Question stringlengths 14 166 | Answer stringlengths 3 17k |
|---|---|
Are services provided to Google employees taxed as income or in any way? | Companies often provide cafeteria, or catering services, to employees tax-free at subsidized rates. I'll use "cafeteria" as an illustration. The IRS says that in order to avoid lunch being taxed as income, the employees must pay the "direct costs" of the lunch, food and labor. In addition to those costs, cafeterias add two more items to come up with the total tab; "overhead," (the cost of renting the space), and of course, profit. The company can waive the last two, and charge employees only materials and labor. That's why subsidized cafeteria food can cost as little as half of what it would cost elsewhere. |
Credit Card Points from Refund | Because your friend isn't going to like the ~2% charge they have to pay to the credit card company on the $10,000 purchase. Credit card companies make money off of transactions. The cardholder normally doesn't pay any transaction fees (and in fact can make a profit via rewards), but the merchant has to pay a certain amount of money to the credit card company for the transaction. In this case, the apartment owners ate the charge, likely because it was easier for them to send a check than to refund the cost of the fee through the credit card company. If you started doing this a lot to take advantage of this, I would imagine they would get smart and refuse your business (it'll be pretty obvious what you're doing if you're not signing any leases). |
Is there a measure that uses both cost of living plus income? | The key term you're looking for is "purchasing power parity", which considers the local prices of goods and services when making comparisons between countries. For example, you can look up the GDP by PPP per capita to get a sense of much people on average incomes can buy in each country. Of course, average incomes may not be too relevant to your own specific circumstances, but nonetheless you can look at the PPP data itself to figure out how to translate specific numbers between two currencies. However, note that the "basket" of goods used to calculate this measure itself has a significant impact on the results. Comparing prices of food and electronic equipment respectively will often give very different answers. |
Is it a gift or not? | There are a few things that this question prompts - |
Do real nappies (reusable / cloth diapers) really save money? | I only used disposable diapers for my baby's first month. However, I now use half disposable diapers (for part-time daycare) and half cloth. My son is now 1 year and during a normal weekday, I go through 4 disposable diapers and 3-4 cloth diapers (this count includes a double thick cloth diaper for night). On the weekend, I use about 7-8 cloth diapers a day. For disposable, I buy Costco's Kirkland brand diapers which gives me about 200 diapers for $50. I tend to go through one pack every other month. For cloth, I bought FuzziBunz One-Size Diapers. These are pretty expensive diapers (about $19/each) but I wanted ones that would last over multiple children (I chose these over the BumGenius because I thought snaps would last longer than velcro). I bought 24 new cloth diapers which means I wash diapers every 2-3 days. A couple of weeks ago I totaled up my receipts for cloth and disposable diapers and determined that I will recoup my diaper costs at around 16 months of part-time use. Notes: |
Will my Indian debit card work in the U.S.? | I recommend that you first try to use your card at a store in your home country, just to make sure that the point-of-sale features are enabled. After you've verified that, you need to contact your bank and ask them if the card will work in both ATMs and in stores in the U.S. They may need to enable it to work in another country. If you are going to be living in the U.S. for a while, you should consider opening an American bank account after you get there. If you don't want a credit card, you should be able to get a debit card here. |
When will Canada convert to the U.S. Dollar as an official currency? | Canada would most likely not convert any time in the near future. The challenge for Canada converting to the US Dollar or the fictional "Amero" mentioned by JohnFX is that : Some of the benefits would be: The challenge right now for any government would be to sell the pros over the cons and from that viewpoint the cons would appear to have more negative impact to voters. Considering that Canada currently has a minority government with no expected change to that status for some time the risk would be very high. For more details see Pros and Cons of Canadian Monetary Union and to see the Mexican impact see North American Currency Union It is interesting to note that currency union was first proposed in 1999 when the Canadian Dollar fluctuated between $0.64 to $0.69 US. The Canadian Dollar is closer to par with the US Dollar currently (in fact it rose to $1.10 US in Nov. 2007). Look-up historical rates at the Bank of Canada |
Is the stock market a zero-sum game? | Would you mind adding where that additional value comes from, if not from the losses of other investors? You asked this in a comment, but it seems to be the key to the confusion. Corporations generate money (profits, paid as dividends) from sales. Sales trade products for money. The creation of the product creates value. A car is worth more than General Motors pays for its components and inputs, even including labor and overhead as inputs. That's what profit is: added value. The dividend is the return that the stock owner gets for owning the stock. This can be a bit confusing in the sense that some stocks don't pay dividends. The theory is that the stock price is still based on the future dividends (or the liquidation price, which you could also consider a type of dividend). But the current price is mostly based on the likelihood that the stock price will increase rather than any expected dividends during ownership of the stock. A comment calls out the example of Berkshire Hathaway. Berkshire Hathaway is a weird case. It operates more like a mutual fund than a company. As such, investors prefer that it reinvest its money rather than pay a dividend. If investors want money from it, they sell shares to other investors. But that still isn't really a zero sum game, as the stock increases in value over time. There are other stocks that don't pay dividends. For example, Digital Equipment Corporation went through its entire existence without ever paying a dividend. It merged with Compaq, paying investors for owning the stock. Overall, you can see this in that the stock market goes up on average. It might have a few losing years, but pick a long enough time frame, and the market will increase during it. If you sell a stock today, it's because you value the money more than the stock. If it goes up tomorrow, that's the buyer's good luck. If it goes down, the buyer's bad luck. But it shouldn't matter to you. You wanted money for something. You received the money. The increase in the stock market overall is an increase in value. It is completely unrelated to trading losses. Over time, trading gains outweigh trading losses for investors as a group. Individual investors may depart from that, but the overall gain is added value. If the only way to make gains in the stock market was for someone else to take a loss, then the stock market wouldn't be able to go up. To view it as a zero sum game, we have to ignore the stocks themselves. Then each transaction is a payment (loss) for one party and a receipt (gain) for the other. But the stocks themselves do have value other than what we pay for them. The net present value of of future payments (dividends, buyouts, etc.) has an intrinsic worth. It's a risky worth. Some stocks will turn out to be worthless, but on average the gains outweigh the losses. |
Can I deduct taxes for home office as a freelance computer software developer? | This answer is assuming you're in the US, which apparently you're not. I doubt that the rules in the EU are significantly different, but I don't know for sure. In case of an IRS control, is it ok to say that I regularly connect remotely to work from home although in the work contract it says I must work at client's office? No. Are there any other ways I can prove that this deduction is valid? No. You can't prove something is valid when its not. You can only deduct home office expense if it is used exclusively for your business, and your bedroom obviously is not. |
Why would you ever turn down a raise in salary? | I recently was offered $1/hr raise. I turned it down because 1.)I had been looking for other jobs and the extra $150 per month wasn't enough money to keep me from exploring other options so it would look bad to take a raise and leave a month later. You never want to burn bridges. 2.) Raises aren't given out everyday. The business I work for is having financial troubles and the $1/hr was probably the best they could do at the time. If business picks up and they can afford to give me more money they won't do it because the record will show that I just got a raise. One good extra is that your boss will be flabergasted that you just turned down a raise and you may gain a lot of respect from your superiors. Don't confuse strategically turning down a raise and letting others sway your opinion because they don't wanna cough up the cash. |
Selling property outside the US - gains are taxable, but how do they convert? | Since you did not treat the house as a QBU, you have to use USD as your functional currency. To calculate capital gains, you need to calculate the USD value at the time of purchase using the exchange rate at the time of purchase and the USD value at the time of sale using the exchange rate at the time of sale. The capital gain / loss is then the difference between the two. This link describes it in more detail and provides some references: http://www.maximadvisors.com/2013/06/foreign-residence/ That link also discusses additional potential complications if you have a mortgage on the house. This link gives more detail on the court case referenced in the above link: http://www.uniset.ca/other/cs5/93F3d26.html The court cases references Rev. Rul 54-105. This link from the IRS has some details from that (https://www.irs.gov/pub/irs-wd/0303021.pdf): Rev. Rul. 54-105, 1954-1 C.B. 12, states that for purposes of determining gain, the basis and selling price of property acquired by a U.S. citizen living in a foreign country should be expressed in United States dollars at the rates of exchange prevailing as of the dates of purchase and sale of the property, respectively. The text of this implies it is for U.S. citizen is living in a foreign country, but the court case makes it clear that it also applies in your scenario (house purchased while living abroad but now residing in the US): Appellants agree that the 453,374 pounds received for their residence should be translated into U.S. dollars at the $1.82 exchange rate prevailing at the date of sale. They argue, however, that the 343,147 pound adjusted cost basis of the residence, consisting of the 297,500 pound purchase price and the 45,647 pounds paid for capital improvements, likewise should be expressed in U.S. dollar terms as of the date of the sale. Appellants correctly state that, viewed “in the foreign currency in which it was transacted,” the purchase generated a 110,227 pound gain as of the date of the sale, which translates to approximately $200,000 at the $1.82 per pound exchange rate. ... However fair and reasonable their argument may be, it amounts to an untenable attempt to convert their “functional currency” from the U.S. dollar to the pound sterling. ... Under I.R.C. § 985(b)(1), use of a functional currency other than the U.S. dollar is restricted to qualified business units ("QBU"s). ... appellants correctly assert that their residence was purchased “for a pound-denominated value” while they were “living and working in a pound-denominated economy,” ... And since appellants concede that the purchase and sale of their residence was not carried out by a QBU, the district court properly rejected their plea to treat the pound as their functional currency. |
UK companies house - what can I glean from an abbreviated balance sheet? | What this abbreviated balance sheet tells you is that this company has negative equity. The liabilities are greater than the value of the assets. The obvious problem for the company who wants to do business with you is that they are going to have a real hard time accessing credit to pay off any debts that they incur with doing business with you. In this case, the recommended course would be to ask them put cash up front instead of putting them on account. You don't really need to look at the income statement to see that they are currently underwater. If their income statement turns out to be splendid, then you can wait for them to get their liabilities under control before you set up an account for them. |
