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Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan? | Loans do not carry an "interest balance". You can not pay off "all the interest". The only way to reduce the interest to zero is to pay off the loan. Otherwise, the interest due each month is some percentage of the outstanding principal. Think of it from the bank's perspective: they've invested some amount of money in you, and they expect a return on that investment in the form of interest. If you somehow paid in 16 years all the interest the bank expected to receive in 30 years, you've been scammed. |
How to start personal finances? | I'm assuming you're in Germany or Europe based on your question, but here's an American's perspective that should pertain you you as well: Once you have a steady income and an emergency fund large enough to keep you from going bankrupt, then start learning about retirement and investment options. |
Can I contribute to an IRA from investment income? | Your contributions must come from "compensation". Quoting IRS Publication 590 on IRAs, "Generally, compensation is what you earn from working." So it is unlikely that your stock sale proceeds, if they're your sole source of income, can be used to fund your IRA. If you do have W-2 income, or self employment income, you can use the proceeds of a stock sale to fund an IRA. The IRS doesn't care where the exact dollars that go into the IRA come from, only that you earned (from working) at least as much as you contributed. |
OTC Stocks - HUGE gains? | Changing my answer based on clarification in comments. It appears that some of the securities you mentioned, including GEAPP, are traded on what is colloquially known as the Grey Market. Grey Sheets, and also known as the "Gray Market" is another category of OTC stocks that is completely separate from Pink Sheets and the OTCBB. From investopedia The grey market is an over-the-counter market where dealers may execute orders for preferred customers as well as provide support for a new issue before it is actually issued. This activity allows underwriters and the issuer to determine demand and price the securities accordingly before the IPO. Some additional information on this type of stocks. (Source) Unlike other financial markets... No recent bid or ask quotes are available because no market makers share data or quote such stocks. There is no quoting system available to record and settle trades. All Grey sheet trading is moderated by a broker and done between consenting individuals at a price they agree on. The only documentation that can be publicly found regarding the trades is when the last trade took place. No SEC registration and little SEC regulation. Regulation of Grey Sheet stocks takes place mainly on a state level. Unlike Pink Sheets, these stocks have no SEC registration to possess a stock symbol or to possess shares or trade shares of that stock. Such penny stocks, similar to Pink Sheets, are not required to file SEC (Securities and Exchange Commission) financial and business reports. These stocks may not be solicited or advertised to the public unless a certain number of shares are qualified to be traded publicly under 504 of Regulation D. Extremely Illiquid. Gray sheet trading is infrequent, and for good reason... Difficult to trade, not advertised, difficult to follow the price, the least regulation possible, hard to find any information on the stock, very small market cap, little history, and most such stocks do not yet offer public shares. The lack of information (bids, history, financial reports) alone causes most investors to be very skeptical of Gray Sheets and avoid them altogether. Gray Sheets are commonly associated with Initial public offering (IPO) stocks or start up companies or spin-off companies, even though not all are IPO's, start-ups or spin-offs. Grey Sheets is also Home to delisted stocks from other markets. Some stocks on this financial market were once traded on the NASDAQ, OTCBB, or the Pink Sheets but ran into serious misfortune - usually financial - and thus failed to meet the minimum requirements of the registered SEC filings and/or stock exchange regulations for a financial market. Such stocks were delisted or removed and may begin trading on the Grey Sheets. So to answer your question, I think the cause of the wild swings is that: Great question, BTW. |
In double entry book-keeping, how should I record writing of a check? | I'm no accounting expert, but I've never heard of anyone using a separate account to track outstanding checks. Instead, the software I use (GnuCash) uses a "reconciled" flag on each transaction. This has 3 states: n: new transaction (the bank doesn't know about it yet), c: cleared transaction (the bank deducted the money), and y: reconciled transaction (the transaction has appeared on a bank statement). The account status line includes a Cleared balance (which should be how much is in your bank account right now), a Reconciled balance (which is how much your last bank statement said you had), and a Present balance (which is how much you'll have after your outstanding checks clear). I believe most accounting packages have a similar feature. |
Can I rely on my home equity to finance large home repairs? | Personally, I'd use my emergency fund first. It is unlikely (though possible, of course) that I will entirely lose my income at the same time I need to replace my roof or my furnace. I'd rather pay my emergency fund back with installment payments than pay off a HELOC to my bank. The lost interest on my emergency fund, which, after all, should be in cash, is much less than the cost of the loan. I could even set up an amortization schedule in a spreadsheet and charge myself interest when paying back into the emergency fund. That said, if I didn't have the cash in my emergency fund, I'd rather borrow against the house than finance with a contractor. If they'd even do that, which is unlikely--I've never dealt with a roofer or heating contractor that required anything but full payment at time of service. Home equity borrowing is generally the cheapest kind. I'm firmly in the camp of those who look at home ownership as a consumption decision rather than an investment. If the value goes up, great, but I just build in about 1% of the cost of building a new house (excluding the land price) into the housing budget each year, right along with mortgage interest, property taxes and basic utilities. Usually, that's enough to cover the major wear-and-tear related repairs (averaged over 3-5 year periods, anyway). |
Is there any reason not to put a 35% down payment on a car? | If you are going to finance a used car, it is frequently best to arrange financing before you even pick out the car. The easiest way I recommend is to talk to a local credit union or two. They'll be able to tell you your interest rate and terms without having to talk to the dealer at all. Most likely, they'll be significantly better than the dealer at getting a good interest rate. As far "what is a good rate?", check out bankrate for average loan rates: http://www.bankrate.com/auto.aspx Today's numbers look like 2.87% is the average for a 48-month used car loan. That means if the bank comes back with something ridiculous like 9% or 10% you know they are way overcharging you. I know someone who got a first-time-buyer rate from Ford and ended up with a 19.99% rate. I could literally buy the car on my credit card and end up in a better spot. Honestly though, if you are 18 and have $5500 to put towards a car, I'd buy a $4500 car and save $1000 for repairs and maintenance. After you have the car, put $250 every month for a "car payment" into a savings account for your next car. |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | I've used PayPal for my business for a long time. Sometimes PayPal doesn't trust credit cards. Debit or direct bank transfer are reliable. There is also a charge for using a credit card but I don't think that is the reason. You may be trying to purchase a high value item. That would be a possible reason why PayPal allowed you to use credit cards in the past, but will not allow you to do so now, for these particular transactions. |
How can I set up a recurring payment to an individual (avoiding fees)? | I think about as close as you're going to get is to use a personal PayPal account, and set up a reminder to yourself to log in and send the money. (Because, as you said, setting up a recurring payment is a business account thing.) From PayPal's website: Sending money – Personal payments: It's free within the U.S. to send money to family and friends when you use only your PayPal balance or bank account, or a combination of their PayPal balance and bank account. ... Receiving money – Personal payments: It's free to receive money from friends or family in the U.S. when they send the money from the PayPal website using only their PayPal balance or their bank account, or a combination of their PayPal balance and bank account. You can automate the reminder to yourself with any of the gazillion task managers out there: Google Calendar, MS Outlook, Todoist, Remember the Milk, etc. |
Canceling credit cards - insurance rate increase? | Your credit score can be part of the algorithm for setting your rates for auto insurance. It is one of many factors including sex, age, zip code, driving record, type of car... There are some states that are concerned about using credit scores, some sates have passed legislation regarding this issue |
Why is the stock market price for a share always higher than the earnings per share? | Think about the implications if the world worked as your question implies that it "should": A $15 share of stock would return you (at least) $15 after 3 months, plus another $15 after 6 months, plus another after 9 and 12 months. This would have returned to you $60 over the year that you owned it (plus you still own the share). Only then would the stock be worth buying? Anything less than $60 would be too little to be worth bothering about for $15? Such a thing would indeed be worth buying, but you won't find golden-egg laying stocks like that on the stock market. Why? Because other people would outbid your measly $15 in order to get this $60-a-year producing stock (in fact, they would bid many hundreds of dollars). Since other people bid more, you can't find such a deal available. (Of course, there are the points others have brought up: the earnings per share are yearly, not quarterly, unless otherwise noted. The earnings may not be sent to you at all, or only a small part, but you would gain much of their value because the company should be worth about that much more by keeping the earnings.) |
How can I determine how much my car insurance will cost me? | The best way to determine how much it will cost you is to call the insurance companies to get a quote from them for all the vehicles that you are planning on purchasing. They will have a set amount depending on the year/make/model of the car combined with all your personal details like where you live, age, sex, occupation. There are many online sites where you an get quotes as well, though talking with a rep may be the better option since you have a lot of questions. If you are still living with your parents, you may be able to get a cheaper rate with that company as you might qualify for a multi-vehicle discount or combined property/vehicle insurance with them. You might also be able to get a better rate since you were probably insured as a secondary driver with that company for several years. The cost of your auto insurance will depend also on what type of premium you choose. For instance, it will be cheaper if you opt to only purchase 3rd party liability insurance (which only covers the cost of repairing the 3rd party's vehicle - ie the person you hit). You may also get discounts for having certain (optional) safety equipment/options - like snow tires. You will need to have your insurance purchased and sorted out before you are able to drive your car out of the dealership. For a male with ~10 years driving experience and a clean record. You could probably find something good for about $120 a month. Of course, this depends on the many factors listed above. |
How much money should I lock up in my savings account? | One issue which I don't see addressed in the answers so far is how to structure bank accounts to get the highest return possible. What you're describing sounds like a certificate of deposit (CD): 'ranging from 1% for 9 months to 2.3% for 5 years' There is a concept which was once more common called a CD Ladder, which still allows you to access your money, while also giving you the highest interest rate offered by the bank. To set one up you divide your account into 5 equal parts, then open 5 CDs with different periods (1-5 years). Each time a new CD matures (once a year), you purchase another 5 year CD with those funds, plus any new money you want to save. Thus you're getting a higher and higher rate, until all of your accounts are earning the 5 year CD rate, and you're never more than a year away from getting money out of the account if a need comes up. |
