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Can I buy stock of a company that just IPO | Yes, you could buy a stock on the day of its IPO. I'm a college student, and I wonder if I can buy stock from a company right after it finishes its IPO? Yes, you can. However, unless you are friends or family of an employee, chances are you'll be paying a higher price than you think as there is generally a fair bit of hype on most IPOs that allows some people to "flip them" which means someone is buying at a higher price. If I am not allowed to buy its stocks immediately after they go on sell, how long do I have to wait? Generally I'd wait until the hype dies down as if you look at most historical IPOs the stock could be bought cheaper later but that's just my perspective. And also who are allowed to buy the stocks at the first minute they are on sell? Anyone but keep in mind that while an IPO may be priced at $x, the initial trades may be a few times that value and the stock may come down over time. Facebook could be an example to consider of a company that had an IPO at one price and then came down for a little while on its chart over the past couple of years. |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | I too was very confused when I tried to be tricky and paid down my balance BEFORE the bill date. I thought this would be a great thing because it would show my utilization near zero percent. The opposite happen, it dropped my credit score from 762 to 708. Here is the best example I can come up with when it comes to utilization. Lets pretend you are an insurance company and you trying to figure out who are the best risk drivers. The people that drive 10% of the day are a better risk than the people that drive 50% of the day. The people that drive 50% of the day are a better risk than the people that drive 90% of the day. Here is the rub when people drive 0%. When you look at the people at 0% they appear to be walking, busing or flying. What they are NOT doing is driving. Since they are not driving (using Credit) they are viewed as POOR drivers since they are not keeping up on their driving skills. (Paying bills, watching how they spend, and managing their debt). So, now before the billing date I pay down my balance to something between 5 to 10% of my utilization. After the bill is issued, I pay it off in FULL. ( I am not going to PAY these crazy interest rates). What shows up on my credit report is a person that is driving his credit between 5 and 10% utilization. It shows I know I how to manage my revolving accounts. I know it's dumb, you would think they reward people that have zero debt, I don't hate banks I hate the game. ( I do love me some reward points =)) |
Why are big companies like Apple or Google not included in the Dow Jones Industrial Average (DJIA) index? | That is a pretty exclusive club and for the most part they are not interested in highly volatile companies like Apple and Google. Sure, IBM is part of the DJIA, but that is about as stalwart as you can get these days. The typical profile for a DJIA stock would be one that pays fairly predictable dividends, has been around since money was invented, and are not going anywhere unless the apocalypse really happens this year. In summary, DJIA is the boring reliable company index. |
Break Even On Options Contracts | Simple answer: Breakeven is when the security being traded reaches a price equal to the cost of the option plus the option's strike price, assuming you choose to exercise it. So for example, if you paid $1.00 for,say, a call option with a strike price of $19.00, breakeven would be when the security itself reaches $20.00. That being said, I can't imagine why you'd "close out a position" at the breakeven point. You wouldn't make or lose money doing that, so it wouldn't be rational. Now, as the option approaches expiration, you may make adjustments to the position to reflect shifts in momentum of the stock. So, if it looks as though the stock may not reach the option strike price, you could close out the position and take your lumps. But if the stock has momentum that will carry it past the strike price by expiration, you may choose to augment your position with additional contracts, although this would obviously mean the new contracts would be priced higher, which raises your dollar cost basis, and this may not make much sense. Another option in this scenario is that if the stock is going to surpass strike price, it might be a good opportunity to buy additional calls with either later expiration dates or with higher strike prices, depending on how much higher you speculate the stock will climb. I've managed to make some money doing this, buying options with strike prices just a dollar or two higher (or lower when playing puts), because the premiums were (in my opinion) underpriced to the potential peak of the stock by the expiration date. Sometimes the new options were actually slightly cheaper than my original positions, so my dollar cost basis overall dropped somewhat, improving my profit percentages. |
If I helped my friend to file taxes; can I represent her on a phone call with FTB? | In order for you to be able to talk to the FTB on someone's behalf, that someone has to submit form 3520. Note that since you're not a professional, this form must be paper-filed (CRTP, EA, CPA or attorneys can have this filed on-line). Once the form is accepted by the FTB, you can contact the FTB on behalf of your friend. Pay attention: you're going to represent the partnership, not the individual. |
How do I interpret this analysis from Second Opinion? | No, you shouldn't buy it. The advice here is to keep any existing holdings but not make new purchases of the stock. |
Freehold and Leasehold for Pub/Bar? | You should be aware that many pubs in the London (indeed, the UK as a whole) are sold as a leasehold with a beer tie. This typically means you pay less rent for the building and premises, but must enter a contract with the Pub Company to buy their beer and day-to-day supplies. You have the legal option to instead pay market rent for some (but not all) Pub Cos, under certain conditions. If you go with leasehold, the landlord can usually close your pub at their will. This is becoming a quite common occurrence in the booming real estate market of London. While your interest will be in running a pub, the Pub Co's interest will be in getting change of use planning permission and selling it to a real estate developer. |
Best way to start investing, for a young person just starting their career? | First, congratulations on even thinking about investing while you are still young! Before you start investing, I'd suggest you pay off your cc balance if you have any. The logic is simple: if you invest and make say 8% in the market but keep paying 14% on your cc balance, you aren't really saving. Have a good supply of emergency fund that is liquid (high yielding savings bank like a credit union. I can recommend Alliant). Start small with investing. Educate yourself on the markets before getting in. Ignorance can be expensive. Learn about IRA (opening an IRA and investing in the markets have (good)tax implications. I didn't do this when I was young and I regret that now) Learn what is 'wash sales' and 'tax loss harvesting' before putting money in the market. Don't start out by investing in individual stocks. Learn about indexing. What I've give you are pointers. Google (shameless plug: you can read my blog, where I do touch upon most of these topics) for the terms I've mentioned. That'll steer you in the right direction. Good luck and stay prosperous! |
