to Royal Bank of Canada) I think it's called RBC Access USA. |
ESPP (Employee Stock Purchase Plan) Funds on Mortgage Loan Application | The problem is that you don't have the money now; so they can't know with 100% certainty that you will have it on settlement day. What happens if you don't file the paperwork in time? or you change your mind because you think the company stock is going to go through the roof next quarter? They would have to pull the funding for the loan. The seller would be upset, and could even file for damages if the deal falls through. It could even snowball because if they delay the sale then they can't buy the new place, which impacts another closing... Frequently lenders want to see the money for the down payment long before settlement. They want to know the money is there, and it isn't a hidden loan. While you can point to the money in the ESPP, they would still like to see the money in a regular bank account. Even if you do convince them to delay their evaluation you can count on being asked to prove the existence of the funds in the days before closing, or they will delay giving the loan. |
Events that cause major movement in forex? | Trading Speeches can be difficult, 1 comment can be bullish then next phrase bearish. However language algorithms can process the tone of the entire message before you can read the first word or have even finished downloading the text of the statement. The biggest news is the 1st Friday of the month, the non-farm payrolls out of the USA. You used to be able to get the news before the price moved, but high-frequency algos changed all that, essentially the exchanges get quote stuffed, so good luck unless you are using a bucketshop. Better to wait for a pull back from the initial reaction if the numbers are good, otherwise you will get a fill at the peak. If the numbers are a big deviation from expectations then you can just jump in. Back in 2006 the Bank of England raised interest rates when it wasn't expected and the GBPUSD flew 500 pips. This Forex calendar has charts of every news release, so you can see what to expected based on what has happened in the past with a certain bit of economic news. http://www.fasteconomicnews.com/fx_calendar.aspx |
Buying a multi-family home to rent part and live in the rest | This is one of those too good to be true things that is actually true. Why? Because only you can do this. Only you can deduct for primary home mortgage interest, only you can get a low cost mortgage (others would have to get investor mortgages at a higher interest rate). So its only a great deal for you. More people would do it if they could, but they can't, thats why you can and should do this. I have a similar setup and it is terrific. |
Is it possible to get life insurance as a beneficiary before the person insured dies? | The short answer is "No". There a 2 ways to get cash from a life insurance policy. If the policy has cash value greater than the surrender value, then the difference can be borrowed, but will generally increase premiums in the future. The other method, available on many term policies allows the owner to receive part of the death benefit if the insured has a physician willing to certify that he/she will probably pass away within a 12 month period. Several carriers also offer cash benefits for critical care. |
Help required on estimating SSA benefit amounts | There has been an abundance of articles in recent years which make it fairly clear that many participants in the Social Security system-- especially those who have started contributing recently, and going forward from that-- will experience negative rates of return. In other words, they will put in more than they will get out. Some examples of such articles: Time Magazine: But it is now official: Social Security is a lousy investment for the average worker. People retiring today will be among the first generation of workers to pay more in Social Security taxes than they receive in benefits over the course of their lives, according to a new analysis by the Associated Press. That AP piece, referenced by Time: People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It's a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press. A piece which appeared in DailyFinance (includes a helpful graphic summary): 10 Myths About Social Security: Myth 4: Social Security Is a Good Deal for Today’s WorkersEven if there were no reduction in benefits or increase in taxes—an impossibility given Social Security’s looming financing shortfalls—Social Security is an extremely bad investment for most young workers. In fact, according to a study by the nonpartisan Tax Foundation, most young workers will actually receive a negative return on their Social Security taxes— they will get less in benefits than they paid in taxes. Some studies indicate that a 30- year-old two-earner couple with average income will lose as much as $173,500. That actual loss does not even consider the opportunity cost, what workers might have earned if they had been able to invest their taxes in real assets that yield a positive return. In fact, a study by financial analyst William Shipman demonstrates that, if a 25-year-old worker were able to privately invest the money he or she currently pays in Social Security taxes, the worker would receive retirement benefits three to six times higher than under Social Security. Has that answered your question? |