Can a company donate to a non-profit to pay for services arranged for before hand? | People put conditions on donations all the time. They donate to the Red Cross for a specific disaster. The donate money to a church for the building fund. They donate money to a hospital to buy a new x-ray machine. They donate money to the scouts for a new dining hall. It is possible to donate money to a non-profit for a specific purpose. If the non-profit doesn't want to accept the money with those strings they can refuse. Generally these specific projects are initiated by the non-profit. But there is no requirement that the idea originate with the non-profit. It is also up to the non-profit and their legal advisers regarding how strictly they view those strings. If you donate money for web design and they don't spend it all, can they pay net years hosting bill with the money, or must they hold it for a few years for when they need a designer again? If the company wants to provide the service, they can structure the project to pay their employees for their time. They pay employees for $100 of labor while deigning the website. The pay and benefits reduce profit thus lowering taxes. Donating money to the non-profit to be given back to the company doesn't seem to be the best way to structure transaction. At best it is a wash. Donating money to a charity and then directing exactly which contractor will perform the service starts to look like money laundering, and most charities will get wary. |
Why is economic growth so important? | Wealth is not distributed equally in any economy. And, even if it were, differentiation between people would lead to different interests being expressed in different ways. As people either attempt to earn more (to improve their situation) or different people express those interests in different ways (saving money to go on a skiing holiday, or to put a downpayment on a house) people invite new products and services to be created to satisfy those demands. In addition, there is the problem of uncertainty. People save money today to cope with uncertainty tomorrow (healthcare, pensions, education, etc.). Those savings don't remain idle, but are lent to others who believe that they can make a return through investing in new businesses or ideas. The point being that any dynamic economy will experience change in the amount of goods available to the people within that economy. From an economic perspective "growth" is just another permutation. From a political perspective, "growth" implies that people are getting wealthier. If that growth is asymmetrically distributed (e.g. the poor don't experience it and the middle classes don't feel they get enough of it) then that is a problem for politicians. The emerging markets of the world are trying to raise millions of people out of poverty. Growth is a way of measuring how quickly they are achieving that end. Growth, in and of itself, is meaningless. There are some people who believe that "we" (as some proxy of society) have enough stuff and growth is unnecessary but that implies that everyone is satisfied. For as long as some people wish to have more wealth/stuff, and have the means to achieve this, there will be growth. And for as long as there is uncertainty growth will vary. |
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's the catch in investing in real estate for rent? | There are those who are knowledgable in real estate who offer rules of thumb: Don't pay more that 50X the rent for the house. Here, $972 x 50 is $48600. Assume half the rent goes to expenses. So from $972, you net $486, and after that mortgage, you have $111 in profit. Zillow usually assumes 20% down, here $20K. So you are seeing a 6.67% return on your 20K. (Plus appreciation and principal paydown.) For the record, I just bought a 3 family, under renovation now. Expecting total cost to be $160K, and total rent $2500. I missed ratio a by a bit, but $1250 to go toward a $120K mortgage works out fine. $550 profit/mo on the 25% down ($40K). (By the way, a turnover of tenants can cost (a) a month of no rent, (b) a cost to the real estate agent, if you use one, and the cost to paint/repair. This is generally considered 10%. So if the 50% of rent seemed high, here's 10 of it.) |
Unmarried couple buying home, what are the options in our case? | Personally I would advise only buying what you can afford without borrowing money, even if it means living in a tent. Financially, that is the best move. If you are determined to borrow money to buy a house, the person with income should buy it as sole owner. Split ownership will create a nightmare if any problems develop in the relationship. Split ownership has the advantage that it doubles the tax-free appreciation deduction from $250,000 to $500,000, but in your case my sense is that that is not a sufficient reason to risk dual ownership. Do not charge your "partner" rent. That is crazy. |
Swiss-style Monetary Policy | I'm not sure what is traditionally meant by "Swiss-style monetary policy" but lately it has meant the same thing as US monetary policy, or Japanese monetary policy, or Euro monetary policy: PRINT. Look how many Swiss Francs it takes to buy a currency that cannot be printed: I'm not sure why they would be touting "Swiss-style monetary policy". That hasn't been too stellar lately. |
Different ways of looking at P/E Ratio vs EPS | You could not have two stocks both at $40, both with P/E 2, but one an EPS of $5 and the other $10. EPS = Earnings Per Share P/E = Price per share/Earnings Per Share So, in your example, the stock with EPS of $5 has a P/E of 8, and the stock with an EPS of $10 has a P/E of 4. So no, it's not valid way of looking at things, because your understanding of EPS and P/E is incorrect. Update: Ok, with that fixed, I think I understand your question better. This isn't a valid way of looking at P/E. You nailed one problem yourself at the end of the post: The tricky part is that you have to assume certain values remain constant, I suppose But besides that, it still doesn't work. It seems to make sense in the context of investor psychology: if a stock is "supposed to" trade at a low P/E, like a utility, that it would stay at that low P/E, and thus a $1 worth of EPS increase would result in lower $$ price increase than a stock that was "supposed to" have a high P/E. And that would be true. But let's game it out: Scenario Say you have two stocks, ABC and XYZ. Both have $5 EPS. ABC is a utility, so it has a low P/E of 5, and thus trades at $25/share. XYZ is a high flying tech company, so it has a P/E of 10, thus trading at $50/share. If both companies increase their EPS by $1, to $6, and the P/Es remain the same, that means company ABC rises to $30, and company XYZ rises to $60. Hey! One went up $5, and the other $10, twice as much! That means XYZ was the better investment, right? Nope. You see, shares are not tokens, and you don't get an identical, arbitrary number of them. You make an investment, and that's in dollars. So, say you'd invested $1,000 in each. $1,000 in ABC buys you 40 shares. $1,000 in XYZ buys you 20 shares. Their EPS adds that buck, the shares rise to maintain P/E, and you have: ABC: $6 EPS at P/E 5 = $30/share. Position value = 40 shares x $30/share = $1,200 XYZ: $6 EPS at P/E 10 = $60/share. Position value = 20 shares x $60/share = $1,200 They both make you the exact same 20% profit. It makes sense when you think about it this way: a 20% increase in EPS is going to give you a 20% increase in price if the P/E is to remain constant. It doesn't matter what the dollar amount of the EPS or the share price is. |
In 2015, why has the price of natural gas been plummeting? | You do not hold leveraged ETF for longer than a few days. You have UGAZ and DGAZ, both 3x leveraged, one longs one shorts. What happens if you buy both? You don't get 0% return. In fact, you get -10% return if you hold both for 3 months. No matter what happens, they both go down in long term. Call it Leverage Decay, Beta Slippage, Contango, Rollover, etc. If you want to gamble that NG goes up within 3 days, go ahead. Just be prepared for the worst cases like losing 15% in 3 days. If you want to speculate the NG will recover in a year, buy Natural Gas industry ETF http://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=FCG |
Why do shareholders participate in shorting stocks? | One thing no one else has touched on is the issue of time frame. If I'm looking to hold my shares over the next few years, I don't mind riding out a few short-term bumps, while the short-seller is looking to make a quick profit on some bad news. Sure, I could sell and rebuy, but that's a lot of hassle, not to mention commissions and tax issues. |
In US, is it a good idea to hire a tax consultant for doing taxes? | Good professional tax advice is expensive. If your situation is simple, then paying someone doesn't give you more than you could get from a simple software package. In this case, doing your own taxes will save you money this year, and also help you next year, as your situation grows steadily more complex. If you don't do your own taxes when you're single with a part time job, you'll never do it when you have a family, a full time job, a side business, and many deductions. Learning how to do your taxes over time, as your 'tax life' becomes complex, is a valuable skill. If your situation is complex, you will need pay a lot to get it done correctly. Sometimes, that cost is worthwhile. At bare minimum, I would say 'attempt to do your taxes yourself, first'. This will force you to organize your files, making the administrative cost of doing your return lower (ie: you aren't paying your tax firm to sort your receipts, because you've already ordered them nicely with your own subtotals, everything perfectly stapled together). If your situation is complex, and you find a place to get it done cheaply (think H&R Block), you will not be getting value for service. I am not saying a low-end tax firm will necessarily get things wrong, but if you don't have a qualified professional (read: university educated and designated) doing your return, the complexities can be ignored. Low-end tax firms typically hire seasonal staff, train them for 1-2 weeks, and mostly just show them how to enter tax slips into the same software you could buy yourself. If you underpay for professional services, you will pay the price, metaphorically speaking. For your specific situation, I strongly recommend you have a professional service look at your returns, because you are a non-resident, meaning you likely need to file in your home country as well. Follow what they do with your return, and next year, see how much of it you can do yourself. Before you hire someone, get a fee quote, and shop around until you find someone you are comfortable with. $1k spent now could save you many headaches in the future. |
15 year mortgage vs 30 year paid off in 15 | Yes. It does cost the same to pay off a "15 year in 15" year versus a "30 year in 15 year" mortgage. After all, the 30 year amortization period is only used by the lender to calculate the monthly payment he'll expect, while, unbeknownst to him, you are using a 15 year amortization and the same rate to calculate the payments you'll really make. One factor: Can you make extra payments at the level you want, without incurring penalties from the lender? Most mortgages have prepayment limits. After all. he's seeing his nice steady 30 years of cash flow suddenly shortened. He has to go out and find someone else to lend the unexpected payments to... EDIT: Closed mortgages, with pre-payment charges are the norm here in Canada; open mortgages predominate in the US http://www.cmhc-schl.gc.ca/en/corp/nero/jufa/jufa_018.cfm |
Do credit checks affect credit scores? | There are two types of credit checks. First is the hard pull which is typically done when you apply for a credit line. The lender will hard pull your file and make his/her decision based on that. This affects your score negatively. You might lose few points for one hard inquiry. Second type is soft pull, which is done as a background check. Typically done by credit card companies to send you a pre-approved offer, or renting an apartment etc. This does not affect your score. One thing to keep in mind is a company will not do a hard pull without your permission, where as they can do soft pulls without you even knowing. Soft inquiries vs hard inquiries |