Why do stocks go up? Is it due to companies performing well, or what else? [duplicate] | Supply and Demand, pure and simple! There are two basic forms of this - a change in the quantity demanded/supplied at any given price, and a true change in the amount of demand/supply itself. Please note that this can be distinct from the underlying change in the value of the company and/or its expected future cash flows, which are a function of both financial performance and future expectations. If more people want the stock that are willing to sell it at a given price at a given point in time, sellers will begin to offer the stocks at higher prices until the market is no longer willing to bear the new price, and vice versa. This will reduce the quantity of stocks demanded by buyers until the quantity demanded and the quantity supplied once again reach an equilibrium, at which point a transaction occurs. Because people are motivated to buy and sell for different reasons at different times, and because people have different opinions on a constant flow of new information, prices change frequently. This is one of the reasons why executives of a recent IPO don't typically sell all of their stock at once. In addition to legal restrictions and the message this would send to the market, if they flooded the market with additional quantities of stock supplied, all else being equal, since there is no corresponding increase in the quantity demanded, the price would drop significantly. Sometimes, the demand itself for a company's stock shifts. Unlike a simple change in price driven by quantity supplied versus quantity demanded, this is a more fundamental shift. For example, let's suppose that the current demand for rare earth metals is driven by their commercial applications in consumer electronics. Now if new devices are developed that no longer require these metals, the demand for them will fall, regardless of the actions of individual buyers and sellers in the market. Another example is when the "rules of the game" for an industry change dramatically. Markets are behavioral. In this sense prices are most directly driven by human behavior, which hopefully is based on well-informed opinions and facts. This is why sometimes the price keeps going up when financial performance decreases, and why sometimes it does not rise even while performance is improving. This is also why some companies' stock continues to rise even when they lose huge sums of money year after year. The key to understanding these scenarios is the opinions and expectations that buyers and sellers have of that information, which is expressed in their market behavior. |
ISA trading account options for US citizens living in the UK | NL7 is most likely right. With the rise of regulatory burden some financial institutions are refusing to do business for which they are at risk of not being compliant (because of complexity) or where being compliant is to onerous. Would suggest you have a look at Good luck |
Cash flow implications of converting primary mortgaged residence to rental | The rental income is indeed taxable income, but you reduce the taxable portion of it by deducting expenses (including mortgage interest, maintenance, insurance, HOA, real estate tax, and of course depreciation). Due to the depreciation, you may end up breaking even, or having very little taxable income. Note that when you sell the property, your basis is reduced by the depreciation you were allowed to deduct (even if you haven't deducted it for whatever reason), and also the personal residence exclusion might no longer be applicable - i.e.: you'll have to pay capital gains tax. You will not be able to deduct a loss though if you sell now, so it may be better to depreciate it as a rental, rather then sell at a loss that won't affect your taxes. Also, consider the fact that the basis for the depreciation is not the basis you currently have in the property (because you're under water). You have to remember that when calculating the taxes. This is not a tax advice, and you should seek a professional help. |
Value of credit score if you never plan to borrow again? | In the United States, the Fair Credit Reporting Act allows companies to buy your credit information for "legitimate business needs." The legitimate use of credit scores and credit reporting varies state to state, but like it or not, you can expect a lot more non-lending use of your credit information in the future. Companies and individuals use credit reports as an assessment of general behavior because, unfortunately, they work. You've seen the disclaimers about "past performance…", but unfortunately in this case… past performance really has been shown to be a pretty reliable indicator of future behavior. So… |
How to estimate a reasonable amount for a signing bonus? | Signing bonuses are probably the most variable of all, as there is a general understanding that more personal factors are taken into account. As a result, HR isn't under a huge obligation to explain away the differences. In comparison, for salary there's the wide expectation that same job = same pay. Since there's so variable, but also fairly rare, "budget" isn't a main concern for many HR departments. And they certainly won't have a finely grained budget breakdown. "This year we'll pay $250.000 for headhunters, $50000 for relocation payments, $100,000 for pension transfers, $150.000 for stock option losses...". It's generally tossed on one big heap, "cost of hiring". So, what can you ask for? That's really a market question. What's your value to the company? How much of that is already reflected in salary and other benefits? The main downside to signing bonuses is that a company won't know how long you'd stay. Your value to the company is probably your monthly work. Therefore they cannot amortize that bonus over a fixed amount of months. What if you leave after 3 months? For that reason, a "conditional" signing bonus is a reasonable offer from your side. E.g. ask for one month salary, conditional on you staying for 24 months, and otherwise you'll repay them from your last salary. |
Why does Yahoo Finance and Google Finance not match historical prices? | I work on a buy-side firm, so I know how these small data issues can drive us crazy. Hope my answer below can help you: Reason for price difference: 1. Vendor and data source Basically, data providers such as Google and Yahoo redistribute EOD data by aggregating data from their vendors. Although the raw data is taken from the same exchanges, different vendors tend to collect them through different trading platforms. For example, Yahoo, is getting stock data from Hemscott (which was acquired by Morningstar), which is not the most accurate source of EOD stocks. Google gets data from Deutsche Börse. To make the process more complicated, each vendor can choose to get EOD data from another EOD data provider or the exchange itself, or they can produce their own open, high, low, close and volume from the actual trade tick-data, and these data may come from any exchanges. 2. Price Adjustment For equities data, the re-distributor usually adjusts the raw data by applying certain customized procedures. This includes adjustment for corporate actions, such as dividends and splits. For futures data, rolling is required, and back-ward and for-warding rolling can be chosen. Different adjustment methods can lead to different price display. 3. Extended trading hours Along with the growth of electronic trading, many market tends to trade during extended hours, such as pre-open and post-close trading periods. Futures and FX markets even trade around the clock. This leads to another freedom in price reporting: whether to include the price movement during the extended trading hours. Conclusion To cross-verify the true price, we should always check the price from the Exchange where the asset is actually traded. Given the convenience of getting EOD data nowadays, this task should be easy to achieve. In fact, for professional traders and investors alike, they will never reply price on free providers such as Yahoo and Google, they will most likely choose Bloomberg, Reuters, etc. However, for personal use, Yahoo and Google should both be good choices, and the difference is small enough to ignore. |