Does Robinhood calculate fees and taxes over the total gain/loss or per-transaction? | I don't see a tag for United States, so I'm having to assume this is US taxes. It doesn't matter what app you use, IRS trades are all calculated the same. First, you have to report each trade on a 8949 and from that the totals go into a schedule D. Short term trades are stocks that you've kept exactly one year or less, long term trades are for 1 year + 1 day or more. Trades where you sold a stock for a loss, then bought that stock back again under 30 days don't get to count as a loss. This only affects realized capital gains and losses, you don't count fees. First, take all of your short term gains then offset them by all of your short term losses. Do the same for long term gains and losses. Short and long term gains are taxed at different rates. You can deduct losses from short term to your long term and vice versa. Then you can deduct the total losses up to $3000 (household, $1500 married, filing separately) per year on your regular income taxes or other dividend taxes. If you have over $3000 in losses, then you need to carry that over to subsequent years. Edited per Dave's comments: thanks Dave |
Short-sell, or try to rent out? | There is another option. Stay where you are. |
Auto loan: must make X payments before payoff | Paperwork prevails. What you have is a dealer who get a kickback for sending financing to that institution. And the dealer pretty much said "We only get paid our kickback at two levels of loan life, 6 and 12 months." You just didn't quite read between the lines. This is very similar to the Variable Annuity salespeople who tell their clients, "The best feature about this product is that the huge commissions I get from the sale fund my kid's college tuition and my own retirement. You, on the other hand, don't really do so well." Car salesmen and VA sellers. |
How to safely earn interest on business profits (UK) | I found some UK personal accounts offer up to 3% interest (no names here, but it is well known bank with red logo). You can take out directors loan from your company, put the cash into that personal account and earn interest. Just don't forget to return this loan before end of financial year, so this interest does not become your dividends. |
Why do banks encourage me to use online bill payment? | It’s more convenient for both you and the bank; its much simpler to handle things electronically than it is to go through paperwork. Also, its eco-friendly and by saying that they care about the environment, banks earn brownie points with environmentally-conscious customers. |
What is the name of inverse of synergy? (finance) | I'd probably call it an intangible or indirect benefit. Not sure what the trade term is. |
What are the options for a 19-year-old college student who only has about $1000? | Put them in Cds. Better than a savings account, you won't lose capital unlike the stock market. |
How to contribute to Roth IRA when income is at the maximum limit & you have employer-sponsored 401k plans? | From the way you frame the question it sounds like you more or less know the answer already. Yes - you can make a non-deductable contribution to a traditional IRA and convert it to a Roth IRA. Here is Wikipedia's explanation: Regardless of income but subject to contribution limits, contributions can be made to a Traditional IRA and then converted to a Roth IRA.[10] This allows for "backdoor" contributions where individuals are able to avoid the income limitations of the Roth IRA. There is no limit to the frequency with which conversions can occur, so this process can be repeated indefinitely. One major caveat to the entire "backdoor" Roth IRA contribution process, however, is that it only works for people who do not have any pre-tax contributed money in IRA accounts at the time of the "backdoor" conversion to Roth; conversions made when other IRA money exists are subject to pro-rata calculations and may lead to tax liabilities on the part of the converter. [9] Do note the caveat in the second paragraph. This article explains it more thoroughly: The IRS does not allow converters to specify which dollars are being converted as they can with shares of stock being sold; for the purposes of determining taxes on conversions the IRS considers a person’s non-Roth IRA money to be a single, co-mingled sum. Hence, if a person has any funds in any non-Roth IRA accounts, it is impossible to contribute to a Traditional IRA and then “convert that account” to a Roth IRA as suggested by various pundits and the Wikipedia piece referenced above – conversions must be performed on a pro-rata basis of all IRA money, not on specific dollars or accounts. Say you have $20k of pre-tax assets in a traditional IRA, and make a non-deductable contribution of $5k. The account is now 80% pre-tax assets and 20% post-tax assets, so if you move $5k into a Roth IRA, $4k of it would be taxed in the conversion. The traditional IRA would be left with $16k of pre-tax assets and $4k of post-tax assets. |