What can I replace Microsoft Money with, now that MS has abandoned it? | I've been budgeting with MS Money since 2004 and was pretty disappointed to hear it's being discontinued. Budgeting is actually a stress-relieving hobby for me, and I can be a bit of a control-freak when it comes to finances, so I decided to start early looking for a replacement rather than waiting until MS Money can no longer download transactions. Here are the pros and cons of the ones I've tried (updated 10/2010): You Need A Budget Pro (YNAB) - Based on the old envelopes system, YNAB has you allot money from each paycheck to a specific budget category (envelope). It encourages you to live on last money's income, and if you have trouble with overspending, that can be a great plan. Personally, I'm a big believer in the envelope concept, so that's the biggest pro I found. Also, it's a downloaded software, so once I've bought it (for about $50) it's mine, without forced upgrades as far as I've seen. The big con for me was that it does not automatically download transactions. I would have to sign on to each institution's website and manually download to the program. Also, coming from Money, I'm used to having features that YNAB doesn't offer, like the ability to store information about my accounts. Overall, it's forward-thinking and a good budgeting system, but will take some extra time to download transactions and isn't really a comprehensive management tool for all my financial needs. You can try it out with their free trial. Mint - This is a free online program. The free part was a major pro. It also looks pretty, if that's important to you. Updating is automatic, once you've got it all set up, so that's a pro. Mint's budgeting tools are so-so. Basically, you choose a category and tell it your limit. It yells at you (by text or email) when you cross the line, but doesn't seem to offer any other incentive to stay on budget. When I first looked at Mint, it did not connect with my credit union, but it currently connects to all my banks and all but one of my student loan institutions. Another recent improvement is that Mint now allows you to manually add transactions, including pending checks and cash transactions. The cons for me are that it does not give me a good end-of-the-month report, doesn't allow me to enter details of my paychecks, and doesn't give me any cash-flow forecasting. Overall, Mint is a good casual, retrospective, free online tool, but doesn't allow for much planning ahead. Mvelopes - Here's another online option, but this one is subscription-based. Again, we find the old envelopes system, which I think is smart, so that's a pro for me. It's online, so it downloads transactions automatically, but also allows you to manually add transactions, so another pro. The big con on this one is the cost. Depending on how you far ahead you choose to pay (quarterly, yearly or biannually), you're paying $7.60 to $12 per month. They do offer a free trial for 14 days (plus another 14 days offered when you try to cancel). Another con is that they don't provide meaningful reports. Overall, a good concept, but not worth the cost for me. Quicken - I hadn't tried Quicken earlier because they don't offer a free trial, but after the last few fell short, I landed with Quicken 2009. Pro for Quicken, as an MS Money user is that it is remarkably similar in format and options. The registers and reports are nearly identical. One frustration I'd had with Money was that it was ridiculously slow at start-up, and after a year or so of entering data, Quicken is dragging. Con for Quicken, again as an MS Money user, is that it's budgeting is not as detailed as I would like. Also, it does not download transactions smoothly now that my banks all ask security questions as part of sign-in. I have to sign in to my bank's website and manually download. Quicken 2011 is out now, but I haven't tried it yet. Hopefully they've solved the problem of security questions. Quicken 2011 promises an improved cash-flow forecast, which sounds promising, and was a feature of MS Money that I have very much missed. Haven't decided yet if it's worth the $50 to upgrade to 2011. |
Who can truly afford luxury cars? | Approximately 25% of all cars sold last year were leased, which is the highest on record. When you are leasing you don't own the car, instead you are basically renting it for a fixed term, and turning it back to the dealership. It is very cost effective, because the manufacturers have a keen interest in making lots of cars. They are often subsidizing the lease by giving incentives to the dealer. They are gambling on the future value of their cars. They can lose on that gamble. The car business has turned into a financial nightmare for the car companies; they have huge development costs as the cars become more like mobile computing platforms loaded with sensors, and software that is constantly changing. They can't hold a model for 20 years like Mercedes was able to do in the past. Now they have to constantly update their products. The only way to survive as a car maker is to pump out volume, and the leasing programs, which are quietly being underwritten by the manufacturers help them increase the production quantities, which helps lower the fixed development costs. If only the defense contractors could do this! they are stuck spending billions to build 20 planes, and so each one has a staggering price tag. In the future, the car companies that will survive are those that have terrific credit, and low borrowing costs. That means Japanese and Germans will own the car business entirely in the end, and countries with higher borrowing costs (like America and Brasil) will not be competitive. Luckily Ford is so frugal, due to the lingering spirit of its founder, that they can hold out. One thing strongly in favor of leasing is that you have zero maintenance costs typically. The repair risk is significant in luxury cars. When you buy a 10 year old BMW, and when the tranny goes, it costs a fortune. Having a superb car for 30 months for a few hundred bucks a month is something a lot of people enjoy doing. Who can blame them? you spend an hour or 2 a day in your car, and why not live in a nice place? |
Making a big purchase over $2500. I have the money to cover it. Should I get a loan or just place it on credit? | From an Indian perspective, this is what I would do. This typically would not only keep your credit score healthy but also give you additional benefits on spends. |
Is Amazon's offer of a $50 gift card a scam? | it's not a scam. it's not even too good to be true. frankly it's the lowest sign up bonus i've ever seen for a credit card. you would be better off signing up for a flagship card from one of the major banks (e.g. chase sapphire, citi double cash, discover it, amex blue). those cards regularly offer sign up bonuses worth between 400$ and 1000$. however, you can't get all the cards at once. noteably chase has a fairly firm limit of 5 new cards per 24 month. the other banks have similar, less publicized limits on who they will approve for a new card. so, by applying for this amazon card you are hurting your chances of getting far more lucrative sign up bonuses. it is however worth noting that those larger bonuses usually come with a minimum spending requirement (e.g. spend 1k$-3k$ in the first 3 months) |
Is it better to buy a computer on my credit card, or on credit from the computer store? | Since you have a credit card, I recommend you use it for the purchase. It gets you two things at the very least: Gets the purchases reported as credit utilization. If you handle that correctly, you can improve your score Most card vendors give free extended warranty and return policies that a retailer or manufacturer does not without extra fees. I buy all my electronics using my cards and not only does that optimize my scores but I have been able to enjoy painless/better RMAs for defective products just because my AmEx card would have refunded me the money anyways and the retailers knew it (AmEx would have recovered it from them in the end so it was in their interest to resolve the matter within 30 days) |
What does the term “match the market” mean? | From Investopedia: "Beating the market" is a difficult phrase to analyze. It can be used to refer to two different situations: 1) An investor, portfolio manager, fund or other investment specialist produces a better return than the market average. The market average can be calculated in many ways, but usually a benchmark - such as the S&P 500 or the Dow Jones Industrial Average index - is a good representation of the market average. If your returns exceed the percentage return of the chosen benchmark, you have beaten the market - congrats! (To learn more, read Benchmark Your Returns With Indexes.) 2) A company's earnings, sales or some other valuation metric is superior to that of other companies in its industry. Matching the market, I would presume will be generating returns equivalent to the index you are comparing your portfolio with. If for a sector/industry then it would be the returns generated by the sector/industry. As an index is more or less a juxtaposition of the market as a whole, people tend to use an index. |
What is the true value, i.e. advantages or benefits, of building up equity in your home? | A person can finance housing expenses in one of two ways. You can pay rent to a landlord. Or you can buy a house with a mortgage. In essence, you become your own landlord. That is, insta the "renter" pays an amount equal to the mortgage to insta the "landlord," who pays it to the bank to reduce the mortgage. Ideally, your monthly debt servicing payments (minus tax saving on interest) should approximate the rent on the house. If they are a "lot" more, you may have overpaid for the house and mortgage. The advantage is that your "rent" is applied to building up equity (by reducing the mortgage) in your house. (And mortgage payments are tax deductible to the extent of interest expense.) At the end of 30 years, or whatever the mortgage term, you have "portable equity" in the form a fully paid house, that you can sell to move another house in Florida, or wherever you want to retire. Sometimes, you will "get lucky" if the value of the house skyrockets in a short time. Then you can borrow against your appreciation. But be careful, because "sky rockets" (in housing and elsewhere) often fall to earth. But this does represent another way to build up equity by owning a house. |
How to find out the amount of preferred stock of Coca Cola Company? | Coca Cola doesn't seem to have any preferred shares outstanding. From the annual report, it does say that the number of common shares outstanding was 2,294,316,831 as of February 22, 2011. (cover page, right before the horizontal break) But normally, you can find it either toward the beginning of the document or in the statement of shareholder's equity. |
Is it wise to switch investment strategy frequently? | A guy who does a sports talk show here in the US can be pretty smart about some things. His advice: If you are wondering if something is a good idea, say it out loud. In his book he cites the fact that people thought, at one time, it would be a good idea to allow smoking on airline flights. Keep in mind you are using liquid oxygen, news paper, and are 10,000+ feet up in the air. Say it like that and you hit yourself in the forehead. Read the title of your question in a day or two, and you can answer it yourself with a resounding NO. |
What does “profits to the shareholders jumped to 15 cents a share” mean? | It means that the company earned 15 cents per share in the most recently reported quarter. Share price may or not be affected, depending on how buyers and sellers value the company. Just because profits "jumped," does not mean the shares will follow suit. An increase in profits may have already been priced into the stock, or the market expected the increase in profit to be even higher. As the shareholder, you don't actually get any of these profits into your hands, unless the company pays out a portion of these profits as a dividend. |
What are the opportunities/implications of having a designated clearing bank in my home country? | For an individual there will not be much impact immediately. This arrangement will help Corporates and Banks settle payments more easily. - It would typically help companies dealing with Yuan [Buying or selling to China or Countries that accept Yuan as payment] to make payments at a cheaper cost & in less time. - In the near future it would make it easier for companies to invest more into China financial markets - It would also open up / create new market for derivatives and other allied products - It would also make Singapore a market place for Yuan outside China [and Hong Kong] resulting in more money and related product. In a related move this would make it easy for Singapore Central Bank to invest in China. Once the markets matures more, there could be some products for Individuals. |
How it actually works? Selling a call on a stock I hold, but has done poor, might the market thinks may rise | You seem to have it right. You will be selling what's known as a covered call. When you sell the call, you enter it as "sell to open" and the system should see that you own the stock. You need to be approved for options trading, not all accounts are. As far as this particular trade goes - No, the stock doesn't necessarily get called away the day it's in the money, but it can be. If the stock closes just in the money around the time of expiration are you ok will selling it for the strike price? Remember, the option buyer is taking a small risk, the cost of this option, hoping the stock will go far above that price. |
What options do I have at 26 years old, with 1.2 million USD? | Buy a land and build a house. Then plant wine trees. Hire people after like 5 years and start to do and sell wine. A beautiful business :-) A second opation is to buy a houses in a city and rent rooms. |