What would I miss out on by self insuring my car? | Insurance is to mitigate risk you can't handle yourself. (All insurance, not just car insurance.) The expected value of the insurance will always cost more than the expected value of your loss, that's how the insurance company makes money. But sometimes the known fixed cost is better for your ability to sleep at night than the unknown (though likely lower) variable cost. If you were suddenly hit with a bill the size of your car tomorrow, would you be ok? If so, then you can handle the risk yourself and don't need insurance. If not, then you need the insurance. The insurance company sells thousands of policies and it's much easier to predict the number out of 1000 people that will get in an accident tomorrow than the chance that you specifically will get in an accident tomorrow. So they can manage the risk by making a small amount of money from 999/1000 people and buying the other guy a new car. |
Computer vendor not honoring warranty. What's the next step? | You're probably best off going to a different store to fix the computer. Right now you don't have "damages." You could sue him but, there's no thing to sue for. If you sue for your original costs, you'd have to return the computer and probably only receive a portion of your original costs, less court filing fees. If you have someone else fix your computer you can sue him for the cost to fix your computer. You'll take him to small claims court, win or lose you probably won't get anything from him. If you win, you'll have a piece of paper (judgement) that says, "Yep, that guy owes you money" if you lose you won't even have that. You could report him to the BBB or some other business agency but that doesn't help you fix the computer. |
Does keeping 'long-term' safety net in bonds make sense? | I am understanding the OP to mean that this is for an emergency fund savings account meant to cover 3 to 6 months of living expenses, not a 3-6 month investment horizon. Assuming this is the case, I would recommend keeping these funds in a Money Market account and not in an investment-grade bond fund for three reasons: |
How exactly could we rank or value how “rich” a company brand is? | Those rankings in particular that you cite are compiled by Millward Brown and the methodology is explained like this: |
If the co-signer on my car loan dies, can the family take the car from me like they're threatening to? | Possession is 9/10 of the law, and any agreement between you and your grandfather is covered under the uniform commercial code covering contracts. As long as your fulfilling your obligation of making payments, the contract stands as originally agreed upon between you and the lender. In short, the car is yours until you miss payments, sell it, or it gets totalled. The fact that your upside down on value to debt isn't that big of a deal as long as you have insurance that is covering what is owed. |
What is the correct answer for percent change when the start amount is zero dollars $0? | As has been said before, going from nothing to something is an infinite percent increase! It is not 100%. Maybe you had a dollar and now have $101 that is a 10000% increase! Quite remarkable. I often work with symmetrized percent changes like: spc = 100 * (y2-y1)/(0.5 * (y1+y2)) Where I compute the percent with respect to the average. First this is more stable as often measurements can have noise, the average is more reliable. Second advantage is also that this is symmetric. So going from 95 to 105 is a 10 % increase while going from 105 to 95 a 10% decrease. Of course you need to explain what you show. |
Should I cash out my Roth IRA to pay my mother's property tax debt, to avoid foreclosure on her home? | @foreverBroke - Ok, here are the questions - Is mom's house paid for in full? If there's any mortgage, is it current? If not, what are the numbers? Is it underwater, i.e. owe more that it's worth? Will the tax department talk to you and negotiate? Maybe let you make payments over time? If you have that kind of cash flow, the slower payment may keep you from killing your savings. We don't know your age. I do know that the early years savings, often around the first 8-12 years, are the funds that turn into half your final retirement savings due to compounding. Obviously, this a tough time emotionally, what I don't want is for you to make a financial move that is a temporary fix. Not knowing the rest of the story limits my answer. If my mom needed my help I'd want to understand the whole picture. Not that I'm a fan, but have you considered a reverse mortgage? It may be a way to keep the house but give up the equity, or some of it, on her moving out or passing. |
Why would a stock opening price differ from the offering price? | The offering price is what the company will raise by selling the shares at that price. However, this isn't usually what the general public sees as often there will be shows to drive up demand so that there will be buyers for the stock. That demand is what you see on the first day when the general public can start buying the stock. If one is an employee, relative or friend of someone that is offered, "Friends and Family" shares they may be able to buy at the offering price. Pricing of IPO from Wikipedia states around the idea of pricing: A company planning an IPO typically appoints a lead manager, known as a bookrunner, to help it arrive at an appropriate price at which the shares should be issued. There are two primary ways in which the price of an IPO can be determined. Either the company, with the help of its lead managers, fixes a price ("fixed price method"), or the price can be determined through analysis of confidential investor demand data compiled by the bookrunner ("book building"). Historically, some IPOs both globally and in the United States have been underpriced. The effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first becomes publicly traded. Flipping, or quickly selling shares for a profit, can lead to significant gains for investors who have been allocated shares of the IPO at the offering price. However, underpricing an IPO results in lost potential capital for the issuer. One extreme example is theglobe.com IPO which helped fuel the IPO "mania" of the late 90's internet era. Underwritten by Bear Stearns on November 13, 1998, the IPO was priced at $9 per share. The share price quickly increased 1000% after the opening of trading, to a high of $97. Selling pressure from institutional flipping eventually drove the stock back down, and it closed the day at $63. Although the company did raise about $30 million from the offering it is estimated that with the level of demand for the offering and the volume of trading that took place the company might have left upwards of $200 million on the table. The danger of overpricing is also an important consideration. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting their commitments to sell shares. Even if they sell all of the issued shares, the stock may fall in value on the first day of trading. If so, the stock may lose its marketability and hence even more of its value. This could result in losses for investors, many of whom being the most favored clients of the underwriters. Perhaps the best known example of this is the Facebook IPO in 2012. Underwriters, therefore, take many factors into consideration when pricing an IPO, and attempt to reach an offering price that is low enough to stimulate interest in the stock, but high enough to raise an adequate amount of capital for the company. The process of determining an optimal price usually involves the underwriters ("syndicate") arranging share purchase commitments from leading institutional investors. Some researchers (e.g. Geoffrey C., and C. Swift, 2009) believe that the underpricing of IPOs is less a deliberate act on the part of issuers and/or underwriters, than the result of an over-reaction on the part of investors (Friesen & Swift, 2009). One potential method for determining underpricing is through the use of IPO Underpricing Algorithms. This may be useful for seeing the difference in that "theglobe.com" example where the offering price is $9/share yet the stock traded much higher than that initially. |
Buy car vs lease vs long term rent for 10 years period | If you plan to keep this asset for ten years then you can take the deprecation of its cost over that time period. For simplicity lets treat that as 120 monthly payments. So at a purchase price of $60,000 you are committing around $500 per month not including vehicle maintenance. I typically allocate around 20 percent of the purchase price of my vehicles for future maintenance costs. Since you have the cash to purchase this outright you have an option not afforded to most people. This adds for additional consideration. Here is an example. You purchase a $60,000 car and put $10,000 down. You finance $50,000 at 2.84% over 60 months. Your total finance cost is $53,693 if you do not miss any payments. The question here is can you make more than $3,693 on the $50,000 that you would retain in this situation over a five year period? I know that I most certainly can and is an excellent example of why I finance my vehicles. Obviously this all goes out the window if you do not have the credit for top rates. I have also negotiated a vehicle maintenance plan with the dealership at the time of my vehicle purchases. Most dealerships offer this service, the key here is negotiating. On my last truck I was able to get an all inclusive maintenance policy for 72 months for 8% of the purchase price. Your mileage will vary with manufacturer and dealership. As described in the comments above it is never beneficial for an individual to lease. You end up paying more for the newer models. I consider that to be a lifestyle choice as it is most certainly not a sound financial decision. |
Investment Newbie - Options in India - For $10K - for 10 years | I would suggest you to put your money in an FD for a year, and as soon as you get paid the interest, start investing that interest in a SIP(Systematic investment plan). This is your safest option but it will not give you a lot of returns. But I can guarantee that you will not lose your capital(Unless the economy fails as a whole, which is unlikely). For example: - you have 500000 rupees. If you put it in a fixed deposit for 1 year, you earn 46500 in interest(At 9% compounded quarterly). With this interest you can invest Rs.3875(46500/12) every month in an SIP for 12 months and also renew your FD, so that you can keep earning that interest.So at the end of 10 years, you will have 5 lacs in your FD and Rs. 4,18,500 in your SIP(Good funds usually make 13-16 % a year). Assuming your fund gives you 14%, you make: - 1.) 46500 at 14% for 9 years - 1,51,215 2.)8 years - 1,32,645 3.) 7 years - 1,16,355 4.) 6 years - 1,02,066 5.) 5 years - 89,531 6.) 4 years - 78,536 7.) 3 years - 68891 8.) 2 years 60,431 9.) 1 year - 53010 Total Maturity Value on SIP = Rs, 8,52,680 Principal on FD = Rs 5,00,000 Interest earned on 10th year = Rs. 46,500 Total = Rs. 13,99,180(14 lacs). Please note: - Interest rates and rate of return on funds may vary. This figure can only be assumed if these rates stay the same.:). Cheers! |
Are you preparing for a possible dollar (USD) collapse? (How?) | I recently finished reading a book that you may be interested in based on your question, The Ultimate Suburban Survivalist Guide. The author begins with a discussion of why he thinks the US economy and currency could collapse. It gets a little scary. Then he goes into great detail on commodities, specifically gold. The rest of the book is about what you can be doing to prepare yourself and your family to be more self sufficient. To answer your question, I do anticipate problems with US currency in the future and plan to put some money in gold if the price dips. |
Explanation on Warren Buffett's famous quote | I think he was trying to say that in the long term the company's fundamental intrinsic value will drive the price of a company's stock, but in the short term stocks move on emotion and publicity that are not necessarily a reflection of their true underlying value. |