Maintaining “Woman Owned Business” while taking on investor | To qualify as a woman owned business, a woman or group of women must own shares worth 51% of the business. If your investor was a woman, the entire 5% could come from her share of the company without affecting the 51% ownership requirement. Could you find a woman to add as an investor? If you each had your shares diluted 5%, She would be down to 48.45% ownership, and you would be down to 46.55% ownership. The only way for you to get back to a 51% female ownership situation would be to give a 2.55% ownership stake (from your share) to a wife, sister, mom, girlfriend, or any other woman who you think should benefit from this arrangement. This would still put you down at 44% (effectively taking the whole 5% from you) but by giving some of your share to someone else, it does require your partner to make some of the sacrifice, while still benefiting someone you care about (if you have someone you would like to give that benefit to). In summary, this is what it would look like: |
Merits of buying apartment houses and renting them | I am not going to argue the merits of investing in real estate (I am a fan I think it is a great idea when done right). I will assume you have done your due diligence and your numbers are correct, so let's go through your questions point by point. What would be the type of taxes I should expect? NONE. You are a real estate investor and the US government loves you. Everything is tax deductible and odds are your investment properties will actually manage to shelter some of your W2(day job) income and you will pay less taxes on that too. Obviously I am exaggerating slightly find a CPA (certified public accountant) that is familiar with real estate, but here are a few examples. I am not a tax professional but hopefully this gives you an idea of what sort of tax benifits you can expect. How is Insurance cost calculated? Best advice I have call a few insurance firms and ask them. You will need landlord insurance make sure you are covered if a tenant gets hurt or burns down your property. You can expect to pay 15%-20% more for landlord insurance than regular insurance (100$/month is not a bad number to just plug in when running numbers its probably high). Also your lease should require tenants to have renters insurance to help protect you. Have a liability conversation with a lawyer and think about LLCs. How is the house price increase going to act as another source of income? Appreciation can be another source of income but it is not really that useful in your scenario. It is not liquid you will not realize it until you sell the property and then you have to pay capital gains and depreciation recapture on it. There are methods to get access to the gains on the property without paying taxes. This is done by leveraging the property, you get the equity but it is not counted as capital gains since you have to pay it back a mortgage or home equity lines of credit (HELOC) are examples of this. I am not recommending these just making sure you are aware of your options. Please let me know if I am calculating anything wrong but my projection for one year is about $8.4k per house (assuming no maintenance is needed) I would say you estimated profit is on the high side. Not being involved in your market it will be a wild guess but I would expect you to realize cash-flow per house per year of closer to $7,000. Maybe even lower given your inexperience. Some Costs you need to remember to account for: Taxes, Insurance, Vacancy, Repairs, CapEx, Property Management, Utilities, Lawn Care, Snow Removal, HOA Fees. All-in-all expect 50% or your rental income to be spent on the property. If you do well you can be pleasantly surprised. |
How frequently should I request additional credit? | I don't know of a guideline to how often you can ask for an increase. You can ask as often as you like. As for consequences, refer to Is there a downside to asking for a credit increase?, where the consensus is that, aside from a possible (temporary) hard pull on your credit report, there's probably no risk to asking. Depending on your credit score/history, and especially in the current economy, you may get "no" as an answer most often. You can try talking to your card's Credit Department or even Customer Retention Department as they may have more leverage. They may say yes or no or that they need to review your account. When you do ask for an increase, I would make sure to ask if there will be a hard pull on your report, if there is any cost or downside to applying, and to make sure that this would be an increase to your current credit line, not a new account. |
How much is inflation? | To add to MrChrister's answer: Canada also has a Consumer Price Index (CPI) used to measure inflation that is distinct and separate from that maintained by the United States. There are differences in inflation between the U.S. and Canada because our currencies are different, and there may be different items in the "basket" of goods that constitutes the index. You can find current information on the Canadian CPI at Statistics Canada, here: Latest release from the Consumer Price Index. Also, the Bank of Canada – our central bank – maintains a free online Inflation Calculator. The BoC's inflation calculator is handy because you can enter a dollar amount for a past date and it will figure out what that would be in today's dollars. For instance, $100 in 1970 dollars had the same purchasing power (under the CPI) as $561.76 in 2009 dollars! And you're right – if you get a salary increase that is less than the rate of inflation, then in theory you have lost purchasing power. So, anybody really looking for a raise ought to make an effort to get more than the increase in CPI. Of course, some employers are counting on you not knowing that, because any increase that's less than CPI is effectively a salary decrease; which could mean more profit for them, if they are able to increase their prices / revenues at inflation or better. Finally, consider that salary & wage increases also contribute to inflation! Perhaps you've heard of the wage/price inflation spiral. If you haven't, there's more on that here and here. |