Is it worth buying real estate just to safely invest money? | The main point to consider is that your payments toward your own home replace your rent. Any house or apartment you buy will have changes in value; the value is generally going slowly up, but there is a lot of noise, and you may be in a low phase at any time, and for a long time. So seeing it as an investment is not any better than buying share or funds, and it has a much worse liquidity (= you cannot as easily make it to cash when you want to), and not in parts either. However, if you buy for example a one-room apartment for 80000 with a 2% mortgage, and pay 2% interest = 1600 plus 1% principal = 800, for a total of 2400 per year = 200 per month, you are paying less than your current rent, plus you own it after 30 years. Even if it would be worth nothing after 30 years, you made a lot of money by paying half only every month, and it probably is not worthless. You need to be careful not to compare apples with oranges - if you buy a house for 200000 instead, your payments would be higher than your rent was, but you would be living in your house, not in a room. For most people, that is worth a lot. You need to put your own value to that; if you don't care to have a lot more space and freedom, the extra value is zero; if you like it, put a price to it. With current interest rates, it is probably a good idea for most people to buy a house that they can easily afford instead of paying rent. The usual rules should be considered - don't overstretch yourself, leave some security, etc. Generally, it is rather difficult to buy an affordable house instead of renting today and not saving a lot of money in the process, so I would say go for it. |
What does an options premium really mean? | Intuitive? I doubt it. Derivatives are not the simplest thing to understand. The price is either in the money or it isn't. (by the way, exactly 'at the money' is not 'in the money.') An option that's not in the money has time value only. As the price rises, and the option is more and more in the money, the time value drops. We have a $40 stock. It makes sense to me that a $40 strike price is all just a bet the stock will rise, there's no intrinsic value. The option prices at about $4.00 for one year out, with 25% volatility. But the strike of $30 is at $10.68, with $10 in the money and only .68 in time premium. There's a great calculator on line to tinker with. Volatility is a key component of options trading. Think about it. If a stock rises 5%/yr but rarely goes up any more or less, just steady up, why would you even buy an option that was even 10% out of the money? The only way I can describe this is to look at a bell curve and how there's a 1/6 chance the event will be above one standard deviation. If that standard deviation is small, the chance of hitting the higher strikes is also small. I wrote an article Betting on Apple at 9 to 2 in which I describe how a pair of option trades was set up so that a 35% rise in Apple stock would return 354% and Apple had two years to reach its target. I offer this as an example of options trading not being theory, but something that many are engaged in. What I found curious about the trade was that Apple's volatility was high enough that a 35% move didn't seem like the 4.5 to 1 risk the market said it was. As of today, Apple needs to rise 13% in the next 10 months for the trade to pay off. (Disclosure - the long time to expiration was both good and bad, two years to recover 35% seemed reasonable, but 2 years could bring anything in the macro sense. Another recession, some worldwide event that would impact Apple's market, etc. The average investor will not have the patience for these long term option trades.) |
When a stock price rises, does the company get more money? | When a stock price rises, the company's assets are worth more. This doesn't mean it gets more cash directly, but it can liquidate (= sell) some of its stocks for a higher return than before. |
Is it better to pay an insurance deductible, or get an upgrade? | I'm going to guess you're on Verizon and your wife has an iPhone. I just went through this exact same situation with my mom's phone last week. When you're off contract with Verizon you're saving $25/month on your plan (at least, I am), so staying off contract is big. If you do the monthly payment you're paying full retail over 2 years, without interest, so you do stay off contract at least. Here's the thing, as long as it's a 16GB iPhone 5 or better, you're going to be able to Craigslist it for the cost of the deductible, no problems. To me that makes the decision pretty easy to make. As long as you can Craigslist it for more than the deductible, get the insurance replacement. Then when you want a new phone you can sell your old one. Since you can sell the phone, I think that makes the comparison between the deductible and deciding to pay off the $100 now and start payments on the new phone less relevant. The real comparison I'd suggest looking at is the value of the phone and the deductible. |
How to rebalance a portfolio without moving money into losing investments | If you are making regular periodic investments (e.g. each pay period into a 401(k) plan) or via automatic investment scheme in a non-tax-deferred portfolio (e.g. every month, $200 goes automatically from your checking account to your broker or mutual fund house), then one way of rebalancing (over a period of time) is to direct your investment differently into the various accounts you have, with more going into the pile that needs bringing up, and less into the pile that is too high. That way, you can avoid capital gains or losses etc in doing the selling-off of assets. You do, of course, take longer to achieve the balance that you seek, but you do get some of the benefits of dollar-cost averaging. |
Advice for opening an IRA as a newbie | First, a Roth is funded with post tax money. The Roth IRA deposit will not offset any tax obligation you might have. The IRA is not an investment, it's an account with a specific set of tax rules that apply to it. If you don't have a brokerage account, I'd suggest you consider a broker that has an office nearby. Schwab, Fidelity, Vanguard are 3 that I happen to have relationships with. Once the funds are deposited, you need to choose how to invest for the long term. The fact that I'd choose the lowest cost S&P ETF or mutual fund doesn't mean that's the ideal investment for you. You need to continue to do research to find the exact investment that matches your risk profile. By way of example, up until a few years ago, my wife and I were nearly 100% invested in stocks, mostly the S&P 500. When we retired, four years ago, I shifted a bit to be more conservative, closer to 80% stock 20% cash. |