Is it worth buying real estate just to safely invest money? | Neither you nor others have mentioned the costs of being a homeowner. First, there are monetary costs. If you own a house, you have to pay taxes. They will vary by jurisdiction, but are usually not zero. You also need insurance, which again comes with monthly rates. Then, once in a while, you'll be hit with unpleasant lump sum payments. In 30 years, the mortgage is over and you own the house - but by that time, it will probably need a new roof. That's in the price range of a new car. And over that time, you'll rack up several other repairs which your landlord covers when you rent. Another thing which feels less like an expense emotionally but ends up thinning your wallet is the cosmetic changes you make just because it's your own home. You wouldn't put marble floors in the bathroom if you rent, but you might be tempted to if you live in the house. It might be even worth it from a life satisfaction point of view, but we are talking finance right now, and that's a minus. And then there are the opportunity costs. A house binds you geographically. You may pass up on a nice job offer because your house is too far away, for example. Or you might experience liquidity problems, because a house is difficult to turn into money in a hurry. If you are able to do so, it is usually a much larger sum than you need, and you are paying the costs inherent in that large transaction. These are just examples, you can probably come up with more costs. Then, it is not sure how much money you can get of the house if you change your mind. Say you take this job at the other end of the country, or you become a parent of four and need more space. At the time you decide to sell, the market may have gone down due to the overall state of the economy, or to the house location's popularity, or your own house may have turned undesirable (what if you get a mold infestation which would only go away if you strip it to the concrete and rebuild?) You could let it to renters, but that's a hassle of its own. It takes time to find renters, it may be expensive (income tax, regulations like Energieausweis in Germany), it is risky (if they don't pay, you might not see money even if you sue them). Then there is the problem that prices reflect not some kind of "true" value, but the intersection of supply and demand. And the home market is not as efficient as in a first semester microeconomics textbook. The buyers of private homes deal in small volumes, have little knowledge in the market, pay intermediaries' cuts, and are emotionally attached to the idea of "owning my own house". This drives demand up and creates higher prices than if you had perfectly rational actors on both sides. People pay money for the feeling of being home owners, so those who forego spending on that feeling have more money to invest in something else. Owning something always causes expenses. You have to calculate the savings of having the house vs. the expenses of having it, before you can decide if it is a good deal or not. If you only calculate one side of the equation, you'll be badly mistaken. |
How does a TFSA work? Where does the interest come from? | As to where the interest comes from: The same place it comes from in other kinds of savings accounts. The bank takes the money you deposit and invests it elsewhere, traditionally by lending it out to others (hence the concept of a "savings and loan" bank). They make a profit as long as the interest they give for "borrowing" from you, plus the cost of administering the savings accounts and loans, is less than the interest they charge for lending to others. No, they don't have to pay you interest -- but if they didn't, you'd be likely to deposit your funds at another bank which did. Their ideal goal is to pay as little as possible without losing depositors, while charging as much as possible without losing borrowers. (yeah, I know, typo corrected) Why do they get higher interest rate than they pay you? Mostly because your deposits and interest are essentially guaranteed, whereas the folks they're lending to may be late paying or default on those loans. As with any kind of investment, higher return requires more work and/or higher risk, plus (ususally) larger reserves so you can afford to ride out any losses that do occur. |
Buy car vs lease vs long term rent for 10 years period | This question has been asked and answered before. Financially, owning a car will be more economical than leasing one in most cases. The reason for this is that leasing arrangements are designed to make a profit for the leasing company over and above the value of the car. A leasing company that does not profit off their customers will not be in business for long. This is a zero-sum game and the leasing customer is the loser. The lion's share of the customer losses are in maintenance and in the event of an accident or other damage. In both cases, leasing arrangements are designed to make a large profit for the owner. The average customer assumes they will never get into an accident and they underestimate the losses they will take on the maintenance. For example, if both oxygen sensors need to be replaced and it would have cost you $800 to replace them yourself, but the leasing company charges you $1200, then BOOM! you just lost $400. If the car is totaled, the customer will lose many thousands of dollars. Leasing contracts are designed to make money for the owner, not the customer. Another way leasing agents make money is on "required maintenance". Most leasing contracts require the leasor to perform "required" maintenance, oil changes, tire rotations, etc. Also, with newer cars manufacturers recalls are common. Those are required as well. Nearly nobody does this maintenance correctly. This gives the agent the excuse to charge the customer thousands of dollars when the vehicle is returned. Bills of $4000 to $6000 on a 3 year lease for failure to perform required maintenance are common. Its items like this that allow the leasing agent to get a profit on what looks like a "good deal" when the customer walked in the door 3 years previously. The advantage of leasing is that it costs less up front and it is more convenient to switch to a different car because you don't have to sell the car. |
Why would a company with a bad balance sheet be paying dividends? | Ford paid off a tremendous amount of debt prior to reinstating the dividend. While they still have a sizable amount of debt on the balance sheet, they've been able to refinance this debt to a much more affordable point. Their free cash flow + cash on the balance could enable them to pay it off in the very near future (12 - 16 months). Most auto companies have debt on their balance sheet if they choose to offer financial services. Their overall credit rating (if you really think such things are valid) has also improved. Generally speaking, I agree its a poor idea to give money back to shareholders if you have high-interest bearing debt. |
Did I get screwed in taxes on a mutual fund dividend payment? | How is that possible?? The mutual fund doesn't pay taxes and passes along the tax bill to shareholders via distributions would be the short answer. Your basis likely changed as now you have bought more shares. But I gained absolutely nothing from my dividend, so how is it taxable? The fund has either realized capital gains, dividends, interest or some other form of income that it has to pass along to shareholders as the fund doesn't pay taxes itself. Did I get screwed the first year because I bought into the fund too late in the year? Perhaps if you don't notice that your cost basis has changed here so that you'll have lower taxes when you sell your shares. Is anyone familiar with what causes this kind of situation of receiving a "taxable dividend" that doesn't actually increase the account balance? Yes, I am rather familiar with this. The point to understand is that the fund doesn't pay taxes itself but passes this along. The shareholders that hold funds in tax-advantaged accounts like 401ks and IRAs still get the distribution but are shielded from paying taxes on those gains at that point at time. Is it because I bought too late in the year? No, it is because you didn't know the fund would have a distribution of that size that year. Some funds can have negative returns yet still have a capital gains distribution if the fund experiences enough redemptions that the fund had to sell appreciated shares in a security. This is part of the risk in having stock funds in taxable accounts. Or is it because the fund had a negative return that year? No, it is because you don't understand how mutual funds and taxes work along with what distribution schedule the fund had. Do I wait until after the distribution date this year to buy? I'd likely consider it for taxable accounts yes. However, if you are buying in a tax-advantaged account then there isn't that same issue. |
What does market cap (or market capitalization) mean? | Market cap is basically the amount of money that it would cost to buy all of the shares of public stock in a company. Or share cost * number of outstanding shares. It is a measure of how much a company is worth. http://en.wikipedia.org/wiki/Market_capitalization |
I have a horrible 401k plan, with high expenses. Should I stay with it or move my money elsewhere? | As to the rollover question. Only rollover to a ROTH if you have other funds you can use to pay the taxes you will be hit with if you do that. DO NOT pay the taxes out of the funds in the 401k. If you don't have a way to pay the taxes, then roll it to a traditional IRA. You never want to pay the government any taxes 'early' and you don't want to reduce the balance. beyond that, A lot depends on how long you figure you will be with that company. If it's only a few years, or if you and other employees can make enough of a fuss that they move the fund to someplace decent (any of the big no-load companies such as Vanguard would be a better custodian), then I'd go ahead and max it out. If you figure to be there for a long while, and it looks like someone is in bed with the custodian and there's no way it will be changed, then maybe look to max out a Roth IRA instead. |
How do I get bill collectors who call about people I know to stop calling me? | I had a similar situation, except the debtor had no connection to us whatsoever, other than holding our phone number previously. We tried going through channels to deal with it, and had no success. At the end of the day, I was very abusive to the people calling, and forwarded the number to a very irritating destination. |
At what point should I begin paying off student loans? | Everyone has made some good points that I was going to mention but to put it in terms that might make it easier to decide. As stated by others, paying off debt and being free is always the goal and desirable. However, you must also consider the "efficiency" of what you do as well. For example, there are two common types of student loans (there are others but let's focus on these) and that is subsidized and unsubsidized. The main difference? Subsidized loans don't earn interest on your balance while you are in school, it only happens when you graduate and come out of repayment grace period. Unsubsidized loans begin accumulating interest the moment they are disbursed, but you are not required to make payments on them until you graduate. All student loans are deferred until you graduate and exhaust your grace period or other means of deferring your payment, say for example a postponement or forbearance. However, it is often recommended that on UNSUBSIDIZED loans, you pay down your principle while still in school to avoid that massive interest amount that will get added to it when you are officially in repayment. On the other hand, it is often (if not always) recommended that you hold off on paying SUBSIDIZED loans until you are done and go into repayment, as for all intents and purposes its not costing you anything extra to wait. Family and parent loans are considered and treated more like personal loans, so treat them as such. Hope that helps. Also, don't forget to take advantage of the income based repayment options, as they will make the payments manageable enough to avoid making them a burden while you are trying to get a job and go post education. Further reading: Income-Driven Plans (Department of Education) Income-Driven Repayment Plans (nelnet) |
Why would a company with a bad balance sheet be paying dividends? | While Ford and the other auto makers have a bad few years, some companies want to have a cash dividend. It appeals to certain investors. Others have tried to avoid dividends: Microsoft didn't start until ~2003; Apple only from mid 80's until mid 90's.; Google never has had a cash dividend. The desire to keep the dividend, or even to increase it, make some companies continue the practice; even when it doesn't make complete sense. Here is a list of stocks that have INCREASED their dividend for the last 25+ years: http://www.dividend.com/dividend-stocks/25-year-dividend-increasing-stocks.php Some have had good years, others bad years, in the last 25+ years. |
How to bet against IPOs? | There are 2 primary ways to bet against a stock if you think it will decline. The first is to short sell shares of that stock the second is to buy put options (I would also add that selling naked call options would also be a bet against but I don't believe that is as common as the other 2 mentioned methods). The problem with short selling an IPO is that you first have to borrow the shares you are going to sell. Since the shares are privately held prior to the IPO that can be problematic. Even after the IPO you may have to wait a bit before shares become available to borrow. The problem with options (either buying puts or seeking naked calls) is similar. Options are traded on a different exchange than the stock and they have their own requirements that a stock must meet to have options traded. Both of these problems eventually correct themselves however, not in time for you to catch the initial fall you seem to be looking for. |
First time home buyer: Can you withdraw funds from a Roth 401k for a first time home purchase? | The rules are quite different. There is no special home purchase penalty-free withdrawal. In the case that your account has been open for five years, you can withdraw the principal (but not the earnings) without penalty. You may want to talk to a professional for further details. The real question is: why do you want to borrow against your future to finance your present? Your down payment funds should come from another source than your retirement. Retirement funds should only be touched in the direst financial straights. |