How long does it take for money to transfer into a mastercard? | In a nutshell, as long as they (Sparkasse) choose to. I work with banks where it happens the moment I submit the transaction (so the next screen already shows the new totals), and I work with banks that make it take 3 days. In the past, Sparkasse and Raifeissenkassen were especially famous to take a looong time ('Wir nehmen mehr als Geld und Zinsen...' - they supposedly work with the money inbetween, as it is gone from the source account but not arrived in the target account yet); that might have changed (or not). Probably Sparkasse has a statement in their fineprint on how long they make it take. I would expect one business day in today's environment, but I didn't look it up. |
Good yield vs. safer route (Checking vs. Savings) | There is no difference in safety form the perspective of the bank failing, due to FDIC/NCUA insurance. However, there is a practical issue that should be considered, if you allow payments to be automatically withdrawn from your checking account In the case of an error, all of you money may be unavailable until the error is resolved, which could be days or weeks. By having two accounts, this possibility may be reduced. It isn't a difference between checking and savings, but a benefit of having two accounts. Note that if both accounts are at the same bank, hey make take money from other accounts to cover the shortfall. That said, I've done this for years and have never had a problem. Also, I have two accounts, one at a local credit union with just enough kept in it to cover any payments, and another online account that has the rest of my savings. I can easily transfer funds between the two accounts in a couple days. |
How would bonds fare if interest rates rose? | 1. Interest rates What you should know is that the longer the "term" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest gains or losses. When a book or financial planner says to buy "bonds" with no other qualification, they almost always mean investment-grade intermediate-term bond funds (or for individual bonds, the equivalent would be a bond ladder averaging an intermediate term). If you want technical details, look at the "average duration" or "average maturity" of the bond fund; as a rough guide, if the duration is 10, then a 1% change in interest rates would be a 10% gain or loss on the fund. Another thing you can do is look at long-term (10 years or ideally longer) performance history on some short, intermediate, and long term bond index funds, and you can see how the long term funds bounced around more. Non-investment-grade bonds (aka junk bonds or high yield bonds) are more affected by factors other than interest rates, including some of the same factors (economic booms or recessions) that affect stocks. As a result, they aren't as good for diversifying a portfolio that otherwise consists of stocks. (Having stocks, investment grade bonds, and also a little bit in high-yield bonds can add diversification, though. Just don't replace your bond allocation with high-yield bonds.) A variety of "complicated" bonds exist (convertible bonds are an example) and these are tough to analyze. There are also "floating rate" bonds (bank loan funds), these have minimal interest rate sensitivity because the rate goes up to offset rate rises. These funds still have credit risks, in the credit crisis some of them lost a lot of money. 2. Diversification The purpose of diversification is risk control. Your non-bond funds will outperform in many years, but in other years (say the -37% S&P 500 drop in 2008) they may not. You will not know in advance which year you'll get. You get risk control in at least a few ways. There's also an academic Modern Portfolio Theory explanation for why you should diversify among risky assets (aka stocks), something like: for a given desired risk/return ratio, it's better to leverage up a diverse portfolio than to use a non-diverse portfolio, because risk that can be eliminated through diversification is not compensated by increased returns. The theory also goes that you should choose your diversification between risk assets and the risk-free asset according to your risk tolerance (i.e. select the highest return with tolerable risk). See http://en.wikipedia.org/wiki/Modern_portfolio_theory for excruciating detail. The translation of the MPT stuff to practical steps is typically, put as much in stock index funds as you can tolerate over your time horizon, and put the rest in (intermediate-term investment-grade) bond index funds. That's probably what your planner is asking you to do. My personal view, which is not the standard view, is that you should take as much risk as you need to take, not as much as you think you can tolerate: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ But almost everyone else will say to do the 80/20 if you have decades to retirement and feel you can tolerate the risk, so my view that 60/40 is the max desirable allocation to stocks is not mainstream. Your planner's 80/20 advice is the standard advice. Before doing 100% stocks I'd give you at least a couple cautions: See also: |