Allocation between 401K/retirement accounts and taxable investments, as a young adult? | I would say yes, it makes sense to keep some money in taxable accounts. Retirement accounts are for retirement, and the various early withdrawal penalties are designed to enforce that. If you're anticipating using the money before retirement (e.g., for home purchase), it makes sense to keep it out of retirement accounts. On the other hand, be aware that, regardless of what kind of account it is in, you face the usual risk/return tradeoff. If you put your money in the S&P 500 and the S&P 500 tanks just before you were going to buy a house, your down payment evaporates and you will have to wait and buy a house later. You can manage this by shifting the allocation of this money and perhaps cashing it out if a certain amount is gained (i.e., it grows to the level of your target down payment) and you are close enough to the house purchase time that you don't want to risk it anymore. Basically, if you invest money for a pre-retirement use, you may want to keep it in a taxable account, but you also need to take account of when you'll need it and manage the risk accordingly. |
Should I give to charity by check or credit card? | In the US, if it's a large donation to a tax-exempt organization (401c3 or equivalent), you may want to consider giving appreciated equities (stocks, bonds, mutual fund shares which are now worth more than you paid for them). You get to claim the deduction's value at the time you transfer it to their account, and you avoid capital gains tax. They would pay the capital-gains tax when they redeem it for cash... but if exempt, they get the full value and the tax is completely avoided. Effectively, your donation costs you less for the same impact. It does take a bit of work to coordinate this with the receiving organization, and there may be brokerage fees, so it probably isn't worth doing for small sums.)Transfers within the same brokerage house may avoid those feee.) So again, you should talk to the charity about what's best. But for larger donations, where larger probably starts at a few thou, it can save you a nice chunk of change. |
Is per diem taxable? | Per-diem is not taxable, if all the conditions are met. Conditions include: You can find this and more in this IRS FAQ document re the per-diem. |
How can I increase my hourly pay as a software developer? | Start by going to Salary.com and figuring out what the range is for your location (could be quite wide). Then also look at job postings in your area and see if any of them mention remuneration (gov't jobs tend to do this). If possible go and ask other people in your field what they think the expected range of salary should be. Take all that data and create a range for your position. Then try and place yourself in that range based on your experience and skill set. Be honest. Compare that with your own pay. If your figures indicate you should be making significantly more, schedule a meeting with your boss (or wait for a yearly review if it's relatively soon) and lay out your findings. They can say: Be ready for curve balls like benefits, work environment and other "intangibles". If they say no and you still think your compensation is unfair, it's time to polish up your CV. The easiest way to get a job is to already have one. |
Totally new to finance, economy, where should I start? | A couple of good books I enjoyed and found very understandable (regarding the stock market): As for investment information you can get lost for days in Investopedia. Start in the stock section and click around. The tutorials here (free) give a good introduction to different financial topics. Regarding theoretical knowledge: start with what you know well, like your career or your other interests. You'll get a running start that way. Beyond that, it depends on what area of finance you want to start with. If it's your personal finances, I and a lot of other bloggers write about it all the time. Any of the bloggers on my blogroll (see my profile for the link) will give you a good perspective. If you want to go head first into planning your financial life, take a look at Brett Wilder's The Quiet Millionaire. It's very involved and thorough. And, of course, ask questions here. |
Why is routing number called ABA/ABN number? | With number of Banks increasing every country at some point in time adopted an Identification code. In US these are called ABA number because they are allocated by American Bankers Association, in UK Sort Codes ... like wise for other countries. See list here http://en.wikipedia.org/wiki/Bank_code In some countries the numbers are given by Central Bank. To enable internationl payments, the SWIFT body apart from message formats, allocated a SWIFT BIC [Bank identification Code] so that Banks can be globally identified. Currently IBAN being adopted in Europe & Australia to identify an Account [at a Bank] Uniquely across globe. In essence these number help uniquely identify a Location/Bank/Branch. The clearing house route the payments or collection instruments to the correct Bank on the basis of this number. |
I can make a budget, but how can I get myself to consistently follow my budget? | It's simple, really: Practice. Fiscal responsibility is not a trick you can learn look up on Google, or a service you can buy from your accountant. Being responsible with your money is a skill that is learned over a lifetime. The only way to get better at it is to practice, and not get discouraged when you make mistakes. |
Bond ETFs vs actual bonds | As keshlam said, an ETF holds various assets, but the level of diversification depends on the individual ETF. A bond ETF can focus on short term bonds, long term bonds, domestic bonds, foreign bonds, government bonds, corporate bonds, low risk, high risk, or a mixture of any of those. Vanguard Total International Bond ETF (BNDX) for instance tries to be geographically diverse. |
Lump sum annuity distribution — do I owe estate tax? | There can be Federal estate tax as well as State estate tax due on an estate, but it is not of direct concern to you. Estate taxes are paid by the estate of the decedent, not by the beneficiaries, and so you do not owe any estate tax. As a matter of fact, most estates in the US do not pay Federal estate tax at all because only the amount that exceeds the Federal exemption ($5.5M) is taxable, and most estates are smaller. State estate taxes might be a different matter because while many states exempt exactly what the Federal Government does, others exempt different (usually smaller) amounts. But in any case, estate taxes are not of concern to you except insofar as what you inherit is reduced because the estate had to pay estate tax before distributing the inheritances. As JoeTaxpayer's answer says more succinctly, what you inherit is net of estate tax, if any. What you receive as an inheritance is not taxable income to you either. If you receive stock shares or other property, your basis is the value of the property when you inherit it. Thus, if you sell at a later time, you will have to pay taxes only on the increase in the value of the property from the time you inherit it. The increase in value from the time the decedent acquired the property till the date of death is not taxable income to you. Exceptions to all these favorable rules to you is the treatment of Traditional IRAs, 401ks, pension plans etc that you inherit that contain money on which the decedent never paid income tax. Distributions from such inherited accounts are (mostly) taxable income to you; any part of post-tax money such as nondeductible contributions to Traditional IRAs that is included in the distribution is tax-free. Annuities present another source of complications. For annuities within IRAs, even the IRS throws up its hands at explaining things to mere mortals who are foolhardy enough to delve into Pub 950, saying in effect, talk to your tax advisor. For other annuities, questions arise such as is this a tax-deferred annuity and whether it was purchased with pre-tax money or with post-tax money, etc. One thing that you should check out is whether it is beneficial to take a lump sum distribution or just collect the money as it is distributed in monthly, quarterly, semi-annual, or annual payments. Annuities in particular have heavy surrender charges if they are terminated early and the money taken as a lump sum instead of over time as the insurance company issuing the annuity had planned on happening. So, taking a lump sum would mean more income tax immediately due not just on the lump sum but because the increase in AGI might reduce deductions for medical expenses as well as reduce the overall amount of itemized deductions that can be claimed, increase taxability of social security benefits, etc. You say that you have these angles sussed out, and so I will merely re-iterate Beware the surrender charges. |