Car insurance (UK) excludes commute to and from work, will not pay on claim during non-commute | You should start by making a written complaint to the insurance company itself. You have two angles of attack: What was discussed when she was sold the policy. Make sure you set out exactly what you believe you were told and highlight that they didn't ask about commuting (assuming that's the case). Ask them to preserve any recordings they have of the call and to send you a copy. The nature of the journey where the accident happened. From the description - unless it was part of a journey to and from work - there's no good reason for them to classify it as commuting. Make sure you make good written notes now of anything that happened verbally - phone calls etc, and keep doing this as the process goes along. If that written complaint doesn't work, your next step is to go to the Financial Ombudsman, who are a neutral adjudication service. If the Ombudsman doesn't support your case, you could go to court directly, but it'll be expensive and a lot of effort, and by this stage it'd be unlikely you would win. The Ombudsman's rejection wouldn't count against you directly, but it'd be a strong indication that your case is weak. See https://www.moneyadviceservice.org.uk/en/articles/making-a-complaint-about-an-insurance-company for a more detailed walk-through. |
W8-BEN for an Indian Citizen | According to the Form W-8BEN instructions for Part II, Line 10: Line 10. Line 10 must be used only if you are claiming treaty benefits that require that you meet conditions not covered by the representations you make on line 9 and Part III. For example, persons claiming treaty benefits on royalties must complete this line if the treaty contains different withholding rates for different types of royalties. In tax treaties, some of the benefits apply to every resident of a foreign country. Other benefits only apply to certain groups of people. Line 10 is where you affirm that you meet whatever special conditions are necessary in the treaty to obtain the benefit. If you are claiming that Article 15 of the U.S.-India Tax Treaty, you could use Line 10 to do this. It is important to remember that this form goes to the company paying you; it does not actually get sent to the IRS. Therefore, you can ask the company themselves if filling out Line 9 only will result in them withholding nothing, or if they would need you to fill out Line 10. |
What does it mean when someone says “FTSE closed at xxx today” | It's sort of the sum of stock prices, but bigger companies are weighed more heavily. |
Employer 401K thru Fidelity - Investment options | The target date investment will automatically reduce equity exposure and increase bond exposure as it approaches retirement date. If you are unlikely to make adjustments as you get older, you may be setting yourself up for more risk down the road. Only you can decide what level of risk you can tolerate as you chase higher gains. |
Can I withdraw from my Roth IRA retirement account to fund a startup? | Yes, it is possible to withdraw money from your Roth IRA before retirement (but I wouldn't necessarily advise you to do so.) Here's the good news, and the bad news: The good news: Unlike a traditional IRA, money contributed to a Roth IRA is done so on an after-tax basis, meaning you don't benefit from a tax deduction on contributions. So, the money you withdraw from your Roth IRA will not be taxed entirely as ordinary income. In fact, you are allowed to withdraw the amount of your original contributions (also known as basis) without any taxes or penalties. Let's imagine you originally deposited $9000 of that current $10K total value – then in such a case, $9000 could be withdrawn tax and penalty free. The bad news: When it comes to the investment earnings – the other $1000 in my example – it's a different story: Since you wouldn't be age 59 1/2 at the time of withdrawal, any money taken out beyond your original contributions would be considered a non-qualified withdrawal and subject to both ordinary income taxes plus a 10% early withdrawal penalty. Ouch! Perhaps you might want to restrict your withdrawal to your original contributions. I would imagine if you've had the account for such a short period of time that much or all of your account value is original contributions anyway. A good article about the rules for early IRA withdrawals is About.com's Tax Penalty for Early Distribution of Retirement Funds. Note: If your Roth IRA funds were the result of a rollover from another account type, other rules may apply. See Roth IRA (Wikipedia) for more detail; search for "rollover". Regarding the withdrawal process itself and the timing, you should check with your account custodian on how to proceed. |
What are the ramifications of lawsuits over “breaches of fiduciary duty” for the average shareholder? | As an investor, I try to interpret the suits as an attempt to in some way influence the actions of the company - and not, usually, as a serious legal threat (or as likely to lead to serious legal consequences). My (shallow) understanding (as a non-lawyer) is that the requirements for a lawsuit to be filed as class-action suit are (relatively speaking) easier to meet when the company is publicly traded - the shareholders are more easily described as a "class". So it's more common for lawsuits that involve stock holders for large, publicly traded companies to be registered as class action suits. Class action suits include a requirement for some advertising and notifications (so all members of the class become aware of the suit, and can decide whether to participate). So, these types of suits can be started with various goals in mind, goals which might be achieved without the suit ever going anywhere - including to gain some publicity for a particular point of view, or to put pressure on the company to perform particular actions. In most cases, though, they are the result of misunderstandings between the various parties with an interest in how the company is run - shareholders, directors and/or executive officers. For most cases, the result of the suit is a more in depth sharing of information between the parties involved, and possibly a change in the plans/actions of the company; the legal technicalities differ from case to case, and, often, the legal consequences are minor. |
What are the implications of a corporate stock repurchase or share buyback program? | The future shares will be fewer in number, yet have claim to less cash in the bank. All in all, there's little reason the shares would rise in value. Say there are 1M shares, trading at $10. Market cap is $10M of course. Now, there happens to be $2M cash in the bank so each share had about $2 cash. By taking the $2M and buying 200K shares, 800K shares remain, but why would you think they'd be valued at $12.50? The same $10 value per share is now an $8M market cap as $2M has been disbursed, no less so than if it were given out in a dividend. |
Would I qualify for a USDA loan? | All the above advices plus this: For you first house, you should start smaller. Buy a 100k or less condo if possible, then grow from there. You sell every 5 years or so when the market is favorable and you will slowly get to that nice 250k house. |
Keeping our current home (second property) as a rental. Will it interfere with purchasing a third home? | There's a couple issues to consider: When you sell your primary home, the IRS gives you a $500k exemption (married, filing jointly) on gain. If you decide not to sell your current house now, and you subsequently fall outside the ownership/use tests, then you may owe taxes on any gains when you sell the house. Rather than being concerned about your net debt, you should be concerned about your monthly debt payments. Generally speaking, you cannot have debt payments of more than 36% of your monthly income. If you can secure a renter for your current property, then you may be able to reach this ratio for your next (third) property. Also, only 75% of your expected monthly rental income is considered for calculating your 36% number. (This is not an exhaustive list of risks you expose yourself to). The largest risk is if you or your spouse find yourself without income (e.g. lost job, accident/injury, no renter), then you may be hurting to make your monthly debt payments. You will need to be confident that you can pay all your debts. A good rule that I hear is having the ability to pay 6 months worth of debt. This may not necessarily mean having 6 months worth of cash on hand, but access to that money through personal lines of credit, borrowing against assets, selling stocks/investments, etc. You also want to make sure that your insurance policies fully cover you in the event that a tenant sues you, damages property, etc. You also don't want to face a situation where you are sued because of discrimination. Hiring a property management company to take care of these things may be a good peace-of-mind. |
Approximate IT company valuation (to proximate stock options value) | You also need to remember that stock options usually become valueless if not exercised while an employee of the company. So if there is any chance that you will leave the company before an IPO, the effective value of the stock options is zero. That is the safest and least risky valuation of the stock options. With a Google or Facebook, stock options can be exercised and immediately sold, as they are publicly traded. In fact, they may give stock grants where you sell part of the grant to pay tax withholding. You can then sell the remainder of the grant for money at any time, even after you leave the company. You only need the option/grant to vest to take advantage of it. Valuing these at face value (current stock price) makes sense. That's at least a reasonable guess of future value. If you are absolutely sure that you will stay with the company until the IPO, then valuing the stock based on earnings can make sense. A ten million dollar profit can justify a hundred million dollar IPO market capitalization easily. Divide that by the number of shares outstanding and multiply by how many you get. If anything, that gives you a conservative estimate. I would still favor the big company offers though. As I said, they are immediately tradeable while this offer is effectively contingent on the IPO. If you leave before then, you get nothing. If they delay the IPO, you're stuck. You can't leave the company until then without sacrificing that portion of your compensation. That seems a big commitment to make. |
Is there an advantage to keeping a liquid emergency fund if one also has an untapped line of credit? | An emergency fund is your money, sitting in a bank, that you can use for emergency purposes. A line of credit is somebody else's money, that they've provisionally promised to let you borrow. But they can change their mind at any time. |
How can someone with a new job but no credit history get a loan to settle another debt? | I believe the best way to go about it is to approach a good friend or relative to borrow the money, interest free. Do discuss with them the repayment schedule. If you have any assets such as house / stocks, you can pledge them in exchange for $5000 cash. I believe the banks would be more than happy to lend to you. You could try one of these Peer to Peer lending sites where you could borrow money from other people instead of banks. |
How much of a down payment for a car should I save before purchasing it? | I've run into two lines of thinking on cars when the 0% option is offered. One is that you should buy the car with cash - always. Car debt is not usually considered "good debt," as there is no doubt but that your car will depreciate. Unless something very odd happens or you keep the car to antique status (and it's a good one), you won't make money off of it. On the other hand, with 0% interest - if you qualify, and remember that dealer promotions aren't for everyone, just those who qualify - you can invest that money in a savings account, bonds, a mutual fund, or the stock market and theoretically make a lot more over the 5 years while paying down the car. In that case, you really only need to make sure you save enough to make the payment low enough for your comfort zone. Personally I prefer to not be making a car payment. Your personal comfort level may vary. Also, in terms of getting your money's worth a gently used car in good condition is miles better than a new car. Someone else took the hit on the "drive it off the lot" decline in price for you. |
Bi-weekly payment option | One point that I don't see covered in the other answers yet: How does this affect the months that have 5 weeks. Do we actually lose two weeks a year? I get paid every two weeks, and pay day is always a Friday. Some months, I get paid 3 times - which is always great. If you live within your means, it's like an extra paycheck. All other months, I get paid two times. How many months a year do I get paid 3 times? 2. It will always be two, because there are 12 months. If you get paid twice a month, that's 24 pay checks, which is 2 shy of 26 pay checks - what we would expect if we were paid every two weeks. That means those 2 extra pay checks need to fall somewhere, and they will be on the months where your pay day is hit 5 times. For example, in 2014, there are 4 months with 5 Fridays: Jan May Aug Oct I got paid the second Friday of January, so I only got 2 checks in January. I will be paid on the first Friday of May, which means I will get 3 checks in May. My other triple-check month this year is October, so of course I am only going to be paid twice in August. |