What differentiates index funds and ETFs? | I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads.. |
Escrow Removal Fee? | Assume they do not overwithhold. You pay in $500/mo, and every time it hits $3000, they pay the tax. Engineers call this a sawtooth function, it looks like this. The average balance is not $3000, but close to $1500. The very simple math is $1500 * rate * years. It looks like your equation except it's not 58, it's just the years. And the question is whether you can make more than $850 on $1500 average before you sell. I wouldn't be so quick to plug in 29 years, as the average home ownership is 7 years, and depending, who knows if a refinance is in your future? The bottom line - How long would it take you to get a 57% return (2350/1500)? Ironically, the most responsible (and risk averse) person would say "decades. Banks offer less than 1%." even an 8% market return, while not guaranteed, is close to 7 years. But, if you carry 18% credit card debt, you can pay it down a bit each month and let it float back up every 6 months. Less than 4 years to break even. |
When does giving a gift “count” for tax year? | Generally it goes by when they receive the check, not when they cash the check. Though if the check was received prior to midnight on December 31st, but after the bank closes, they would probably let the tax payer decide to count it for the next year. Of course if the check is from person A to person B then the only issue is gift tax, or annual limit calculations. If it is company to person then income tax could be involved. The IRS calls this Constructive receipt Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. If you receive property or services, you must include their fair market value in income. Example. On December 30, 2011, Mrs. Sycamore sent you a check for interior decorating services you provided to her. You received the check on January 2, 2012. You must include the amount of the check in income for 2012. Constructive receipt. You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. Example. Interest is credited to your bank account in December 2012. You do not withdraw it or enter it into your passbook until 2013. You must include it in your gross income for 2012. Delaying receipt of income. You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. You must report the income in the year the property is received or made available to you without restriction. Example. Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2012. She was told in December that her payment was available. At her request, she was not paid until January 2013. She must include this payment in her 2012 income because it was constructively received in 2012. Checks. Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. Example. Dr. Redd received a check for $500 on December 31, 2012, from a patient. She could not deposit the check in her business account until January 2, 2013. She must include this fee in her income for 2012. In general it is best not to cut it close. If the check is to be counted as an January event it is best to send it in January. If it is to be December event it is best to send it early enough to be able to say with confidence that the check arrived at the destination before the end of the year. |
Ongoing things to do and read to improve knowledge of finance? | Good luck! |
Settlement of Shares Underlying a Covered Call Option | It's a covered call. When I want to create a covered call position, I don't need to wait before the stock transaction settles. I enter it as one trade, and they settle at different times. |
Negative interest rates and search for yield | Can it be so that these low-interest rates cause investors to take greater risk to get a decent return? With interest rates being as low as they are, there is little to no risk in banking; especially after Dodd-Frank. "Risk" is just a fancy word for "Will I make money in the near/ long future." No one knows what the actual risk is (unless you can see into the future.) But there are ways to mitigate it. So, arguably, the best way to make money is the stock market, not in banking. There is a great misallocation of resources which at some point will show itself and cause tremendous losses, even maybe cause a new financial crisis? A financial crisis is backed on a believed-to-be strong investment that goes belly-up. "Tremendous Losses" is a rather grand term with no merit. Banks are not purposely keeping interest rates low to cause a financial crisis. As the central banks have kept interest rates extremely low for a decade, even negative, this affects how much we save and borrow. The biggest point here is to know one thing: bonds. Bonds affect all things from municipalities, construction, to pensions. If interest rates increased currently, the current rate of bonds would drop vastly and actually cause a financial crisis (in the U.S.) due to millions of older persons relying on bonds as sources of income. |