Currently a Microsoft Money user on PC, need a replacement suitable for Mac | I switched from Quicken for Mac to Moneydance, and have not regretted it. I see only one weakness in MD compared with Quicken: its reporting is not very good. Your information is all there and well organized, but sometimes it's hard work to extract it in a convenient form. Of course a lot depends on what you need from the application, but I strongly recommend you take a look at MD before deciding. |
How do I figure out the next step in deciding to sell my home to the market or to a uniquely interested buyer? | We considered similar big renovations when putting our house on the market. The answer turns out to be pretty simple; unless you do renovation-type work as your day job, or have really good friends in the residential contracting business, sell as-is. You will virtually never get back the full price of bringing in a gen-con to renovate any space in your home; you do that when you want to spend the extra to make your home exactly what you wanted, so you can live in it for decades and get the enjoyment out of it. If you're trying to turn a profit with the renovation, like house-flippers do professionally, you look for easy repairs/renos, buy good-looking but inexpensive materials, and do the labor yourself. Whether you sell to the market or to a specifically-interested buyer is your call, but I will caution you that a specifically-interested buyer is going to be looking for a deal, or a steal. When marketing our house, we met with three different realtors. The first one was very overoptimistic about what we could list for (basically assuming that we could get the same price as a fully-upgraded version of our same floor plan with a pool out back). She also had a to-do list a mile long, and my wife and I both noticed that she looked very apprehensive about the house when looking around, even as she reassured us that selling it would be no trouble. We eventually realized why she was so apprehensive, and fired her before we got even halfway through her to-dos, which included major landscaping, new kitchen floors and countertops, etc, which would have cost us thousands and would not have gotten the house price even close to the target. The second one took a look at our half-finished refinish and told us to stop everything we were doing to update the minor stuff like paint and fixtures, saying we were putting lipstick on a pig; she would market the house to some cash buyers she knew personally, for about 80% of the list price our first realtor quoted, and implied that we should be kissing her boots for finding us a buyer willing to take the house off our hands at all. During the tour, she pointed out "problems" with the house that weren't even there, like foundation issues such as sloping floors, in an attempt to scare us into going with her strategy. We sniffed that out pretty quickly, showed her the door at the end of the initial consult and never called back. This, by the way, is the kind of thing you want to avoid; unless your home is really dilapidated or torn apart with unfinished major renos, it should have decent value on the market and you shouldn't have to resort to a cash buyer looking for a flip or a rental property on the cheap. Just like Goldilocks, our third choice was just right. He saw all the same comparables, toured our house, and recommended that we offer about $20k less than the fully-upgraded version (but still about $20k more than the second realtor was estimating), targeting a "real" buyer and not an investor or flipper, but at a price that would make the lack of upgrades more acceptable. We finished the paint and finish projects we started, brought in a weekend's worth of scheduled showings, and our house was under contract for full price within 3 days, giving us the extra $20k worth of down payment to put into our new house. In summary, I highly recommend a realtor, because the one we eventually listed with worked his butt off on the business side while we fixed up the house. However, make sure you find the right one; realtors are ultimately in business for themselves, and their ultimate interest is in getting your house sold and getting you into a new one. That is what gets them paid. Some of them will do it the right way, working the deal with other realtors and their prospective buyers to get you what you need. Others will take the easy way out, at your expense, either giving you bad advice about how to present and price your home so that you end up on the market for 6 months with no offers, or handing your house to their business buddies at a discount. |
Which is better when working as a contractor, 1099 or incorporating? | I'll just re-post my comment as an answer as i disagree with Michael Pryor. According to this article (and few others) you may save money by incorporating. These factors don’t change the general payroll tax advantage of an S corporation, however: A S corporation can often save business owners substantial amounts of payroll tax if the business profit greatly exceeds what the business needs to pay owners for their work. |
May 6, 2010 stock market decline/plunge: Why did it drop 9% in a few minutes? | Part of it was an Oops, but not all of it. There were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock. The drop in that stock's price was enough to trigger "sell" orders across the market. Source: http://www.msnbc.msn.com/id/36983596/ns/business-stocks_and_economy/ |
Can I cover a short sale with the stock I already own? | Yes, you call the broker and tell him to use those shares to deliver to the short position. |
How can I avoid international wire fees or currency transfer fees? | One way is to wire transfer large amounts. If you transfer $5,000 at one go, that $50 fee works out to 1%, same as the $5 on a $500 ATM withdrawal (and ATM fees, hidden and explicit, tend to be higher than $5). The downside is exchange rate risk (taking more money at one go exposes you to that day's rate, good or bad, vs taking it in multiple chunks). If you're American, you also have to report large transfers and foreign balances on your taxes. Shopping around for a good home bank (with low wire & foreign ATM fees), is quite important. |
Do individual stocks have futures trading | There's a market for single stock futures. The market (however small) is OneChicago, "an Equity Finance Exchange offering security futures products." I don't know how easy access is for retail investors. |