How is my employer affected if I have expensive claims on my group health insurance? | Many big companies self insure. They pay the insurance company to manage the claims, and to have access to their network of doctors, hospitals, specialists, and pharmacies; but cover the costs on a shared basis with the employees. Medium sized companies use one of the standard group policies. Small companies either have expensive policies because they are a small group, or they have to join with other small companies through an association to create a larger group. The bigger the group the less impact each individual person has on the group cost. The insurance companies reprice their policies each year based on the expected demographics of the groups, the negotiated rates with the network of providers, the required level of coverage, and the actual usage of the group from the previo year.. If the insurance company does a poor job of estimating the performance of the group, it hits their profits; which will cause them to raise their rates the next year which can impact the number of companies that use them. Some provisions of the new health care laws in the US govern portability of insurance regarding preexisting conditions, minimum coverage levels, and the elimination of many lifetime cap. Prior to these changes the switching of employers while very sick could have a devastating impact on the finances of the family. The lifetime cap could make it hard to cover the person if they had very expensive illnesses. If the illness doesn't impact your ability to work, there is no need to discuss it during the interview process. It won't need to be discussed except while coordinating care during the transition. There is one big issue though. If the old company uses Aetna, and the new company doesn't then you might have to switch doctors, or hospitals; or go out-of-network at a potentially even bigger cost to you. |
Looking into investment bonds for the first time- what do I need to be aware of? | All bonds carry a risk of default, which means that it's possible that you can lose your principal investment in addition to potentially not getting the interest payments that you expect. Bonds (in the US anyway) are graded, so you can manage this risk somewhat by taking higher quality bonds, i.e. in companies or governments that are considered more creditworthy. Regular bank savings (again specific to the US) are insured by FDIC, so even if your bank goes bust, the US Government is backing them up to some limit. That makes such accounts less risky. There's generally no insurance on a bond, even if it is issued by a government entity. If you do your homework on the bond rating system and choose bonds in a rating band where you're comfortable, this could be a good option for you. You'll find, however, that the bond market also "knows" that the interest rates are generally low, so be ware that higher interest issues are usually coming from less creditworthy (and therefore more risky) issuers. EDIT Here's some additional information based on the follow-up question in the comment. When you buy a bond you are actually making a loan to the issuer. They will pay you interest over the lifetime of the bond and then return your principal at the end of the term. (Verify this payment schedule - This is typical, but you should be sure that whatever you're buying works like this.) This is not an investment in the value of the issuer itself like you would be making if you bought stock. With stock you are taking an ownership share in the company. This might entitle you to dividends if the company pays them, but otherwise your investment value on a stock will be tied to the performance of the company. With the bond, the company might be in decline but the bond still a good investment so long as the company doesn't decline so much that they cannot pay their debts. Also, bonds can be issued by governments, but governments do not sell stock. (An "ownership share of the government" would not make sense.) This may be the so-called sovereign debt if issued by a sovereign government or it may be local (we call it municipal here in the US) debt issued by a subordinate level of government. Bonds are a little bit like stock in the sense that there's a secondary market for them. That means that if you get partway through the length of the bond and don't want to hold it, you can sell the bond to someone else. Of course, it will be harder to sell a bond later if the company becomes insolvent or if the interest rates go up between when you buy and when you sell. Depending on these market factors, you might end up with a capital gain or capital loss (meaning you get more or less than the principal that you put into the bond) at the time of a sale. |
How to work around the Owner Occupancy Affidavit to buy another home in less than a year? | Although it may be a little late for you, the real answer is this: When you close on a mortgage for a primary residence you are affirming (in an affidavit), two intents: Now, these are affirming intentions — not guarantees; so if a homeowner has a change of circumstance, and cannot meet these affirmed intentions, there is almost always no penalty. Frankly, the mortgage holder's primary concern is you make payments on time, and they likely won't bother with any inquiry. That being said, should a homeowner have a pattern of buying primary residences, and in less than 1 year converting that primary to a rental, and purchasing a new primary; there will likely be a grounds for prosecution for mortgage fraud. In your specific situation, you cannot legally sign the owner-occupancy affidavit with the intention of not staying for 1 year. A solution would be to purchase the condo as a second home, or investment; both of which you can still typically get 80% financing. A second home is tricky, I would ask your lender what their requirements are for 2nd home classification. Outside that, you could buy the condo as a primary, stay in it for a year, then convert. If you absolutely had to purchase the 2nd property before 1 year, you could buy it as a primary with a 2 month rent back once you reach 10 months. Should you need it earlier, just buy the 2nd house as an investment, then once you move in, refinance it as a primary. This last strategy requires some planning ahead and you should explain your intention to the loan officer ahead of time so they can properly price the non-owner occupied loan. |
In Australia, how to battle credit card debt? | To confirm: you say you have credit card debt of $18,000 with min. repayment of $466.06, plus on top of this you are also paying off a car loan and another personal loan. From my calculations if your monthly interest on your credit card is $237, the interest on your credit card should be about 15.8% p.a. Is this correct? Balance Transfer If you did a balance transfer of your $18,000 to a new credit card with 0% for 14 months and keep your repayments the same ($466) you would have saved yourself a bit over $3020 in interest over those 14 months. Your credit card balance after 14 months would be about $11,471 (instead of $14,476 with your current situation). If your interest after the 14 months went back to 15.8% you would be able to pay the remaining $11,471 in 2.5 more years (keeping repayments at $466), saving 10 months off your repayments and a total of $4,781 in interest over 3 years and 8 months. The main emphasis here is that you are able to keep your repayments at least the same so you are able to pay off the debt quicker, and that your interest rate on the new credit card after the 14 months interest free is not more than your current interest rate of 15.8%. Things you should be careful about if you take this path: Debt Consolidation In regards to a Debt Consolidation for your personal loan and credit card (and possibly your car loan) into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. As you already have you credit card and personal loan with CBA talk to them to see what kind of deal they can give you. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians. |
How smart is it to really be 100% debt free? | When you're debt free everything you own feels different. The lack of financial stress in your life goes away. BUT! before you do go gung-ho on paying down debt think through these steps (and no I did not come up with them. Dave Ramsey did and others). Truncated from - http://www.daveramsey.com/new/baby-steps/ I have 1 credit card. Only use it for business/travel but pay it off every month (yay for auto-draft). Everthing else is cash/debit and we live by a budget. If it's not in the budget we don't buy it. Easy as pie. The hard part is disciplining yourself to wait. Our society is gear for BUY NOW! PAY LATER! and well you can see where that has taken our country and families. And celebrate the small victories. Pay off 1 debt then go have a nice dinner. Things like that help keep you motivated and pursuing the end goal. |
Does borrowing from my 401(k) make sense in my specific circumstance? | Your comment regarding your existing finances is very relevant and helpful. You need to understand that generally in personal finance circles, when a strong earning 22 year-old is looking for a loan it's usually a gross spending problem. Their car costs $1,000 /month and their bar tabs are adding up so the only logical thing to do is get a loan. Most 22-year-olds don't have a mortgage soaking up their income, or a newborn. With all of this in mind I essentially agree with DStanley and, personally, and many people here would probably disagree, I'd stop the 401(K) contribution and use that money to pay the debt. You're still very young from a retirement standpoint, let the current balance ride and forego the match until the debt is paid. I think this is more about being debt free at 22 quickly than it's about how much marginal money could be saved via 401(k) or personal loan or this strategy or that strategy. I think at your age, you'll benefit greatly from simply being debt free. There are other very good answers on this site and other places regarding the pitfalls of a 401(k) loan. The most serious of which is that you have an extremely limited time to pay the entire loan upon leaving the company. Failure to repay in that situation incurs tax liability and penalties. From my quick math, assuming your contribution is 8% of $70,000 /year, you're contributing something in the neighborhood of $460/month to your 401(k). If you stopped contributing you'd probably take home a high $300 number net of taxes. It'll take around 20 months to pay the loan off using this contribution money without considering your existing payments, in total you're probably looking at closer to 15 months. You'll give up something in the neighborhood of $3,500 in match funds over the repayment time. But again, you're 22, you'll resume your contributions at 24; still WAY ahead of most people from a retirement savings standpoint. I don't think my first retirement dollar was contributed until I was about 29. Sure, retirement savings is important, but if you've already started at age 22 you're probably going to end up way ahead of most either way. When you're 60 you're probably not going to bemoan giving up a few grand of employer match in your 20s. That's what I would do. Edit: I actually like stannius's suggestion in the comments below. IF there's enough vested in your plan that is also available for withdrawal that you could just scoop $6,500 out of your 401(k) net of the 10% penalty and federal and state taxes (which would be on the full amount) to pay the debt, I'd consider that instead of stopping the prospective contributions. That way you could continue your contributions and receive the match contributions on a prospective basis. I doubt this is a legitimate option because it's very common for employers to restrict or forbid withdrawal of employee and/or employer contributions made during your employment, but it would be worth looking in to. |
How to dollar-cost-average with a large amount of money in a savings account? | I up voted JoeTaxpayer but i would like add a couple of things. Dollar Cost averaging over a 5 day period is in no way practical. If you get a 1% swing in that time that would be quite a lot. Personally I think 5 years is way to long. When markets go down they go down fast. I would suggest 1 to 2 years investing quarterly. I would hate seeing you miss out on market gains for a 5 year period on the last of your money. The whole point of Dollar Cost averaging instead of market timing is the mantra "Its about time in the market not timing the market" So if you have money on the sidelines for years you are missing out on your time in the market. |
Roth IRA - Vanguard or Fidelity? If a college student had to pick one? | The minimum at Schwab to open an IRA is $1000. Why don't you check the two you listed to see what their minimum opening balance is? If you plan to go with ETFs, you want to ask them what their commission is for a minimum trade. In Is investing in an ETF generally your best option after establishing a Roth IRA? sheegaon points out that for the smaller investor, index mutual funds are cheaper than the ETFs, part due to commission, part the bid/ask spread. |