What does an x% inflation rate actually mean? | Inflation is an attempt to measure how much less money is worth. It is a weighted average of some bundle of goods and services price's increase. Money's value is in what you can exchange it for, so higher prices means money is worth less. Monthly inflation is quoted either as "a year, ending on that month" or "since the previous month". As the values differ by more than a factor of 10, you can usually tell which one is being referred to when they say "inflation in August was 0.4%, a record high" or "inflation in August was 3.6%". You do need some context of the state of the economy, and how surprised the people talking about the numbers are. Sometimes they refer to inflation since the last month, and then annualize it, which adds to the confusion. "Consumer Inflation"'s value depends on what the basket of goods is, and what you define as the same "good". Is a computer this year the same as the last? If the computer is 10x faster, do you ignore that, or factor it in? What basket do you use? The typical monthly consumables purchased by a middle class citizen? By a poor citizen? By a rich citizen? A mixture, and if so which mixture? More detailed inflation figures can focus on inflation facing each quntile of the population by household income, split durable goods from non-durable goods from services, split wage from non-wage inflation, ignore volatile things like food and energy, etc. Inflation doesn't directly cause prices to raise; instead it is a measure of how much raise in prices happened. It can easily be a self-fullfilling prophesy, as inflation expectations can lead to everyone automatically increasing the price they charge for everything (wages, goods, etc). Inflation can be viewed as a measurement of the "cost of holding cash". At 10% inflation per year, holding a million dollars in cash for a year costs you 100,000$ in buying power. At 1% inflation it costs 10,000$. At 0.1% inflation, 1000$. Inflation of 10% in one year, followed by 10% the next, adds up to 1.1*1.1-1 = 21% inflation over the two years. For low inflation numbers this acts a lot like adding; the further from 0% you get the more the lower-order terms make the result larger. 1% inflation for two years adds up to 2.01%, 10% over two years 21%, 100% over two years 300%, 1000% over two years 12000%, etc. (and yes, some places suffer 1000% inflation) |
How to find a good third-party, 401k management/advice service? | Another option to a human advisor is FutureAdvisor, a web service that (if it supports your 401k plan) gives personalized algorithmic advice on what you should hold in your 401(k) and other retirement accounts. If it doesn't support your 401(k) plan just yet you can sign up to be emailed when your plan is added. [Disclosure: I work here, but I believe in the product and it's designed to solve this exact problem so I'm mentioning it here] Note from JoeTaxpayer - bolu's disclosure is much appreciated. The fee is $39/yr, with a free trial. Consider that a commissions based advisor won't even take on a $10K level account, and at $100K, you'd be hard pressed to gain by more than his 1% fee. So while I've not dug deeper into this site, a rules-based methodology is likely to be worth the cost if over time it gains you even a fraction of a percent compared to what you'd have done blindly. |
How should I save money if the real interest rate (after inflation) is negative? | (Real) interest rates are so low because governments want people to use their money to improve the economy by spending or investing rather than saving. Their idea is that by consuming or investing you will help to create jobs that will employ people who will spend or invest their pay, and so on. If you want to keep this money for the future you don't want to spend it and interest rates make saving unrewarding therefore you ought to invest. That was the why, now the how. Inflation protected securities, mentioned in another answer, are the least risk way to do this. These are government guaranteed and very unlikely to default. On the other hand deflation will cause bigger problems for you and the returns will be pitiful compared with historical interest rates. So what else can be done? Investing in companies is one way of improving returns but risk starts to increase so you need to decide what risk profile is right for you. Investing in companies does not mean having to put money into the stock market either directly or indirectly (through funds) although index tracker funds have good returns and low risk. The corporate bond market is lower risk for a lesser reward than the stock market but with better returns than current interest rates. Investment grade bonds are very low risk, especially in the current economic climate and there are exchange traded funds (ETFs) to diversify more risk away. Since you don't mention willingness to take risk or the kind of amounts that you have to save I've tried to give some low risk options beyond "buy something inflation linked" but you need to take care to understand the risks of any product you buy or use, be they a bank account, TIPS, bond investments or whatever. Avoid anything that you don't fully understand. |
To use a line of credit or withdraw from savings | No one can really answer this for you. It is a matter of personal preference and the details of your situation. There are some really smart people on here, when placed in your exact situation, would do completely different things. Personal finance is overall, personal. If it was me, I'd never borrow money in retirement. If I had the cash, I'd use it to help fund the purchase. If I didn't, I simply wouldn't. For me wealth retention (in your case) is surprisingly more about behavior than math (even though I am a math guy). You are simply creating a great deal of risk at a season in your life with a diminished ability to recover from negative events. In my opinion you are inviting "tales of woe" to be part of your future if you borrow. Others would disagree with me. They would point to the math and show how you would be much better off on borrowing instead of pulling out of investments provided a sufficient return on your nest egg. They may even have a case as you might have to pay taxes on money pulled out magnifying the difference in net income on borrowing versus pulling out in a lump sum. Here in the US, the money you pulled out would be taxed at the highest marginal rate. To help with a down payment of 50K, you might have to pull out 66,500 to pay the taxes and have enough for the down payment. The third option is to not help with a down payment or to help them in a different way. Perhaps giving them a few hundred per month for two years to help with their mortgage payment. Maybe watch their kids some to reduce day care costs or help with home improvements so they can buy a lower price home. Those are all viable options. Perhaps the child is not ready to buy a home. Having said all that it really depends on your situation. Say your sitting on 5 million in investments, your pensions is sufficient to have some disposable income, and they are asking for a relatively small amount. Then pull the money out and don't be concerned. You nest egg will quickly recover the money. |
How to calculate car insurance quote | Former software developer at an insurance company here (not State Farm though). All of the above answers are accurate and address how the business analysts come up with factors on which to rate your quote. I wanted to chime in on the software side here; specifically, what goes into actually crunching those numbers to produce an end result. In my experience, business analysts provide the site developers with a spreadsheet of base rates and factors, which get imported into a database. When you calculate a quote, the site starts by taking your data, and finding the appropriate base rate to start with (usually based on vehicle type, quote type (personal/commercial/etc.) and garaging zip code for the US). The appropriate factors are then also pulled, and are typically either multiplicative or additive relative to the base rate. The most 'creative' operation I've seen other than add/multiply was a linear interpolation to get some kind of gradient value, usually based on the amount of coverage you selected. At this point, you could have upwards of twenty rating factors affecting your base rate: marriage status, MVR reports, SR-22; basically, anything you might've filled into your application. In the case of MVR reports specifically, we'd usually verify your input against an MVR providing service to check that you didn't omit any violations, but we wouldn't penalize for lying about it...we didn't get that creative :) Then we'd apply any fees and discounts before spitting out the final number. With all that said, these algorithms that companies apply to calculate quotes are confidential as far as I'm aware, insofar as they don't publish those steps anywhere for the public to access. The type of algorithm used could even vary based on the state you live in, or really just when the site code is arbitrarily updated to use a new rating system. Underwriters and agents might have access to company-specific rating tables, so they might have more insight at the company level. In short, if there's an equation out there being used to calculate your rate, it's probably a huge string of multiplications with some base rate additions and linear interpolations peppered in, based on factors (and base rates) that aren't readily publicized. Your best bet is to not go through the site at all and talk to a State Farm agent about agency-specific practices if you're really curious about the numbers. |
Should I buy out my brother on a property we will inherit before making improvements? | In the end you, your dad, and your brother should come to an agreement so there's no surprises or unfulfilled expectations, but here's my opinion: If you can afford to make the additions now: I would offer to pay fully for the addition, with the understanding that the additional value that it generates is yours. That keeps everything in your name, and should be fair since you pay for the expense and someday reap the benefit. If you can't afford to make the additions now: I see two options: have your brother buy your father's house, giving you half of the proceeds, and use those proceeds to make the addition as above, or split the cost of the addition and have some sort of contract drawn up promising to reimburse him (with the amount of the reimbursement very clear, like XXX dollars plus accrued interest at Y% annually) as a condition to selling the house. One other part you didn't mention is any compensation you get for keeping your father at your house. What compensation (if any) you get is not as important as making sure that the three of you all agree on what is fair. In any case, clear, honest communication and full agreement is key. There is a very real risk that when your father's estate is settled that there will be disputes over what the agreement was and who it entitled to what. Having everything in writing may sound cold, but it keeps everyone on the same page. |
How can I live outside of the rat race of American life with 300k? | Even with a good investment strategy, you cannot expect more than 8-10% per year in average. Reducing this by a 3% inflation ratio leaves you with 5 - 7%, which means 15k$ - 21k$. Consider seriously if you could live from that amount as annual income, longterm. If you think so, there is a second hurdle - the words in average. A good year could increase your capital a bit, but a bad year can devastate it, and you would not have the time to wait for the good years to average it out. For example, if your second year gives you a 10% loss, and you still draw 15k$ (and inflation eats another 3%), you have only 247k$ left effectively, and future years will have to go with 12k$ - 17k$. Imagine a second bad year. As a consequence, you either need to be prepared to go back to work in that situation (tough after being without job for years), or you can live on less to begin with: if you can make it on 10k$ to begin with (and do, even in good years), you have a pretty good chance to get through your life with it. Note that 'make it with x' always includes taxes, health care, etc. - nothing is free. I think it's possible, as people live on 10k$ a year. But you need to be sure you can trust yourself to stay within the limit and not give in and spent more - not easy for many people. |
Unable to understand logic behind why there is no exit load on liquid fund | Imagine that a fund had a large exit load that declined over several years. If you wanted to sell some or all of your investment in that fund you would face a large fee, unless you held it a long time. You would be hesitant to sell because waiting longer would save you money. That is the exact opposite of a liquid investment. Therefore the ideal level for a liquid fund is to have zero exit load. |