Options for the intelligent but inexperienced | I strongly suggest you read up the Option Greeks. You can be right about a stocks price movement and still not make money b/c other factors come into play from time or volatility. For a "free" option hedge you can look at collars. Buying puts and selling calls to offset the debit you pay for the transaction. Ex: AAPL is 115, You buy the 110 puts and sell the 120 calls. This gives you a collar around he current price. Your hedged below 110 and can still participate in upside move to 120. Also look into time value. Time decays exponentially in the last 30 days. If you are long this hurts you, if you are short(selling) this is good. Be sure to take this into account. Delta: relation of the option to the underlying stock move on a .01-1 scale, .50 is "normal." Deep in the money options have higher deltas. It is possible other factors can offset this delta move. This is why people will lose money on earnings plays even though they are right. EX: Say you buy an AAPL call at 120, earnings comes out and the stock goes to 121. Even though you are "in the money" your contract may still have less value than what you paid because of VOLATILITY collapse. The market place knows earnings move a stock and that is factored into the price of the options expected volatility. As mentioned watch out for dividend dates. Always be aware of dividend dates and earnings dates and if your contract is going to cover one of these events. Interest rates have an effect as well but since the Fed has near 0 rates there is little impact at the present. Though this could certainly change if the fed starts raising rates. Research the Black Scholes Pricing model. Whenever you trade always think about what the other guys is thinking. Sometimes we forget their is someone else on the other side of my trade that thinks essentially the exact opposite of me. Its a zero sum game. As far as choosing strikes you can look at calculating the At THe money straddle to see if the options are "cheap" [stock Price * Implied Volatility (for 30, 60, 90 days Depending on your holding period)* Sq root of days to expiration] / 19 (which is sq root of days/yr) Add and subtract this number to the current stock price to give you an approximate 1 standard deviation of expected price movement. Keeping with our example. AAPL at 115, lets say your formula spits out a 6; therefore price range is expected to be 109 to 121 for the time period. Helpful for selling options, I would sell the 122 call or the 108 puts. Hope this helps. Start small and get a feel for things. |
How exactly does a country devalue its currency? | Does some official tell the Foreign Exchange the the new exchange rate for the yuan is 0.98 * the current exchange rate? For China (and other countries with fixed/controlled exchange rates) - that's exactly how it happens. Does it just print more? This is the way to go for fully convertible currencies (like the USD, EUR, GBP, and handful of others, there're about 20 in the world). Flood the market and as with any commodity - flooding the market leads to a price drop. Obviously "just print more" is much harder to do than picking up the phone and saying "Now you're buying/selling dollars at this price and if you don't I'll have you executed". |
What are my investment options in real estate? | Real estate investment is a proven creator of wealth. Check into the history of the rich and you will find real estate investment. Starting your investment in multi-family is a great idea. It is a good way to gain experience in real estate while exponentially increasing cash flow. If you turn the properties over to a reputable property management company, your cash flow will be a little less but so will your headaches. (Expect to pay 8 - 10% of gross income.) You could start investing now by looking into discounted real estate such as foreclosures, tax sales, short sales etc while the market is still depressed. This way your return on investment should be higher. From there you could expand into land development (i.e. subdivision) or commercial investments. Commercial properties with triple net leases can be a great low-stress investment opportunity (but they take more cash upfront). Attending some local real estate investment classes would be a great idea for starters. |
After Market Price change, how can I get it at that price? | Buying stocks is like an auction. Put in the price you want to pay and see if someone is willing to sell at that price. Thing to remember about after hours trading; There is a lot less supply so there's always a larger bid/ask price spread. That's the price brokers charge to handle the stocks they broker over and above the fee. That means you will always pay more after the market closes. Unless it is bad news, but I don't think you want to buy when that happens. I think a lot of the after market trading is to manipulate the market. Traders drive up the price overnight with small purchases then sell their large holdings when the market opens. |
Pay for a cheap car or take out a loan? | Buying a car is a very big financial decision. There are three major factors to decide which car to buy: Pick two because you can't have all three. You can either have a reliable car that has cheap running costs but will be expensive to buy or a cheap car that is unreliable. If you are mechanically minded then reliability might not be that important to you. However, if you must get to work on time every day then owning a car that breaks down once every six months might be something you wish to avoid. There are a lot of hidden costs that should be thought about very carefully when considering purchasing a car: In my country, annual car registration costs are around $650. I budget around $1000 for maintenance each year (a major + minor service and some extra repair work). When I factor in an amount for depreciation, that brings the running costs of the car to somewhere between $1500 and $2000 per annum before I've driven it anywhere. Generally I will fill up my car for $50 around once a month (I don't drive too often) which makes my total cost of ownership somewhere around $2500 per annum. When I was driving my car to work daily, the petrol costs were much higher at around $50 per week, which made my TCO somewhere around $4500 p.a. And this is on an extremely reliable, fuel efficient 2006 model car which cost me $18k to purchase. I have no debt on this car. But the car itself is a liability. Any car will be a liability. I understand that petrol prices are ridiculously low in the US and probably registration is lower as well. In this case you will need to adjust your figures and do the maths to work out what your annual cost of ownership will be. There are three alternatives to car ownership to consider which may save you money: Public transportation and car pooling are highly recommended from a financial perspective, though you may not have access to either in your situation. Moving closer to work may also be an option, though for many jobs this may increase your cost of living. If you decide that you do need a car and decide that $2000 is not going to get you the car you feel you need ($2000 usually does not get you much), you will need to decide how to finance the car. You will want to avoid most dealer-based finance deals. Be very wary of any dealer offering interest free finance as they usually have some pretty nasty conditions. Getting a loan from your parents or another family member is usually the best option. Otherwise consider getting a personal loan, which will have a lower interest rate than a credit card or dealer finance. Another option could be to get a credit card on an interest-free promotional deal which you could pay down before the interest kicks in. Be warned though, these deals usually require you to pay off your whole balance before the due date or they will back-charge interest on the whole amount. In