What is the rough estimate of salary value for a taxpayer to pay AMT? | Turbox Tax states the following: "For 2015, the AMT exemption amounts are $53,600 for individual taxpayers, $83,400 for married taxpayers filing jointly and surviving spouses, and $41,700 for married persons filing separately. This is the amount you're allowed to deduct from your taxable income before applying the AMT." |
What are some good, easy to use personal finance software? [UK] | Update: I am now using another app called toshl and I am very satisfied with it. In fact, I am a paying customer. It is web based, but it has clients for iPhone, Android and Windows Phone as well. Another one, I tried is YNAB. Did you consider trying an online app? I am using Wesabe and I am happy with it. I found it much better these web-based ones because I can access my data from anywhere. |
How does the price of oil influence the value of currency? | From an investor's standpoint, if the value of crude oil increases, economies that are oil dependent become more favourable (oil companies will be more profitable). Therefore, investors will find that country's currency more attractive in the foreign exchange market. |
Mortgage or not? | If you do as you propose you are going to get burned. You need to sell, then start to rent. amongst other things. Since 2008, the economy never "recovered," but was sort of stabilized temporarily like a fighter on the ropes. The economy is beginning to collapse again, and that collapse will accelerate around the Fall. The dollar too will also begin its delayed downward fall come Autumn. Just one example of what I speak: https://research.stlouisfed.org/fred2/series/CIVPART I would be happy to tell you more if you like, but I am already going to get pilloried for what I have already said. I do not sell anything, or push anything, but since you asked, and I follow this day in and day out, I thought that I would give you my very well informed answer. Take it for what it's worth. So let me know if you want more. |
Investment Options for 14-year old? | A Junior ISA might be one option if you are eligible do you have a CTF? (child trust fund) though the rules are changing shortly to allow those with CTF's to move to a junior ISA. JISA are yielding about 3.5% at the moment Or as you are so young you could invest in one or two of the big Generalist Investment trusts (Wittan, Lowland) - you might need an adult open this and it would be held via a trust for you. Or thinking really far ahead you could start a pension with say 50% of the lumpsum |
How to invest in stocks without using an intermediary like a broker? Can shares be bought direct? | Yes! What you are describing is an "off-exchange" trade and can be done using stock certificates. Here, you will privately negotiate with the seller on a price and delivery details. That is the old-school way to do it. Many companies (about 20% of the S&P 500) will not issue paper certificates and you may run a hefty printing fee up to $500 (source: Wikipedia, above). Other other type of private-party transactions include a deal negotiated between two parties and settled immediately or based on a future event. For example, Warren Buffet created a deal with Goldman Sachs where Warren would have the choice to purchase GS shares in the future at a certain price. This was to be settled with actual shares (rather than cash-settled). Ignoring that he later canceled this agreement, if it were to go through the transaction would still have been handled by a broker transferring the shares. You can purchase directly from a company using a direct stock purchase plan (SPP). Just pick up the phone, ask for their investor relations and then ask if they offer this option. If not, they will be glad for your interest and look into setting it up for you. |
What is the correct pronunciation of CAGR? | Most readers probably know that an acronym is an invented word made up of the initial letters or syllables of other words, like NASA or NATO. Fewer probably know that an initialism is a type of acronym that cannot be pronounced as a word, but must be read letter-by-letter, like FBI or UCLA. A quote from Daily Writing Tips. CAGR is an initialism, and should not be pronounced. |
Risks associated with investing in dividend paying stocks for short term income. Alternatives? | Your back of the envelope calculation shows an income of about 5.5% per year, which is much better than a bank. The risk of course is that in a few years when you want to sell the stock, the price may not be at the level you want. The question is what are you giving up with this plan. You have 80K in cash, will cutting it to 30K in cash make it harder for your business to survive? If your income from the business starts slowly, having that 50K in cash may be better. Selling the stock when the business is desperate for money may lock in losses. |
Why call option price increases with higher volatility | When volatility is higher, the option is more likely to end up in-the-money. Moreover, when it ends up in-the-money, it is likely to be over the strike price by a greater amount. Consider a call option. With high volatility, moves in the stock price are big - both up moves and down moves. If the stock moves up by a lot, the call option holder will benefit greatly. On the other hand, when the stock moves down, below a certain point the option holder does not care how big a down move the stock has. His downside is limited. Hence, the value of the option is increased by high volatility. I know everyone who searches this is looking for this answer. Bump so people are able to get this concept instead of looking all over the web for it. |