Should I buy out my brother on a property we will inherit before making improvements? | If your father is still able to make financial decisions and sign contracts, I see a better option. Have your father borrow against his equity to finance the renovation. Example: the house is worth 400 now. He can borrow 100 against that. He spends it on the addition, making the house worth 500, with the same 400 of equity as before. (In some cases, spending 100 might add 150 to the house value, but let's assume here the increase is just what was spent.) When he dies, the mortgage has to be repaid. If he has no other money (that the two of you would otherwise split) then the mortgage has to be repaid by the two of you putting in cash. So you pay your brother 250 (half the new total value of the house) but he gives 50 of that to the bank for the mortgage. You also give 50 of your own money to the bank for the mortgage. Net result: your brother has 200 (the same as if he had inherited half the unimproved house), and you have a 500 house after paying out 300. Your gain is also the same as if the house was unimproved. Now if the house went up 150 by spending 100, or went up 60 by spending 100, you and your brother would also be sharing this profit or loss. If you don't want that to happen, you will need a different agreement. The advantage of the approach I'm suggesting is you just need one appraisal after your father dies. Not accounted for in this is that you lived (without paying rent) in your father's house for some time, and that you worked (without being paid) as a caregiver to your father for that time. Some families might think those two things balanced, others might feel you need to be compensated for caring for him, and others that you need to compensate the others for your benefit of living in the large house. Be sure to discuss this with your brother so that you agree in advance whether a plan is fair or not. |
Cons of withdrawing money from an Roth IRA account? | One "con" I have not yet seen mentioned: retirement accounts are generally protected from creditors in a bankruptcy. There are limits and exceptions, Roth has a 1.2 million dollar limit and can be split by a divorce QDRO for instance. Link Since it seems you have no income this year, you may may be raiding your IRA for living expenses. If there is a chance you may declare bankruptcy in the next year or so, consider doing that first and raid the IRA for seed money after. |
Everyone got a raise to them same amount, lost my higher pay than the newer employees | Why do you think you are entitled to "fairness"? In this world you get what you get. I am pretty sure your employer is not paying you for how you "feel" either. And by-the-way turning up on time and not leaving early is not exceptional behaviour; it is expected behaviour. Bottom line: do you add more value to your employer's business then the new hires? If so, ask for a raise, if not find a way to add more value and then ask for a raise or keep doing what you're doing and accept what you get. |
Paying Off Principal of Home vs. Investing In Mutual Fund | The mathematically correct answer is to invest, because you'll get a higher rate of return. I think that answer is bunk -- owning your home free and clear is a huge burden lifted off of your shoulders. You're at an age where you may find a new job, business, personal or other opportunities will be easier to take advantage of without that burden. |
Official site to follow Warren Buffet's Berkshire Hathaway change in investment holdings? | The official source is the most recent Form 13F that Berkshire Hathaway, which is filed with the Securities & Exchange Commission on a quarterly basis . You can find it through the SEC filing search engine, using BRKA as the ticker symbol. and then looking for the filings marked 13-FR or 13-FR/A (the "/A" indicates an amended filing). As you can see by looking at the 13-F filed for the quarter ending September 30 , the document isn't pretty or necessarily easy to read, hence the popularity of sites such as those that Chad linked to. It is, though, the truly official source from which websites tracking the Berkshire Hathaway portfolio derive their information. |
Do individual stocks have futures trading | Things very similar to the idea of a "future" that routinely apply to single stocks are "warrants" and "options". |
United Kingdom: Where to save money for a property deposit | The chancellor announced an ISA in this week's budget intended for people saving to buy their first home. For every £200 put in the government will add £50 to the account so I would strongly encourage you to put the money into that as it is also tax free. |
How to check stock prices online? | Yes, there are a lot of places you can research stocks online, Google Finance, Yahoo Finance, Reuters etc. It's important to understand that the price of the stock doesn't actually mean anything. Share price is just a function of the market capitalization divided by the number of shares outstanding. As an example take two companies that are both worth $1 million, but Company A has issued 10,000 shares and Company B has issued 100,000 shares. Company A has a share price of $100 while Company B has a share price of just $10. Comparing share price does nothing to indicate the relative value or health of Company A versus Company B. I know there are supposed to be no product recommendations but the dictionary area of investopedia.com is a good source of beginner investing information. And as Joe points out below the questions here with the "stock" tag would also be a good place to start. And while I'm on a roll, the book "A Random Walk Down Wall Street" is a good starting point in investing in the stock market. |
Would I ever need credit card if my debit card is issued by MasterCard/Visa? | I haven't had a credit card in fifteen years. I use nothing but my debit card. (I find the whole idea of credit on a micro scale loathsome.) I have yet to encounter a single problem doing so, other than a lower than usual credit score for not keeping 23(!!!) revolving lines of credit open, or that's the number CreditKarma tells me I need in order to be an optimal consumer. In an nutshell, no, you don't NEED one. There are reasons to have them, but no. |
Is there such a thing as “stock insurance”? | Yes, you can insure against the fall in price of stock by purchasing a put option. You pay for a put and if the price of the share falls below the "strike price" of the put, then you can exercise the put. On exercise, the person who sold you the put contract agrees to buy the stock for the strike price, even though that strike price is higher than the market price. You can adjust the level of insurance by buying put options at higher or lower prices, or buying fewer put options than shares you own (leaving some shares uninsured). Alternatively, you can minimize your risk exposure by investing in an index or other fund, which gives you partial ownership in a large number of shares. That means on any given day, lots of shares do worse and lots of shares do better. You can reduce the need for insurance by purchasing a lower-risk, lower-growth financial product. |
Why liquidity implies tight spread and low slippage | Theoretically, it's a question of rate of return. If a desired or acceptable rate of return for market makers' capital is X, and X is determined by the product of margin & turnover then higher turnover means lower margin for a constant X. Margin, in the case of trading, is the bid/ask spread, and turnover, in the case of trading, is volume. Empirically, it has been noted in the last markets still offering such wide-varying evidence, equity options: http://faculty.baruch.cuny.edu/lwu/890/mayhew_jf2002.pdf |
Should I put more money down on one property and pay it off sooner or hold on to the cash? | I would go with the 2nd option (put down as little as possible) with a small caveat: avoid the mortgage insurance if you can and put down 20%. Holding your rental property(ies)'s mortgage has some benefits: You can write off the mortgage interest. In Canada you cannot write off the mortgage interest from your primary residence. You can write off stuff renovations and new appliances. You can use this to your advantage if you have both a primary residence and a rental property. Get my drift? P.S. I do not think it's a good time right now to buy a property and rent it out simply because the housing prices are over-priced. The rate of return of your investment is too low. P.S.2. I get the feeling from your question that you would like to purchase several properties in the long-term future. I would like to say that the key to good and low risk investing is diversification. Don't put all of your money into one basket. This includes real estate. Like any other investment, real estate goes down too. In the last 50 or so years real estate has only apprepriated around 2.5% per year. While, real estate is a good long term investment, don't make it 80% of your investment portfolio. |
Is it bad etiquette to use a credit or debit card to pay for single figure amounts at the POS | I would like to offer a different perspective here. The standard fee for a credit card transaction is typically on the order of 30 cents + 2.5% of the amount (the actual numbers vary, but this is the ballpark). This makes small charges frequently unprofitable for small merchants. Because of this they will often have minimum purchase requirements for credit/debit card payments. The situation changes for large retailers (think Wal-mart, Target, Safeway, Home Depot). I cannot find a citation for this right now, but large retailers are able to negotiate volume discounts from credit card companies (a guy who used to work in finance at Home Depot told me this once). Their transaction fees are MUCH lower than 30 cents + 2.5%. But you get the same reward points on your credit card/debit card regardless of where you swipe it. So my personal philosophy is: large chain - swipe away without guilt for any amount. Small merchant - use cash unless it's hundreds of dollars (and then they may give you a cash discount in that case). And make sure to carry enough cash for such situations. When I was a student, that was about $20 (enough for coffee or lunch at a small place). |
Can you step up your cost basis indefinitely via the 0% capital gains rate? | As JoeTaxpayer illustrated, yes you can. However, one thing to remember is that unless you live in a state with no state income tax, there may be state tax to pay on those gains. Even so, it's likely a good idea if you expect either your income (or the federal capital gains tax rate) to rise in the future. |
How do I find a good mutual fund to invest 5K in with a moderately high amount of risk? | The "Money 70" is a fine list: http://money.cnn.com/magazines/moneymag/bestfunds/index.html Money magazine is usually more reasonable than the other ones (SmartMoney, Kiplinger's, etc. are in my opinion sillier). If you want a lot of depth, the Morningstar Analyst Picks are useful but you have to pay for a membership which is probably not worth it for now: http://www.morningstar.com/Cover/Funds.aspx (side note: Morningstar star ratings are not useful, I'd ignore those. analyst picks are pretty useful.) Vanguard is a can't-go-too-wrong suggestion. They don't have any house funds that are "bad," while for example Fidelity has some good ones mixed with a bunch that aren't so much. Of course, some funds at Vanguard may be inappropriate for your situation. (Vanguard also sells third-party funds, I'm talking about their own branded funds.) If getting started with 5K I think you'd want to go with an all-in-one fund like a target date retirement fund or a balanced fund. Such a fund also handles rebalancing for you. There's a Vanguard target date fund and balanced fund (Wellington) in the Money 70 list. fwiw, I think it's more important to ask how much risk you need to take, rather than how much you are willing to take. I wrote this down at more length here: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ First pick your desired asset allocation, then pick your fund after that to match. Good luck. |
Dealing with event driven market volatility | If you're worried about volatility, and you're in mostly long positions, you should be looking to diversify your portfolio (meaning, buying some stocks that will do better in a bear market) if it's not already diverse, but you shouldn't be looking to abandon your positions, unless you anticipate a short-term need for cash. Other than that, you may want to hold off on the short-term positions for a while if you're concerned about volatility, though many traders see volatility as a great time to make money (as there is more movement, there's more opportunity to make money from mispriced stocks in both directions). Unless you think the market will be permanently down due to these reasons, anyway, but I don't see any reason to believe that yet. Even World War Two wasn't enough to permanently hurt the market, after all! Remember that everyone in the market knows what you do. If there were a sure thing that the market was going to crash, it already would have. Conservative positions tend to involve holding onto a well diversified portfolio rather than simply holding onto cash, unless the investor is very conservative (in which case the portfolio should be cash anyway). The fact that you say this is your rainy day fund does make me a little curious, though; typically rainy day funds are better in cash (and not invested) since you might hit that rainy day and need cash quickly (in which case you could take significant losses if the time isn't right). |