short, these are the decisions that you will need to make: |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | Credit Scores / Rates are based on sometimes simple and sometimes quite complex Statistical Models (Generalised Linear Models, Neural Networks, Regression and Classification Trees, Mixture Models, etc).This depends on whether it is something more general like FICO or what large banks develop in-house. In any case, there are many legislation-dependent factors (Qualitative such as education, occupation security, sex, etc, payment history; or Quantitative such as age, liquidity and leverage ratios, etc). Now, most model that are used today are propriety and closely held trade secrets. The most important reason for this is actually because of the databases that feed the models. More better quality data is what makes the real difference ... although at the cutting-edge, the mathematicians/statisticians/computer scientists that design the algorithms will make a huge difference. Now, back to the main thing: The Credit Score/Rate is meant to be used only as an indicator for representing the Probability of Default ("How likely you are to default on your obligation towards me?" is what it means and that is largely based upon "Has company/he/she honoured his financial obligations?") of a certain consumer. In more sophisticated models, they may also use your industry sector or occupational and financial security to predict the future behaviour. However, this "Credit Score" has meaning only in relation to a "Credit Limit" ("Can you pay back my $X?"). The credit limit on the other hand is defined by your income level, debt/asset, etc). As a credit risk analyst, whether we are dealing with large corporate loans, mortgages, personal loans, etc), the principles are the same: One thing to consider is that factors considered in determining a credit score usually do not have a simple linear relationship. Consumer Profile types such as utilisation rate are a lot more about EFFECT than CAUSE: The most important thing is to honour your obligations, whether you pay before or after you spend makes little difference, so long as you pay in full and prior to maturity, your rate/score will improve with time. Financial Institutions have many ways to make money of everyone. Some, such as interest rates and fees are directly charged to you and some are charged to your goods-and-services providers. That has no bearing on your score. Sometimes it even makes sense to take on customers with rock-bottom ratings, lend them lots of money, and charge them to dirt. As you may well know, the recent financial crisis - with ongoing after-shocks and tremors - was the result of such practices. |
Faster degree with debt or slower degree with no debt? | Basically do some math on the 2 schools. Let's say you know it will take 4 years if you go the cheaper route, at $8k/yr, plus the $300/month, total cost: $46,400. If you (for these purposes) do not have to pay back new loans until school is completed, (and depending on the rate of those loans), you would need approx $6k/yr in loans, plus the same costs ($300/month + $8k/yr to cover the other part of tuition). Let's say the expensive school takes 3 years to complete, which means you're out of pocket $34,800 and in debt an additional $18,000, totaling $52,800. This means that to make the 2nd school worth it (assuming your rates don't kill you, etc) you should have an increased earning potential of at least $6,400/yr after you get your degree. If you can finish in 2 years, your costs are: $23,200 + $12k, and you don't even have to change your earning potential to come out ahead. Other factors to consider are: If you aren't following any of the math, or want to post more information, just comment back to me, and I'll try to explain further. Best of luck! |
If a stock doesn't pay dividends, then why is the stock worth anything? | The answer is Discounted Cash Flows. Companies that don't pay dividends are, ostensibly reinvesting their cash at returns higher than shareholders could obtain elsewhere. They are reinvesting in productive capacity with the aim of using this greater productive capacity to generate even more cash in the future. This isn't just true for companies, but for almost any cash-generating project. With a project you can purchase some type of productive assets, you may perform some kind of transformation on the good (or not), with the intent of selling a product, service, or in fact the productive mechanism you have built, this productive mechanism is typically called a "company". What is the value of such a productive mechanism? Yes, it's capacity to continue producing cash into the future. Under literally any scenario, discounted cash flow is how cash flows at distinct intervals are valued. A company that does not pay dividends now is capable of paying them in the future. Berkshire Hathaway does not pay a dividend currently, but it's cash flows have been reinvested over the years such that it's current cash paying capacity has multiplied many thousands of times over the decades. This is why companies that have never paid dividends trade at higher prices. Microsoft did not pay dividends for many years because the cash was better used developing the company to pay cash flows to investors in later years. A companies value is the sum of it's risk adjusted cash flows in the future, even when it has never paid shareholders a dime. If you had a piece of paper that obligated an entity (such as the government) to absolutely pay you $1,000 20 years from now, this $1,000 cash flows present value could be estimated using Discounted Cash Flow. It might be around $400, for example. But let's say you want to trade this promise to pay before the 20 years is up. Would it be worth anything? Of course it would. It would in fact typically go up in value (barring heavy inflation) until it was worth very close to $1,000 moments before it's value is redeemed. Imagine that this "promise to pay" is much like a non-dividend paying stock. Throughout its life it has never paid anyone anything, but over the years it's value goes up. It is because the discounted cash flow of the $1,000 payout can be estimated at almost anytime prior to it's payout. |
How important is reconciling accounts for a small LLC (Quickbooks)? | I would suggest opening a new account (credit card and bank) for just your business. This protects you in multiple ways, but is no bigger burden for you other than carrying another card in your wallet. Then QB can download the transactions from your website and reconciling is a cinch. If you got audited, you'd be in for a world of pain right now. From personal experience there are a few charges that go unnoticed that reconciling finds every month at our business. We have a very strict process in place, but some things slip through the cracks. |
Credit Card Purchase - 'it is the bank's money no[t] yours' ? | Yes, they're referring to the credit card dispute (chargeback) process. In the case of dispute, credit card company will refund/freeze your charge so you don't have to pay until the dispute is resolved (or at all, if resolved in your favor). If the dispute is resolved in your favor, your credit card company will charge back the merchant's service provider which in turn will charge back (if it can) the merchant itself. So the one taking the most risk in this scenario is the merchant provider, this is why merchants that are high risk pay significantly higher fees or get dropped. |