Methods for forecasting price? | Assuming a price is set on an free market there are particular difficulties to pricing. A free market is one where the price is entirely determined by the willingness of people to buy and sell at a particular price point. What you perceive as price, is actually the "tick", i.e. the quote of the last transaction. The first and most serious major obstacle to pricing is a variation of the prisoners dilemma, a psychological phenomenon. For instance, bitcoin might be worth 4$ now, but you believe it will be worth 5$ in 3 days. Will you buy bitcoin? If acting only on your conviction, yes. But what if you consider what other people will do? Will others believe bitcoin will be worth 5$ in 3 days? Will they act on their conviction? Will the others believe that others believe that it wil be worth 5$ in 3 days, and will the others believe that the others who believe will act on their conviction? Will the others believe that others believe of still others who believe that they will act on their conviction? It goes on like this ad-infinitum. The actual behavior of any individual on the market is essentially chaotic and unpredictable (for the reason stated above and others). This is related to a phenomenon you call market efficiency. An efficient market always reflects the optimal price-point at any given time. If that is so, then you cannot win on this market, because at the time you would have to realize a competitive edge, everybody else has already acted on that information. Markets are not 100% efficient of course. But modern electronic markets can be very, very efficient (as say compared to stock markets fro 100 years ago, where you could get a competitive edge just by having access to a fast courier). What makes matters rather more difficult for price forecasting is that not only are humans engaging in the market, machines are as well. The machines may not be terribly good at what they do, but they are terribly fast. The machines that work well (i.e. don't loose much) will survive, and the ones that don't will die in short order. Since speed is one of the major benefits of the machines over humans, they tend to make markets even more efficient. Another phenomenon to price forecasting is that of information and entropy. Suppose you found a reliable method to predict a market at a given time. You act on this information and indeed you make a profit. The profit you will be able to achieve will diminish over time until it reaches zero or reverts. The reason for this is that you acted on private information, which you leaked out by engaging in a trade. The more successful you are in exploiting your forecast, the better you train every other market participant to react to their losses. Since for every trade you make successfully, there has to be somebody who lost. People or machines who lose on markets usually exit those markets in some fashion. So even if the other participants are not adjusting their behavior, your success is weeding out those with the wrong behavior. Yet another difficulty in pricing forecasts are black-swan events. Since information can have a huge impact on pricing, the sudden appearance of new information can throw a conservative forecast completely off the rails and incur huge losses (or huge unexpected benefits). You cannot quantify black-swan events in any shape or form. It is my belief that you cannot predict efficient and well working markets. You might be able to predict some very sub-optimal markets, but usually, hedge-funds are always on the hunt for inefficient markets to exploit, so by simple decree of market economics, the inefficient markets tend to be a perpetually dying species. |
Does doing your “research”/“homework” on stocks make any sense? | The markets are not as information efficient as some might have you believe. But on the contrary, looking up what the aggregate professional analysts have said is also part of "doing your homework" |
Should a high-school student invest their (relative meager) savings? | At your age (heck, at MY age :-)) I would not think about doing any of those types of investments (not savings) on your own, unless you are really interested in the investment process for its own sake, and are willing to devote a lot of time to investigating companies in order to try to pick good investments. Instead, find a good mutual fund from say Vanguard or TRP, put your money in there, and relax. Depending on your short-term goals (e.g. will you expect to need the money for college?) you could pick either an index fund, or a low-risk, mostly bond fund. |
Dividends - Why the push to reinvest? | There can be a good reason if you own shares issued in a different country: For example, if you are in the UK and own US shares and take the dividend payments, you get some check in US dollars that you will have to exchange to UK£, which means you pay fees - mostly these fees are fixed, so you lose a significant percentage of your dividends. By reinvesting and selling shares accumlated over some years, you got one much bigger check and pay only one fee. |
ETF's for early retirement strategy | This is the chart going back to the first full year of this fund. To answer your question - yes, a low cost ETF or Mutual fund is fine. Why not go right to an S&P index? VOO has a .05% expense. Why attracted you to a choice that lagged the S&P by $18,000 over this 21 year period? (And yes, past performance, yada, yada, but that warning is appropriate for the opposite example. When you show a fund that beat the S&P short term, say 5 years, its run may be over. But this fund lagged the S&P by a significant margin over 2 decades, what makes you think this will change? |
Can paying down a mortgage be considered an “investment”? | Something you invest in has the ability to grow in value. So examples of investments would be buying stocks, bonds, currencies, commodities. Buying your house or a piece of real estate can be considered an investment because the house/property will hopefully be worth more as time passes. So the act of paying down a mortgage really isn't an investment. |
Is the return on investment better with high or low dividends? | Let's say two companies make 5% profit every year. Company A pays 5% dividend every year, but company B pays no dividend but grows its business by 5%. (And both spend the money needed to keep the business up-to-date, that's before profits are calculated). You are right that with company B, the company will grow. So if you had $1000 shares in each company, after 20 years company A has given you $1000 in dividends and is worth $1000, while company B has given you no dividends, but is worth a lot more than $2000, $2653 if my calculation is right. Which looks a lot better than company A. However, company A has paid $50 every year, and if you put that money into a savings account giving 5% interest, you would make exactly the same money either way. |
How do used vehicle exchange programs at car dealerships work? | You are correct to be wary. Car dealerships make money selling cars, and use many tactics and advertisements to entice you to come into their showroom. "We are in desperate need of [insert your make, model, year and color]! We have several people who want that exact car you have! Come in and sell it to us and buy a new car at a great price! We'll give you so much money on your trade in!" In reality, they play a shell game and have you focus on your monthly payment. By extending the loan to 4 or 5 years (or longer), they can make your monthly payment lower, sure, but the total amount paid is much higher. You're right: it's not in your best interest. Buy a car and drive it into the ground. Being free of car payments is a luxury! |
If a stock is selling for less than book value, is the company headed for bankruptcy? | An answer can be found in my book, "A Modern Approach to Graham and Dodd Investing," p. 89 http://www.amazon.com/Modern-Approach-Graham-Investing-Finance/dp/0471584150/ref=sr_1_1?s=books&ie=UTF8&qid=1321628992&sr=1-1 "If a company has no sustained cash flow over time, it has no value...If a company has positive cash flow but economic earnings are zero or less, it has a value less than book value and is a wasting asset. There is enough cash to pay interim dividends, bu the net present value of the dividend stream is less than book value." A company with a stock trading below book value is believed to be "impaired," perhaps because assets are overstated. Depending on the situation, it may or may not be a bankruptcy candidate. |
Stock options value | What you will probably get is an option to buy, for £10,000, £10,000 worth of stock. If the stock price on the day your option is granted is £2.50, then that's 4,000 shares. Companies rarely grant discounted options, as there are tax disincentives. The benefit of the stock option is that when you exercise it, you still only pay £10,000, no matter what the 4,000 shares are now worth. This is supposed to be an incentive for you to work harder to increase the value of the company. You should also check the vesting schedule. You will typically not be able to exercise all your options for some years, although some portion of it may vest each year. |
Does this sound like a great idea regarding being a landlord and starting a real estate empire? | The idea you present is not uncommon, many have tried it before. It would be a great step to find landlords in your area and talk to them about lessons learned. It might cost you a lunch or cup of coffee but it could be the best investment you make. rent it out for a small profit (hopefully make around 3 - 5k a year in profit) Given the median price of a home is ~220K, and you are investing 44K, you are looking to make between a 6 and 11% profit. I would not classify this as small in the current interest rate environment. One aspect you are overlooking is risk. What happens if a furnace breaks, or someone does not pay their rent? While some may advocate borrowing money to buy rental real estate all reasonable advisers advocate having sufficient reserves to cover emergencies. Keep in mind that 33% of homes in the US do not have a mortgage and some investment experts advocate only buying rentals with cash. Currently owning rental property is a really good deal for the owners for a variety of reasons. Markets are cyclical and I bet things will not be as attractive in 10 years or so. Keep in mind you are borrowing ~220K or whatever you intend to pay. You are on the hook for that. A bank may not lend you the money, and even if they do a couple of false steps could leave you in a deep hole. That should at least give you pause. All that being said, I really like your gumption. I like your desire and perhaps you should set a goal of owning your first rental property for 5 years from now. In the mean time study and become educated in the business. Perhaps get your real estate license. Perhaps go to work for a property management company to learn the ins and outs of their business. I would do this even if I had a better paying full time job. |
Are long-term bonds risky assets? | Bonds have multiple points of risk: This is part of the time value of money chapter in any finance course. Disclaimer - Duff's answer popped up as I was still doing the bond calculations. Similar to mine but less nerdy. |
How can I buy and sell the same stock on the same day? | you need minimum of 25k otherwise youll reach a limit. you have to wait 3 days for the sale to clear unless youre on margin. dont buy anything based on idiots on twitter or the internet. however, theres some good people to follow though that know what theyre doing. dont listen to this guy saying that etrade or those platforms arent fast enough. they all offer level 2 prices so i dont know what hes talking about. successful day traders arent buying and selling a stock every single day. theres not always something to buy and sell...unless youre just gambling, and in that case just go to the casino and lose your money there. |
Does getting a 1099 from another state count as working in another state if I was physically in my home state? | You might need to check yes... but I would check out New York's nonresident income tax requirements... My guess is yes if you meet the requirements, but I am not an expert nor do I work in the accounting or legal field. Check out New York's nonresident tax page explaination |
Is insurance worth it if you can afford to replace the item? If not, when is it? | Generically, like farnsy noted in the other answer, you will only come ahead in dollar terms when you are significantly riskier than the average insuree. Otherwise the insurance company would have higher rates to make a profit. In the case of Apple Care there can arguably be other factors involved. If you did not insure your $2000 laptop and it broke (unfixably) just after the warranty period, would you replace it with a new Apple product? Maybe not, so Apple could lose a customer. That means they have an incentive to keep you happy. If your product breaks but insurance replaces it, you are a happier customer and more likely to buy other Apple products. This is not an incentive for traditional insurance companies that only do business in insurance. Now, with the profit margins Apple likes in general, I don't know if they've underpriced their insurance. I sort of doubt it even. But their margins on it are probably not high, meaning it's a closer call even if you are only averagely risky. |
If a startup can always issue new shares, what value is there to stocks/options? | Companies normally do not give you X% of shares, but in effect give you a fixed "N" number of shares. The "N" may translate initially to X%, but this can go down. If say we began with 100 shares, A holding 50 shares and B holding 50 shares. As the startup grows, there is need for more money. Create 50 more shares and sell it at an arranged price to investor C. Now the percentage of each investor is 33.33%. The money that comes in will go to the company and not to A & B. From here on, A & C together can decide to slowly cut out B by, for example: After any of the above the % of shares held by B would definitely go down. |
What are the financial advantages of living in Switzerland? | In addition to what George said, there are other things that probably benefit Switzerland: |
What are the tax implications on selling the Share ISA portfolio? | Assets held within an ISA or New ISA are completely free of CGT, so you won't have to pay either income tax or capital gains tax. |