Choosing the “right” NAPFA advisor, and whether fees are fair, etc.? | Some sample prices for straightforward pay-for-hours-or-deliverables planners: I think I've seen some similar rates elsewhere, too. I'd feel like you might get something perfunctory and boilerplate for too much less than $1000 - how could the person afford to spend much time? - and I'd feel like lots more than $1000 for just a standard straightforward plan might be a ripoff. Basically you're paying $1000 for a day or two of work, you don't want just a couple hours of work, but you don't need a week of work either. Anyway, extracting the general guideline (since prices may vary regionally or over time), you could figure it takes a day or two to do a decent job on a basic complete financial plan without a lot of complexities in it. From there you can decide what's fair, adding or subtracting time if you need less than a complete plan or have complex issues. This is assuming you're paying for time and deliverables, which is not a given. The biggest factor in how much you pay is probably how they charge; a couple of the most common models, (There are other models but these are the ones I've seen most.) The difference between these two models is a lot of money over time. Hourly is going to be much cheaper, because it's a one-time cost instead of ongoing, and unrelated to what you have in assets. However, you won't get investment management, which can be valuable if you aren't the kind to stick to an investment plan or you want someone else to completely take care of it for you. The investment-management planners have the potential to make a lot more money (and are more likely to be in it for the money). Hourly planners don't really have as good a business from a business owner's perspective, but they are cheaper from a customer perspective, as long as you're happy to DIY a bit. One thing I like about hourly planners is that I don't really feel investments are the main place planners can add value, so it makes me nervous to have the compensation based on that. Insurance, estate planning, taxes, etc. are where it's harder for a layperson to know all the ins and outs and DIY. From what I've seen, the cheapest planners are the ones that you can get free or discounted from companies like USAA or Vanguard if you have an account with them. However, they will only recommend products from the company in question, so that's a downside, and you probably won't get to meet them in person. This question may be useful too: What exactly can a financial advisor do for me, and is it worth the money? |
What risks are there acting as a broker between PayPal and electronic bank transfers? | Another reason to think it's a scam: fake paypal email notifications are a thing. I've seen one that was quite convincing (but it wasn't mine to properly analyse or report), so the intial payment may be a fake from another account belonging to the scammer, and you've just transferred money to the scammer. The fake email can include links to log in to a fake paypal website, which can be quite convincing as the mark will give the login details which can be used to scrape data. Links not going to where they say is the giveaway here. |
Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan? | Forget about terms. Think about loans in terms of months. To simplify things, let's consider a $1000 loan with .3% interest per month. This looks like a ten month term, but it's equally reasonable to think about it on a month-to-month basis. In the first month, you borrowed $1000 and accrued $3 interest. With the $102 payment, that leaves $901 which you borrow for another month. So on and so forth. The payoff after five payments would by $503.54 ($502.03 principal plus $1.51 interest). You'd save $2.99 in interest after paying $13.54. The reason why most of the interest was already paid is that you already did most of the borrowing. You borrowed $502.03 for six months and about $100 each for five, four, three, two, and one month. So you borrowed about $4500 months (you borrowed $1000 for the first month, $901 for the second month, etc.). The total for a ten month $1000 loan is about $5500 months of borrowing. So you've done 9/11 of the borrowing. It's unsurprising that you've paid about 9/11 of the interest. If you did this as a six month loan instead, then the payments look different. Say You borrow $1000 for one month. Then 834 for one month. So on and so forth. Adding that together, you get about $168.50 * 21 or $3538.50 months borrowed. Since you only borrow about 7/9 as much, you should pay 7/9 the interest. And if we adding things up, we get $10.54 in interest, about 7/9 of $13.54. That's how I would expect your mortgage to work in the United States (and I'd expect it to be similar elsewhere). Mortgages are pretty straight-jacketed by federal and state regulations. I too once had a car loan that claimed that early payment didn't matter. But to get rid of the loan, I made extra payments. And they ended up crediting me with an early release. In fact, they rebated part of my last payment. I saved several hundred dollars through the early release. Perhaps your loan did not work the same way. Perhaps it did. But in any case, mortgages don't generally work like you describe. |
How can I find/compare custodians for my HSA in the United States? | In general, things to look for are: Things to look out for: I'd recommend two places: I'd recommend reading up on HSA's in this related question here. |
Which credit card is friendliest to merchants? | Accepting cash isn't free to the merchant's either. It needs to be counted, reconciled, stored, and taken to the bank each day. There is a certain amount that needs to be on-hand, not in the bank earning interest. There is more of a worry about employees taking cash from the register. There is the chance of inadvertently accepting counterfeit currency. I'm not sure how the cost of cash compares to the cost of accepting credit card, but there is a cost that cannot be ignored. |
Do other countries have the equivalent of Australia's Negative Gearing? | In India, where I live, you can: In addition, housing loans are given priority status as well - bank capital requirements on housing loans is lower than for, say, a corporate loan or a loan against other kinds of collateral. That makes housing loans cheaper as well - you get a home loan at around 10% in India versus 15% against most other assets, and since you can deduct it against tax, the effective interest rate is even lower. Housing in India is unaffordable too, if you're wondering. In a suburb 40 Km away from Delhi, a 2000 sq. foot apartment, about 1500 sq. ft. of carpet area, with no appliances costs about USD 250,000. |
Insurance company sent me huge check instead of pharmacy. Now what? | Checks are awesome things in that, even if it gets lost the money doesn't change hands until the check is cashed. I would highly recommend NOT signing a check over and putting it in the mail though. Essentially putting your signature on it is saying yes, pay to whomever. Theoretically acceptable, rarely a good idea. Call the insurance company and have them cancel current check to reissue to the correct people. Don't forget to write VOID (in huge letters) on the check before throwing away and/or tearing it up. |
Setting a trailing stop loss at $39.70 bid price, stock sold at $41 | There could be a number of reasons: The price hit your number ($39.70) but by the time your order hit the market, the price had gone up. Perhaps the stock went up between when you placed the stop loss and when the order was executed. A trailing stop loss will ratchet up: Very simply, the trailing stop maintains a stop-loss order at a precise percentage below the market price (or above, in the case of a short position). The stop-loss order is adjusted continually based on fluctuations in the market price, always maintaining the same percentage below (or above) the market price. |
What would happen if the Euro currency went bust? | These rumors are here just to help dollar stay alive. Euro have problems, but they are rather solvable, unlike dollar situation. Even if something wrong would happen - countries would return to their national currencies, mainly Germany & France are important here. This does not means that EuroUnion would be destroyed - some countries live in EU without Euro and they are just fine. |
How can I avoid international wire fees or currency transfer fees? | Be aware that ATM withdrawals often generate hidden fees, which are not obviously declared. Many banks operate e.g. with a currency exchange fee, giving you an exchange rate some 1-2% lower than actually applicable. If you withdraw larger amounts, such a currency exchange fee easily adds up to what you would have paid for a wire transfer, where you would get a better exchange rate. Although it's probably much hassle for you to change banks, another option may be to find a bank which operates both in France and the US. Banks with different national branches often offer cheap and fast wire transfers between same-bank accounts in different countries. E.g. Citibank used to offer such services, but I am not sure if they still serve private customers in France. |
Is there a way to take advantage of nice numbers? | You'd need millions of dollars to trade the number of shares it would take to profit from these penny variations. What you bring up here is the way high frequency firms front-run trades and profit on these pennies. Say you have a trade commission of $5. Every time you buy you pay $5, every time you sell you pay $5. So you need a gain in excess of $10, a 10% gain on $100. Now if you wanted to trade on a penny movement from $100 to $100.01, you need to have bought 1,000 shares totaling $100,000 for the $0.01 price movement to cover your commission costs. If you had $1,000,000 to put at risk, that $0.01 price movement would net you $90 after commission, $10,000,000 would have made you $990. You need much larger gains at the retail level because commissions will equate to a significant percentage of the money you're investing. Very large trading entities have much different arrangements and costs with the exchanges. They might not pay a fee on each transaction but something that more closely resembles a subscription fee, and costs something that more closely resembles a house. Now to your point, catching these price movements and profiting. The way high frequency trading firms purportedly make money relates to having a very low latency network connection to a particular exchange. Their very low latency/very fast network connection lets them see orders and transact orders before other parties. Say some stock has an ask at $101 x 1,000 shares. The next depth is $101.10. You see a market buy order come in for 1,000 shares and place a buy order for 1,000 shares at $101 which hits the exchange first, then immediately place a sell order at $101.09, changing the ask from $101.00 to $101.09 and selling in to the market order for a gain of $0.09 per share. |
Why do I see multiple trades of very small quantities? | Probing for hidden limit orders usually involves sending the orders and then cancelling them before they get filled if they don't get filled. With trades actually going through multiple times for small amounts it looks more like a VWAP strategy where the trader is feeding small volumes into the market as part of a larger trade trying to minimize average cost. It could be probing but without seeing the orders and any cancels it would be difficult to tell. edit: I just had another thought; it could possibly be a market maker unwinding a bad position caused by other trading. Sometimes they drip trades into the market to prevent themselves from hitting big orders etc. that might move back against them. This is probably not right but is just another thought. source: I work for an organization that provides monitoring for these things to many large trading organizations. |
Is it worth it to reconcile my checking/savings accounts every month? | I don't use debit cards, but if I did I would review that portion of the statement. I look at my credit card statements pretty closely, and probably catch one or two mistakes or things I want to question every year. |
New company doesn't allow 401k deposits for 6 months, what to do with money I used to deposit? | Two options not mentioned: -No information about your emergency fund in your question. If you don't have 6 months of expenses saved up in a "safe" place (high yield savings account or money market fund) I'd add to that first. -Could you auto-withdraw the amount over six months, then when you can start contributing, contribute twice as much so you are still putting in $18,000 a "year"? The amount you pulled into savings the first 6 months could be used to make up for the extra income coming out after the six months are over. Depending on your income, and since you have the ability to save, it's important not to "lose" access to these tax efficient accounts. And also... -After-tax brokerage account (as mentioned above) is also fine. But if you will use this money for downpayment on a home or something similar within the next five years, I wouldn't recommend investing it. However, having money invested in an after-tax account isn't a terrible thing, yes you'll get taxed when you sell the investments but you have a lot of flexibility to access that money at any time, unlike your retirement accounts. |