Where can I trade FX spot options, other than saxobank.com? | Oanda.com trades spot forex and something they call box options, it's not quite what you are looking for, but maybe worth looking up. |
What should I do with the stock from my Employee Stock Purchase Plan? | Judge this stock no differently than any other is the answer. Optimism isn't fact. http://clarkhoward.com/liveweb/shownotes/2007/06/06/12304/?printer=1 Now because you get to buy extremely low, and sell for probably higher and you believe in the stock, I'd say go ahead and purchase the stock, manage it for taxes with the advice of your advisor and get your portfolio rebalanced as soon as you can. That might admittedly be a year or more, but as you say you have time. Like any investment, don't spend money you can't lose. |
Personal credit card for business expenses | You should be careful about mingling your personal money and that of the business, even if it is a sole prop right now. It is a good habit to keep separate business and personal bank/credit accounts just so that when you change to an LLC, it is simpler for you to separate what belongs to the company and what is yours personally. What you're doing makes it more difficult (although only marginally so) to itemize business deductions that were paid with an ostensibly personal credit account. The better habit to get into now is keeping that distinct separation between personal and business. That being said, there's nothing illegal in what you're doing, but it would make an accountant cringe, that's for sure. (chuckle) Hope this helps. Good luck! |
Why index funds have different prices? | To add on to the other answers, in asking why funds have different price points one might be asking why stocks aren't normalized so a unit price of $196 in one stock can be directly compared to the same price in another stock. While this might not make sense with AAPL vs. GOOG (it would be like comparing apples to oranges, pun intended, not to mention how would two different companies ever come to such an agreement) it does seem like it would make more sense when tracking an index. And in fact less agreement between different funds would be required as some "natural" price points exist such as dividing by 100 (like some S&P funds do). However, there are a couple of reasons why two different funds might price their shares of the same underlying index differently. Demand - If there are a lot of people wanting the issue, more shares might be issued at a lower price. Or, there might be a lot of demand centered on a certain price range. Pricing - shares that are priced higher will find fewer buyers, because it makes it harder to buy round lots (100 shares at $100/share is $10,000 while at $10/share it's only $1000). While not everyone buys stock in lots, it's important if you do anything with (standardized) options on the stock because they are always acting on lots. In addition, even if you don't buy round lots a higher price makes it harder to buy in for a specific amount because each unit share has a greater chance to be further away from your target amount. Conversely, shares that are priced too low will also find fewer buyers, because some holders have minimum price requirements due to low price (e.g. penny) stocks tending to be more speculative and volatile. So, different funds tracking the same index might pick different price points to satisfy demand that is not being filled by other funds selling at a different price point. |
Are long-term bonds risky assets? | In the quoted passage, the bonds are "risky" because you CAN lose money. Money markets can be insured by the FDIC, and thus are without risk in many instances. In general, there are a few categories of risks that affect bonds. These include: The most obvious general risk with long-term bonds versus short-term bonds today is that rates are historically low. |
Equity As Part of Compensation | At the most basic level, the employee is getting a share of ownership in the company and would get a percentage of the sales price. That said, as littleadv alluded to, different share classes have different priorities and get paid in different orders. In a bankruptcy, for example, some classes almost never get paid in practice because they are so far down the ladder of priority. The first step you should take would be to try to clarify what you are getting with the company itself. Failing that, contact a financial professional or an attorney in your area who can read the terms and give you a better understanding of the contract before you sign. |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | The main factor should be what sorts of emergencies you are trying and also need to protect yourself against. Overall I'd say at least 6-9 months of expenses, adjusted for the above factors. More might be better but I'd probably keep that in a different type of investment vehicle, mainly because it doesn't really need to be accessible instantaneously like your normal emergency fund would need to be. |
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