Calculate APR for under 1 year loan | Is the pay cycle every 2 weeks? So 30% each two week period is 1.3^26 = 917.33 or an APR of 91633%. Loansharks charge less, I believe standard vig was 2%/week for good customers. Only 180% per year. |
Why so much noise about USA's credit rating being lowered? | Dollar is the lingua franca of the financial industry and unluckily it is the US currency. It is till today considered the most safest investment bet, that is why you have China possesing $3 trillion of US debt, as an investment albiet a very safe one. Financial investors get in queue to by US bonds the moment they are put up for sale. Because of the AAA rating the investors consider it to be safe at a specific rate. Now when you lower the credit rating you are indirectly asking the US government that you want a higher return(yield) on your investments. When you ask for higher yields, it translates into higher interest rates (money US would get for bonds issued decreases and so more bonds are issued). So you basically start looking at a slowdown in consumer spendings households and businesses. With already defaults, repossesions and lesser spending, the slowdown would increase manifold. |
Asset management after leaving the USA | Yes to all three. However, |
Deductible expenses paid with credit card: In which tax year would they fall? | Being a professional auditor and accountant, deduction against expenses are claimed in the year in which expenses has been incurred. It has no relationship with when it is paid. For example, we may buy on credit does not mean that they will be allowed in the period in which it is paid. This is against the fundamental accounting principles. |
How bad is it to have a lot of credit available but not used? | Unless you have a history of over-using credit (i.e. you've gotten yourself into debt trouble), then I think that the banker is giving you bad advice in telling you to get your own credit limit reduced. Having more credit available to you that is left unused will make your utilization ratio lower, which is generally better for your credit score, according to this article on CreditKarma.com. The "sweet spot" seems to be 1-20% utilization of your total credit. (But remember, this is only one factor in your credit score, and not even the biggest-- having a long history of on-time payments counts the most.) My own personal experience seems to bear this out. I have two major credit cards that I use. One card has a high credit limit (high for me anyway) and I use it for just about everything that I buy-- groceries, gas, durable goods, services, you name it. The other card has a limit that is about 1/3 of the first, and I use it for a few recurring bills and occasional purchases where they don't take the first card. I also have a couple of department store cards that I use rather infrequently (typically 1 purchase every 3 months or so). At the end of each month, when the respective statements post, each card has a balance that is 15% or less of the credit limit on that card. I pay off the entire balance on each card each month, and the cycle repeats. I have never been late on a payment, and my credit history for all of these cards goes back 10 years. My credit score is nearly as high as it can go. If having unused credit were a detriment, I would expect my score to be much lower. So, no, having "too much credit available" is not going to hurt you, unless you are not using it at all, or are tempted to abuse it (use too much). The key is to use common sense. Have a small number of cards, keep them active, spend within your means so you can pay off the balance in full after the statement posts, and never be late on your payments. That's all it takes to have good credit. |
I am not VAT registered. Do I need to buy from my supplier with excl VAT prices or incl VAT? | It looks like there's some confusion about the purchase price and reclaiming VAT. You should pay your supplier the total amount (£10 + VAT in this scenario, so £12) - look for this figure on the invoice or receipt. The supplier doesn't normally expect you to work this out for yourself, so I'd be a little surprised if it's not on there? As Dumbcoder's said, you'd then be able to claim the VAT back from HMRC if you were VAT registered. But seeing as you're not, then you don't need to worry about claiming it. And as for selling the product without VAT, you can (and probably should) increase the unit price to cover the extra cost, otherwise you'll be operating at a loss. Hope this helps! |
Are services provided to Google employees taxed as income or in any way? | In many countries, giving something free to the employee is considered a taxable income equivalent, and taxes have to be paid on it. As it cannot be assigned to specific employees, the company pays a flat tax on it, so it actually costs the company more. Also, not all employees value it equally, or consider it as a part of their income, so reducing the salary accordingly would not be considered ok by many employees. As a result, the company can only do it as an additional offer, which is too expensive for small businesses. |
How does start-up equity end up paying off? | Read the book, "Slicing Pie: Fund Your Company Without Funds". You can be given 5% over four years and in four years, they hire someone and give him twice as much as you, for working a month and not sacrificing his salary at all. Over the four years, the idiot who offered you the deal will waste investors money on obvious, stupid things because he doesn't know anything about how to build what he's asking you to build, causing the need for more investment and the dilution of your equity. I'm speaking from personal experience. Don't even do this. Start your own company if you're working for free, and tell the idiot who offered you 5% you'll offer him 2% for four years of him working for you for free. |
What US tax laws apply to a 13 year old game developer? | After doing a little research, I was actually surprised to find many internet resources on this topic (including sites from Intuit) gave entirely incorrect information. The information that follows is quoted directly from IRS Publication 929, rules for dependents First, I will assume that you are not living on your own, and are claimed as a "dependent" on someone else's tax return (such as a parent or guardian). If you were an "emancipated minor", that would be a completely different question and I will ignore this less-common case. So, how much money can you make, as a minor who is someone else's dependent? Well, the most commonly quoted number is $6,300 - but despite this numbers popularity, this is not true. This is how much you can earn in wages from regular employment without filing your own tax return, but this does not apply to your scenario. Selling your products online as an independent game developer would generally be considered self-employment income, and according to the IRS: A dependent must also file a tax return if he or she: Had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. So, your first $400 in earnings triggers absolutely no requirement to file a tax return - blast away, and good luck! After that, you do not necessarily owe much in taxes, however you will need to file a tax return even if you owe $0, as this was self-employment income. If you had, for instance, a job at a grocery store, you could earn up to $6,300 without filing a return, because the store would be informing the IRS about your employment anyway - as well as deducting Medicare and Social Security payments, etc. How much tax will you pay as your income grows beyond $400? Based upon the IRS pages for Self-Employment Tax and Family Businesses, while you will not likely have to pay income tax until you make $6,300 in a year, you will still have to pay Social Security and Medicare taxes after the first $400. Roughly this should be right about 16% of your income, so if you make $6000 you'll owe just under $1000 (and be keeping the other $5000). If your income grows even more, you may want to learn about business expense deductions. This would allow you to pay for things like advertisement, software, a new computer for development purposes, etc, and deduct the expenses out of your income so you pay less in taxes. But don't worry - having such things to wonder about would mean you were raking in thousands of dollars, and that's an awfully good problem to have as a young entrepreneur! So, should you keep your games free or try to make some money? Well, first of all realize that $400 can be a lot harder to make when you are first starting in business than it probably sounds. Second, don't be afraid of making too much money! Tax filing software - even totally free versions - make filing taxes much, much easier, and at your income level you would still be keeping the vast majority of the money you earn even without taking advantage of special business deductions. I'd recommend you not be a afraid of trying to make some money! I'd bet money it will help you learn a lot about game development, business, and finances, and will be a really valuable experience for you - whether you make money or not. Having made so much money you have to pay taxes is not something to be afraid of - it's just something adults like to complain about :) Good luck on your adventures, and you can always come back and ask questions about how to file taxes, what to do with any new found wealth, etc! |
Why can't I short a stock that sells for less than $5? Is there another way to “go short” on them? | A bit of poking around brought me to this thread on the Motley Fool, asking the same basic question: I think the problem is the stock price. For a stock to be sold short, it has to be marginable which means it has to trade over $ 5.00. The broker, therefore, can't borrow the stock for you to sell short because it isn't held in their clients' margin accounts. My guess is that Etrade, along with other brokers, simply exclude these stocks for short selling. Ivestopedia has an explanation of non-marginable securities. Specific to stocks under $5: Other securities, such as stocks with share prices under $5 or with extremely high betas, may be excluded at the discretion of the broker itself. |
If a stock doesn't pay dividends, then why is the stock worth anything? | The company gets it worth from how well it performs. For example if you buy company A for $50 a share and it beats its expected earnings, its price will raise and lets say after a year or two it can be worth around $70 or maybe more.This is where you can sell it and make more money than dividends. |
Warrant shares/UNIT | A warrant is similar to a call option (the right to buy stock at a certain price), with the difference that warrants are filled by the issuing company with new shares, diluting the existing shareholders' ownership. The language is a bit confusing, but how I interpret it is: So your 9,000 shares will get you 3,000 shares and 3,000 warrants (the right to buy shares at a maximum price of 0.27 between April 2, 2018 and April 30, 2018. I think the phrase "The subscription price is SEK 0.27 per Unit" means that you can buy each unit for 0.27 SKE (which gets you one share and one option to buy another share. |
How come the government can value a home more than was paid for the house? | When a house is sold at a foreclosure auction, the selling bank usually does not provide the guarantees that a normal house seller provides. Furthermore, the previous owner may have neglected the property, and/or spitefully damaged the property. Bank-owned properties are often neglected and/or vandalized. Banks are usually too short-sighted to properly market the real estate they own, and do a poor job of making it easy to buy the property. Thus, foreclosure sales usually happen at a price that is significantly below the "fair market value" of sales between competent households. It is common for a house that is worth $ 125,000 (even in a depressed market) to sell for only $ 100,000 in a short sale or foreclosure. It is possible that this property sold for an even larger discount. It is also possible that the tax assessor is (inadvertently) comparing a run-down property with well-maintained properties that have extra expensive features, without fully adjusting for the properties' conditions and features. In the latter scenario, the property owner can ask the tax assessor to re-consider the assessment. Usually this request is called an "appeal". |
Where do large corporations store their massive amounts of cash? | Short term investments, treasuries, current accounts. |
Investing $50k + Real Estate | I have been on the same boat as you are right now. So basically, it depends on your goals, risk tolerance, upcoming life events! You want a plan not just for this particular 50K, but for your household assets and future earnings to come! My suggestion: Get a flat fee, online financial advisor to do the work for you. You don’t have to figure this out by yourself. Personally, I would invest in a portfolio that: Offers dynamic asset allocation plans that evolves over time based on changing market conditions. Offers a healthy mix of beta and alpha strategies along with the liquidity and ability to monitor activity online. Has structural risk management in place. Risk management is as much about increasing risk as it is about cutting risk. Therefore, you want a plan for de-allocating and re-allocating risk Hope this helps. |
Good yield vs. safer route (Checking vs. Savings) | In the US bank or credit union checking, savings, CD's are insured through FDIC or NCUA. The coverage is for $250,000. This limit can be increased by having multiple accounts. You, your spouse, and a Joint account with your spouse, are considered 3 different accounts, so you could have $750K coverage. IRA funds are considered a separate pot of money for insurance coverage. Here is an explanation from NCUA and FDIC. There is no safety difference between savings and checking. There are differences regarding minimum balances, maximum number of transactions per month, and fees. But they are equally safe. |