Is it worth it to buy TurboTax Premier over Deluxe if I sold investments in a taxable account? | I have used turbo tax for years. Apart from the snafu in 2014, I have had no problem using deluxe, and I have lots of asset sales to report. I prefer form mode anyway. I can import the data from my broker, and I can e-file with no problem. So the only thing I'm missing is the support. I can usually find answers to questions on the web, anyway. |
“Convertible -debt/note/bond/debentures” which of these are the same or different? | They all basically mean the same thing - a type of debt than can be exchanged for (converted into) equity at some point. It's only the mechanics that can be different. A convertible bond is structured just like a regular bond - it (usually) pays periodic interest and has a face value that's due at maturity. The difference is that the bond holder has the option to exchange the debt for equity at some point during the life of the bond. There can be restrictions on when that conversion is possible, and they typically define a quantity of equity (number of shares) that the bond can be converted into. If the market price of the shares goes above a price that would make the shares more valuable than the bond, it's in the best interest of the bond holder to convert. A convertible note is typically used to describe a kind of startup financing that does not pay interest or have a face value that's redeemed, but instead is redeemed for equity as part of a later financing round. Rather than specifying a specific number of shares, the bond holder receives equity at a certain discount to the rest of the market. So they both are debt instruments that can turn into equity investments, just through different mechanisms. A debenture is a fancy word for unsecured debt, and convertible debt could be used to described either structure above, so those terms could mean either type of structure. |
Under specific conditions can I write off Spotify or other streaming audio services? | Nice try. No. If you were in the music industry, you might have a case. Depending on the exact job, certain things related to music would be a business expense. I don't see how this would pass an audit as it really is unrelated to the work you do. |
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. |
How to properly do background check for future tenant in my own house? | I am a realtor. For our rental business, we use a service that offers a background check. It costs us about $25, and it is passed along in the form of an application fee. I suggest you contact a local real estate agent who you know does rentals. Have a conversation about what you are doing, and see if they will help process the application for you, for a fee of course. If you are truly concerned about your safety (The text you wrote can either read as true concern or sarcasm. Maybe we are really in a wild country?) It's worth even a couple hundred bucks to screen out a potential bad roommate. |
How much can I withdraw from Betterment and be considered long-term investment? | No matter what, you owe taxes on the gains, known as capital gains. How much, depends on how long you invested it for. In your example, each month is treated separately - each month you contribute starts a new clock on that set of investments. If you hold it for longer than a year, the taxes are treated as long-term, and less than a year is short-term. Short term taxes are at your marginal rate, and long term taxes are different, usually 15%. https://www.irs.gov/taxtopics/tc400/tc409 |
Regarding Australian CBS takeover of TEN | they are purchasing the company" is this correct? Yes this is correct. If I purchase a "company" here in Australia, I also purchase its assets and liabilities Yes that is correct. How can it be NIL? How can it be legal? The value of shares [or shareholders] is Assets - liabilities. Generally a healthy company has Assets that are greater than its liabilities and hence the company has value and shareholders have value of the shares. In case of TEN; the company has more liabilities; even after all assets are sold off; there is not enough money left out to pay all the creditors. Hence the company is in Administration. i.e. it is now being managed by Regulated Australian authority. The job of the administrator is to find out suitable buyers so that most of the creditors are paid off and if there is surplus pay off the shareholder or arrive at a suitable deal. In case of TEN; the liabilities are so large that no one is ready to buy the company and the deal of CBS will also mean nothing gets paid to existing shareholders as the value is negative [as the company is separate legal entity, they can't recover the negative from shareholders]. Even the current creditors may not be paid in full and may get a pro-rated due and may lose some money. |
What does the term “match the market” mean? | If your returns match the market, that means their rate of return is the same as the market in question. If your returns beat the market, that means their rate of return is higher. There's no one 'market', mind you. I invest in mutual funds that track the S&P500 (which is, very roughly, the U.S. stock market), that track the Canadian stock market, that track the international stock market, and which track the Canadian bond market. In general, you should be deeply dubious of any advertised investment option that promises to beat the market. It's certainly possible to do so. If you buy a single stock, for example, that stock may go up by 40% over the course of a year while the market may go up by 5%. However, you are likely taking on substantially more risk. So there's a very good chance (likely, a greater chance) that the investment would go down, losing you money. |
Professional investment planning for small net-worth individual in bearish market | You're going to have a hard time finding a legit investment planner that is willing to do things like take short-term positions in shorts, etc for a small investor. Doing so would put them at risk of getting sued by you for mismanagement and losing their license or affiliation with industry associations. |
Confirming that stocks are listed under my name | The answer to your question is "no". Unless you specifically ask to receive paper share certificates, then brokers will hold your shares with a custodian company in the broker's own nominee account. If you are able to receive paper certificates, then the registrar of the company whose shares you own will have a record of your name, however this is exceptionally rare these days. Using a stockbroker means that your shares will be held in the broker's nominee account. A nominee company is a custodian charged with the safekeeping of investors’ securities. It should be a separate entity from the broker itself. In essence, the nominee is the legal owner of the securities, while you retain actual ownership as the beneficiary. Your broker can move and sell the securities on your behalf – and gets to handle all the lovely paperwork – but the assets still belong to you. They can’t be claimed by the broker’s creditors if things get messy. The main reason for this kind of set-up is cost, and this is why brokers are able to offer relatively low dealing costs to their clients. You can, if you wish, ask your broker for an account that deals with paper share certificates. However, few brokers will offer such an account and it will mean that you incur much higher dealing costs and may mean that you cannot sell you shares without first submitting the paper certificates back to your stock broker. Note that the stock exchange plays no role in recording ownership. Nor does your broker's account with the clearing house. |
“No taxes to be paid with owning Berkshire” | It depends on your investment profile but basically, dividends increase your taxable income. Anyone making an income will effectively get 'lower returns' on their investments due to this effect. If you had the choice between identical shares that either give a dividend or don't, you'll find that stock that pays a dividend has a lower price, and increases in value more slowly than stock that doesn't. (all other things being equal) There's a whole bunch of economic theory behind this but in short, the current stock price is a measure of how much the company is worth combined with an estimation of how much it will be worth in the future (NPV of all future dividends is the basic model). When the company makes profit, it can keep those profits, and invest in new projects or distribute a portion of those profits to shareholders (aka dividends). Distributing the value to shareholders reduces the value of the company somewhat, but the shareholders get the money now. If the company doesn't give dividends, it has a higher value which will be reflected in a higher stock price. So basically, all other things being equal (which they rarely are, but I digress) the price and growth difference reflects the fact that dividends are paying out now. (In other words, if you wanted non-dividend shares you could get them by buying dividend shares and re-investing the dividend as new shares every time there was a payout, and you could get dividend-share like properties by selling a percentage of non-dividend shares periodically). Dividend income is taxable as part of your income right away, however taxes on capital gains only happen when you sell the asset in question, and also has a lower tax rate. If you buy and hold Berkshire Hatheway, you will not have to pay taxes on the gains you get until you decide to sell the shares, and even then the tax rate will be lower. If you are investing for retirement, this is great, since your income from other sources will be lower, so you can afford to be taxed then. In many jurisdictions, income from capital gains is subject to a different tax rate than the rest of your income, for example in the US for most people with money to invest it's either 15% or 20%, which will be lower than normal income tax would be (since most people with money to invest would be making enough to be in a higher bracket). Say, for example, your income now is within the 25% bracket. Any dividend you get will be taxed at that rate, so let's say that the dividend is about 2% and the growth of the stock is about 4%. So, your effective growth rate after taxation is 5.5% -- you lose 0.5% from the 25% tax on the dividend. If, instead, you had stock with the same growth but no dividend it would grow at a rate of 6%. If you never withdrew the money, after 20 years, $1 in the dividend stock would be worth ~$2.92 (1.055^20), whereas $1 in the non-dividend stock would be worth ~$3.21 (1.06^20). You're talking about a difference of 30 cents per dollar invested, which doesn't seem huge but multiply it by 100,000 and you've got yourself enough money to renovate your house purely out of money that would have gone to the government instead. The advantage here is if you are saving up for retirement, when you retire you won't have much income so the tax on the gains (even ignoring the capital gains effect above) will definitely be less then when you were working, however if you had a dividend stock you would have been paying taxes on the dividend, at a higher rate, throughout the lifetime of the investment. So, there you go, that's what Mohnish Pabrai is talking about. There are some caveats to this. If the amount you are investing isn't large, and you are in a lower tax bracket, and the stock pays out relatively low dividends you won't really feel the difference much, even though it's there. Also, dividend vs. no dividend is hardly the highest priority when deciding what company to invest in, and you'll practically never be able to find identical companies that differ only on dividend/no dividend, so if you find a great buy you may not have a choice in the matter. Also, there has been a trend in recent years to also make capital gains tax progressive, so people who have a higher income will also pay more in capital gains, which negates part of the benefit of non-dividend stocks (but doesn't change the growth rate effects before the sale). There are also some theoretical arguments that dividend-paying companies should have stronger shareholders (since the company has less capital, it has to 'play nice' to get money either from new shares or from banks, which leads to less risky behavior) but it's not so cut-and-dried in real life. |
Saving tax for long term stock investment capital gain by quiting my current job? | The capital gain is counted as part of your income. So with a million capital gain you will be in a high tax bracket, and have to pay the corresponding capital gains tax rate on the million. |
30% share in business | Get involved a lawyer and Accountant. Without it you may not be sure what you are getting. What exactly will 30% mean for me? It will mean exactly what gets written in contract. It can mean you are owner of 30% of the company. If this is structured as partnership, it would also mean you are party to 30% loss. It can mean by current valuation, you get x fixed shares. In future if the directors creates more shares, your % ownership can get diluted. Or anything else. It all depends on what is written in contract and how the contract is structured. Is there anything I should I be aware of before agreeing? Get a draft and talk to a Lawyer and Accountant, they should be able to tell you exactly what it means and you can then decide if you agree to it or not; or need this contract worded differently. |
Mortgage or not? | Buy a rental property instead. You get tax benefits as well as passive income. And it pays for itself |
Condo Purchase - Tax Strategies [US] | You will need to see a tax expert. Your edited question includes the line For the short term, we will be "renting" it to my wife's grandmother at a deep discount. According to the instructions for schedule E If you rented out a dwelling unit that you also used for personal purposes during the year, you may not be able to deduct all the expenses for the rental part. “Dwelling unit” (unit) means a house, apartment, condominium, or similar property. For each property listed on line 1a, report the number of days in the year each property was rented at fair rental value and the number of days of personal use. A day of personal use is any day, or part of a day, that the unit was used by: I have no idea how this will work for Schedule C. |
How to calculate Price/Earnings - Price/Sales - Price/Free Cash Flow for given stock | To calculate you take the Price and divide it by the Earnings, or by the Sales, or by the Free Cash Flow. Most of these calculations are done for you on a lot of finance sites if the data is available. Such sites as Yahoo Finance and Google Finance as well as my personal favorite: Morningstar |
A debt collector will not allow me to pay a debt, what steps should I take? | This may not apply in your particular situation, but I think it's important to mention: When a debt collector doesn't act like a debt collector, it may be because they aren't actually a debt collector. It's certainly strange that someone called you to collect money from you, and when you asked for a simple document, they not only got off the phone quickly but they also told you the debt would be cancelled. That just doesn't make sense: Why would they cancel the debt? Why wouldn't they send you the document? My initial impression is that you were possibly being scammed. The scam can take on many forms: Whenever you are called by a debt collector (or someone pretending to be one), it's a good idea to verify their identity first. More info here. |
Are forward curves useful tools for trading decisions and which informations can be gathered from them? | The forward curve for gold says little, in my opinion, about the expected price of gold. The Jan 16 price is 7.9% (or so) higher than the Jan 12 price. This reflects the current cost of money, today's low interest rates. When the short rates were 5%, the price 4 years out would be about 20% higher. No magic there. (The site you linked to was in German, so I looked and left. I'm certain if you pulled up the curve for platinum or silver, it would have the identical shape, that 7.9% rise over 4 years.) The yield curve, on the other hand, Is said to provide an indication of the direction of the economy, a steep curve forecasting positive growth. |
How are mortgage interest rates determined? | Sheegan has a great explanation of how the TBA market contributes to mortgage rates. The 30 Year Mortgage rates are closely tied to the 10-Year Treasury. One can track this rate at many stock quoting sites using symbol TNX. |
Does a stock really dip in price on the ex-dividend date? And why would it do this? | Suppose the price didn't drop on the ex-dividend date. Then people wanting to make a quick return on their money would buy shares the day before, collect the dividend, and then sell them on the ex-dividend date. But all those people trying to buy on the day before would push the price up, and they would push the price down trying to sell on the date. |
Bonus issue - Increasing share capital | Fully Paid up Partly Paid up: A company may issue stock to you which is only partly paid up, for example, a company may issue a stock of face value 10 to you and ask you to pay 5 now and other 5 will be adjusted later by some other mechanism. This stock shall be partly paid up. Usually, these stocks are issued in different circumstances, for example as part payment for debentures, preference shares or other capital structuring. On the other hand for a fully paid up share no more money needs to be paid by you or no other adjustments need to be made. So, above, the company is issuing you with stocks for which you will need to pay no further money, they are fully paid for. Authorized Capital: Authorized capital of a company is the amount of money a company can raise by selling stock (not debt, equity). This number is registered when the company is incorporated, subsequently, this number can be revised upward by applying to the registrar of companies. Now, this means that at max. the company is authorized to raise this much capital and no more. However, a company may raise less than this, which is called Issued Capital. In your case, the company is raising its authorized capital by applying to the registrar of companies, though in this case they are looking at their full authorized capital to be issued capital, it was not necessary to do so. Increase of Authorized capital: The main benefit is that the company can get more money in form of equity and utilize the same, perhaps, for expansion of business etc., that is the primary benefit. Bonus Share: Usually, companies keep some surplus as reserve, this money comes out of the profit the company makes and is essentially money of the shareholders. This reserve surplus is maintained for situations, when the money may be required for exigencies. However, this surplus grows over a few years and the company usually the company plans for an expansion of business. However, this money cannot be just taken, as it belongs to the shareholder, so shareholders are issued extra equity in proportion to their current holding and this surplus is capitalized i.e. used as part of the company's equity capital. Bonus declaration does not add t o the value of the company and the share prices fall in proportion (but not quite) to the bonus. |
What choices should I consider for investing money that I will need in two years? | If you ever need the money in three years, imagine that today is 2006 and you need the money in 2009. Keep it in savings accounts, money-markets, or CDs maturing at the right time. |
What is the smartest thing to do in case of a stock market crash | First, there will always be people who think the market is about to crash. It doesn't really crash very often. When it does crash, they always say they predicted it. Well, even a blind squirrel finds a nut once in a while. You could go short (short selling stocks), which requires a margin account that you have to qualify for (typically you can only short up to half the value of your account, in the US). And if you've maxed out your margin limits and your account continues to drop in value, you risk a margin call, which would force you to cover your shorts, which you may not be able to afford. You could invest in a fund that does the shorting for you. You could also consider actually buying good investments while their prices are low. Since you cannot predict the start, or end, of a "crash" you should consider dollar-cost-averaging until your stocks hit a price you've pre-determined is your "trigger", then purchase larger quantities at the bargain prices. The equity markets have never failed to recover from crashes. Ever. |
What is the median retirement savings in the United States today? | I find this very hard to believe Believe it. The bottom quarter of American households have negative net worth, and the bottom three quarters have no more than a tiny amount saved up. https://en.wikipedia.org/wiki/Wealth_in_the_United_States#/media/File:MeanNetWorth2007.png In an emergency, 63% of Americans would not be able to come up with $500 without going into debt. http://www.forbes.com/sites/maggiemcgrath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emergency/ Nobody can retire with 5k in the U.S. The money will be gone within a year. Is it possible? Now you begin to see why the long-term stability of Social Security and Medicare are at present hot topics in American political life. Without them, a great many more Americans would die in poverty. What is the actual figure? The $5000 figure is accurate but irrelevant; that median includes people who are thirty years from retirement and people who are two days from retirement. The more relevant statistics are those restricted to people at or close to retirement age, and they can be found lower down in the article you cite, or in numerous other studies. Here's one from the GAO for example: http://www.gao.gov/products/GAO-15-419 The figures here are, unfortunately, no less terrifying: Now $104K is a lot better than $5K, but it's still not much to retire on. Why we believe that it is reasonable to throw out all the zeros before taking the median, I do not know. That seems like bad math to me. UPDATE: There is some discussion of this point in the comments; all I'm saying here is that this is a clumsy and possibly misleading way to characterize the situation. The linked report has the actual data, but let's try to summarize it here in a more meaningful way. Let's suppose that we make buckets for how dependent on SS is a retirement-age household to avoid starving to death, being homeless, and so on? Maybe these buckets are not ideal, and we could move them around a bit. The takeaways here are that the ratios of nothing:inadequate:barely adequate:comfortable is about 40:30:20:10. That only the top decile of retirement-age households can fund a comfortable retirement without help illustrates just how dependent on SS American households are. how do 50% of old Americans survive in their old age? Social Security and Medicare. As the cited GAO report indicates: "Social Security provides most of the income for about half of households age 65 and older." Do most old Americans rely on their children for financial support? One day I met a woman at a party and we were making small talk about her kids. She had a couple already and one more was on the way. "I want to have lots of children to support me in my old age", she said. "Do you support your parents?" I asked, which frankly seemed like an entirely reasonable question. "Of course not! I can't afford it. I've got a baby on the way and two more kids at home!" I left her to draw her own conclusions as to the viability of her retirement plan. |
Can one use dollar cost averaging to make money with something highly volatile? | if you know when and by how much something will fluctuate, you can always make money. Buy it when it's cheaper and sell it when it's more expensive. If you just know that it fluctuated a lot recently, then you don't know what it will do next. Most securities that go to zero or go much higher bounce all over the place for a while first. But you don't know when they'll move decisively lower or higher. So how could you figure out if you'll make money - you can't know. DCA will on average make you better off, unless the extra commissions are too high relative to your purchase sizes. But it will in retrospect make you worse off in many particular cases. This is true of many investment disciplines, such as rebalancing. They are all based on averages. If the volatility is random then on average you can buy more shares when the price is lower using DCA. But when the lowest price turns out to have been on a certain day, you'd have been better off with a single lump sum put in on that day. No way to know in advance. Degree of volatility shouldn't matter; any fluctuation is enough for DCA or rebalancing to get you ahead, though it's true they get you ahead farther if the fluctuations are larger, since there's then more difference between DCA and a lump purchase. I think the real reason to do DCA and rebalancing is risk control. They reduce the risk of putting a whole lump sum in on exactly the wrong day. And they can help keep a portfolio growing even if the market is stagnant. |
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