Why are U.S. Treasury interest rates are so low vs. other nearly risk-free rates? | As I'm sure you are reading in Hull's classic, the basic valuation of bonds depends on the chance of entity defaulting on those bonds. Let's start with just looking at the US. The United States has a big advantage over corporations in issuing debt as it also prints the same currency that the debt is denominated in. This makes it much easier not to default on your debt as you can always print more money to pay it. Printing too much currency would cause inflation lowering the value of debt, but this would also lower the value of US corporate debt as well. So you can think of even the highest rated corporate bonds as having the same rate as government debt plus a little extra due to the additional default risk of the corporation. The situation with other AA rated governments is more complicated. Most of those governments have debt denominated in their local currency as well so it may seem like they should all have similar rates. However, some governments have higher and some actually have lower rates than the United States. Now, as above, some of the difference is due to the possible need of printing too much currency to cover the debt in crisis and now that we have more than one country to invest in the extra risk of international money flowing out of the country's bonds. However, the bigger difference between AA governments rates depends more on money flow, central banks and regulation. Bonds are still mostly freely traded instruments that respond to supply and demand, but this supply and demand is heavily influenced by governments. Central banks buy up large portions of the debt raising demand and lowering rates. Regulators force banks to hold a certain amount of treasuries perhaps inflating demand. Finally, to answer your question the United States has some interesting advantages partially just due to its long history of stability, controlled inflation and large economy making treasuries valuable as one of the lowest risk investments. So its rates are generally on the low end, but government manipulation can still mean that it is not necessarily the lowest. |
Who are the sellers for the new public stocks? | In an IPO the seller is the Company selling new shares. Some of the IPOs also include something called "secondary" sales which are existing holders selling at the same time at the IPO price. But that is a but more unusual. And as someone noted, the $68 is the price paid for the people who bought at the IPO (the aggregate group usually called the syndicate). The $85 is the price that it is trading at once there is trading in the open market. People that are able to get into the syndicate to buy the stock at $68 sometimes quickly sell if the price is much higher when trading starts. This is called "flipping" the stock. Hedge funds do this much more often than institutional buyers like Fidelity. |
Should I lease, buy new, or buy used? | Welcome to Personal Finance and Money. This answer will depend a lot on what is most important to the buyer, for example, whether it is important to always be in a newer car, to save money, or strike a balance between the two. There are trade-offs and I don't think there is one right answer for all circumstances. Leasing Leasing does make financial sense for at least two types of people I'm aware of: The company I work for provides company cars to sales executives, which we lease. We lease because it wouldn't be appropriate for a salesperson to meet a client in a car that clearly appears used. Similarly, I know people who value being in a newer car all the time, and for them, leasing makes more financial sense then buying a new car every 2-3 years, and selling their old car which is now 2-3 years old and has depreciated significantly. They understand that they are paying more to always be able to be in a newer car. I used to work with a manager who, every time the new model of the car he owned came out, would see the car and buy it on the spot, even though he already owned last year's model, and he didn't need two cars. He just couldn't help himself; he felt he had to have the new model. It's no use sermonizing about how he "should" learn to save money by just being content with what he had. In reality, if he is going to buy the new model every year no matter what, he should lease rather than buy. From my experience, I would only recommend leasing if you would otherwise be buying a new car on a regular basis, and the lease would be less expensive. This is probably the most cost effective way to maintain the highest possible quality, but would cost much more than buying and holding a new car or buying a value used car. I don't see reliability as much of a factor here since the seller will have a very good idea of how much maintenance will cost, but you will pay a premium to be able to pay a fixed cost for maintenance instead of risking a worse-than-average experience. Buying New According to Edmunds and BIGResearch, only a relatively small number of people are ever in the market for a new car at a given point in time. While you do pay quite a bit more to own a brand new car instead of the same car that is 2-3 years old, there are several reasons I'm aware of why people buy new cars: Number 4 is probably the biggest reason, and many people are willing to pay for the certainty of knowing that the miles are correct, the parts are new, the car is in good working condition, etc. Additionally, some makes of cars have much higher resale values than others (such as Hondas), meaning that there isn't as large of a drop in price between a new car and a used car. Many people consider buying a new car the best way to ensure they get the best reliability since they know the initial condition of the car and can care for it meticulously from that point on. This can especially make sense when the buyer intends to keep the car for the like of the car as the buyer will then benefit from having no car payments once it is paid off. Buying Used Buying a used car is the most affordable option, but for a given quality of car the reliability can be a significant potential pitfall. It can be very difficult for a non-professional to tell whether they are getting a good value. Additionally, it is hard for an owner who wants to sell a used car in excellent condition to get the true value of the car, and much easier for an unscrupulous seller to to get the market price by selling to an unaware buyer (the "lemons" problem in economics). You could buy an inspected car with a limited warranty from a retail seller like CarMax or a dealership, but you often pay a significant premium that cancels out much of the biggest reason to buy used - saving money. However, there is an opportunity to save money when buying used if you're willing to compromise on the condition of the car (if you don't care whether a car has hail damage, for example), or if you are able to wait until you find a motivated/distressed seller who needs to sell quickly and is willing to sell at a discount. If cost is your primary priority, buying a used car is likely the best option, but I would recommend the following in all circumstances: If the seller isn't willing to offer both of these, I would walk away. When buying used, you will also need to consider maintenance, which will vary significantly based on the make and model of the car as well as the condition, which is another risk you need to be willing to take on if you choose to buy used. |
Why is it in a company’s interest to have high stock prices? [duplicate] | After the initial public offering, the company can raise money by selling more stock (equity financing) or selling debt (e.g. borrowing money). If a company's stock price is high, they can raise money with equity financing on more favorable terms. When companies raise money with equity financing, they create new shares and dilute the existing shareholders, so the number of shares outstanding is not fixed. Companies can also return money to shareholders by buying their own equity, and this is called a share repurchase. It's best for companies to repurchase their shared when their stock price is low, but "American companies have a terrible track record of buying their own shares high and selling them low." The management of a company typically likes a rising stock price, so their stock options are more valuable and they can justify bigger pay packages. |
Effective returns on investment in housing vs other financial instruments | Then at the end, if you decide to cash in your house, you can roll the proceeds into a fancier house to avoid paying taxes on your profit. The problem is that the book was written in 1989. That comment is no longer true; that part of the tax law changed in the 1990's. Also in 1989 the maximum amount that person could put in an IRA was $2,000 and hadn't been raised for almost a decade and wouldn't be raised for another decade. Roth accounts didn't exist; nor did HSA's or 529's. Most people didn't have a 401K. You are asking to compare what options we have today compared to what was available in the late 1980's. For me except, for the years 2001-2005 and 2010-2015, the period from 1988 until now has had flat real estate values. Still the current values haven't returned to the peak in 2005. The score is 11 great years, 17 flat or negative. I know many people who during the 1990's had a zero return on their real estate. |
Probablity of touching In the money vs expiring in the money for an american option | Conceptually, yes, you need to worry about it. As a practical matter, it's less likely to be exercised until expiry or shortly prior. The way to think about paying a European option is: [Odds of paying out] = [odds that strike is in the money at expiry] Whereas the American option can be thought of as: [Odds of paying out] = [odds that strike price is in the money at expiry] + ( [odds that strike price is in the money prior to expiry] * [odds that other party will exercise early] ). This is just a heuristic, not a formal financial tool. But the point is that you need to consider the odds that it will go into the money early, for how long (maybe over multiple periods), and how likely the counterparty is to exercise early. Important considerations for whether they will exercise early are the strategy of the other side (long, straddle, quick turnaround), the length of time the option is in the money early, and the anticipated future movement. A quick buck strategy might exercise immediately before the stock turns around. But that could leave further gains on the table, so it's usually best to wait unless the expectation is that the stock will quickly reverse its movement. This sort of counter-market strategy is generally unlikely from someone who bought the option at a certain strike, and is equivalent to betting against their original purchase of the option. So most of these people will wait because they expect the possibility of a bigger payoff. A long strategy is usually in no hurry to exercise, and in fact they would prefer to wait until the end to hold the time value of the option (the choice to get out of the option, if it goes back to being unprofitable). So it usually makes little sense for these people to exercise early. The same goes for a straddle, if someone is buying an option for insurance or to economically exit a position. So you're really just concerned that people will exercise early and forgo the time value of the American option. That may include people who really want to close a position, take their money, and move on. In some cases, it may include people who have become overextended or need liquidity, so they close positions. But for the most part, it's less likely to happen until the expiration approaches because it leaves potential value on the table. The time value of an option dwindles at the end because the implicit option becomes less likely, especially if the option is fairly deep in the money (the implicit option is then fairly deep out of the money). So early exercise becomes more meaningful concern as the expiration approaches. Otherwise, it's usually less worrisome but more than a nonzero proposition. |
Do stock splits make one's shares double in voting power? | Ordinarily a stock split increases all shareholders' share counts, so that there is no change in anybody's voting power. For example, if you owned 1% of the company before the split, after the split you now have twice as many shares, but there are now twice as many shares outstanding, so you still own 1% of the company. Also, stock splits are not ordinarily "triggered". Usually they happen when the board decides that for one reason or another it's desirable to increase the number of shares in circulation, which causes the price of each share to decrease proportionally. I'm not familiar with the show, and in particular I don't know what the action is that the character being addressed is thinking of taking, but it sounds like they are describing something akin to a "poison pill". In these arrangements, the "pill" is triggered by some predefined condition, say a party acquiring shares in excess of a defined threshold. What typically happens is that shareholders other than the ones who triggered the pill get a chance to buy shares at a substantial discount, thereby diluting the shares of the party that triggered it. Because the other shareholders have to buy their additional shares, albeit at a discount, and because it applies only to certain shares, it's not really a split, but it's close enough that the writers of the show may have felt it was worth using the term that is more familiar to the public. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.