Are Forex traders forced to use leverage? | I recommended Currency Trading For Dummies, in my answer to Layman's guide to getting started with Forex (foreign exchange trading)? The nature of the contract size points toward only putting up a fraction of the value. The Euro FX contract size is 125,000 Euro. If you wish to send the broker US$125K+ to trade this contract, go ahead. Most people trade it with a few thousand dollars. |
How can I stop wasting food? | Let me start out by saying I know your pain. One of the most important things to do is have the basics in stock in your larder. They are the sorts of things that keep well, and you can make great simple meals from them whenever, without having to worry about them going off in a matter of days. A simple inventory like this - http://www.thesimpledollar.com/2006/12/06/the-well-stocked-kitchen-staple-foods-you-should-always-have-on-hand/ - can make a big difference. (This list is good, but check the comments for additional suggestions. There are a few extras that commenters reckon you should have and I think they are right - I certainly have more than just what's on that list.) And remember - frozen veg may or may not be as nutritious as fresh, but they are better than nothing. |
How to rebalance a portfolio without moving money into losing investments | You are very correct, rebalancing is basically selling off winners to buy losers. Of course the thinking is that selling a winner that has already increased 100% on the basis that it has doubled so it is likely to go down in the near future. However, just look at Apple as an example, if you bought Apple in June 2009 for $20 (adjusted price) and sold it as part of rebalancing when it rose to $40 (adjusted price) in September 2010, you would have missed out on it reaching over $95 2 years later. Similarly you look to rebalance by buying assets which have been battered (say dropped by 50%) on the basis that it has dropped so much that it should start increasing in the near future. But many times the price can fall even further. A better method would be to sell your winners when they stop being winners (i.e. their uptrend ends) and replace them with assets that are just starting their winning ways (i.e. their downtrend has ended and are now starting to Uptrend). This can be achieved by looking at price action and referring to the definitions of an uptrend and a downtrend. Definition of an uptrend - higher highs and higher lows. Definition of a downtrend - lower lows and lower highs. |
UK Limited Company paying third party medical costs | One possibility to consider would be making an arrangement with a registered UK charity where you would donate the necessary amount for the specific purpose of covering medical costs of that particular person. Charitable donations are expressly deductible from business profits. Some charities may be genuinely interested in helping people from developing countries get quality medical help that's not available in those countries. There may be some organizations in the proposed beneficiary's country that have contacts among the UK charities. PS. I am not a lawyer or an accountant, nor do I claim to be either. The above is not a legal or accounting advice. Consider seeking professional assistance. |
Understanding taxes when buying goods at a store | Grocery food is not subject to sales tax in Maryland, but some food is taxed depending on category or preparation. So you must have had a combination of grocery and taxable foods. One of the cheaper items you purchased was subject to a whopping penny of sales tax. http://taxes.marylandtaxes.com/Individual_Taxes/Taxpayer_Assistance/Individual_Tax_FAQs/Use_Tax_FAQs/q4.shtml In general, food sales are subject to Maryland's 6 percent sales and use tax unless a person operating a substantial grocery or market business sells the food for consumption off the premises and the food is not a taxable prepared food. A grocery or market business is considered to be "substantial" if the sales of grocery or market food items total at least 10 percent of all food sales. |
In the stock market, why is the “open” price value never the same as previous day's “close”? | What most of these answers here seem to be missing is that a stock "price" is not exactly what we typically expect a price to be--for example, when we go in to the supermarket and see that the price of a gallon of milk is $2.00, we know that when we go to the cash register that is exactly how much we will pay. This is not, however, the case for stocks. For stocks, when most people talk about the price or quote, they are really referring to the last price at which that stock traded--which unlike for a gallon of milk at the supermarket, is no guarantee of what the next stock price will be. Relatively speaking, most stocks are extremely liquid, so they will react to any information which the "market" believes has a bearing on the value of their underlying asset almost (if not) immediately. As an extreme example, if allegations of accounting fraud for a particular company whose stock is trading at $40 come out mid-session, there will not be a gradual decline in the price ($40 -> $39.99 -> $39.97, etc.)-- instead, the price will jump from $40 to say, $20. In the time between the the $40 trade and the $20 trade, even though we may say the price of the stock was $40, that quote was actually a terrible estimate of the stock's current (post-fraud announcement) price. Considering that the "price" of a stock typically does not remain constant even in the span of a few seconds to a few minutes, it should not be hard to believe that this price will not remain constant over the 17.5 hour period from the previous day's close to the current day's open. Don't forget that as Americans go to bed, the Asian markets are just opening, and by the time US markets have opened, it is already past 2PM in London. In addition to the information (and therefore new knowledge) gained from these foreign markets' movements, macro factors can also play an important part in a security's price-- perhaps the ECB makes a morning statement that is interpreted as negative news for the markets or a foreign government before the US markets open. Stock prices on the NYSE, NASDAQ, etc. won't be able to react until 9:30, but the $40 price of the last trade of a broad market ETF at 4PM yesterday probably isn't looking so hot at 6:30 this morning... don't forget either that most individual stocks are correlated with the movement of the broader market, so even news that is not specific to a given security will in all likelihood still have an impact on that security's price. The above are only a few of many examples of things that can impact a stock's valuation between close and open: all sorts of geopolitical events, announcements from large, multi-national companies, macroeconomic stats such as unemployment rates, etc. announced in foreign countries can all play a role in affecting a security's price overnight. As an aside, one of the answers mentioned after hours trading as a reason--in actuality this typically has very little (if any) impact on the next day's prices and is often referred to as "amateur hour", due to the fact that trading during this time typically consists of small-time investors. Prices in AH are very poor predictors of a stock's price at open. |
Do personal checks expire? [US] | When I last asked a certain large bank in the US (in 2011 or 2012), they didn't offer expiring personal checks. (I think they did offer something like that for business customers.) They also told me that, even if the payee cashes the check a year later and the check bounces, even if it's because I have closed the respective account, he will be able to go to the police and file a report against me for non-payment. (This is what the customer service rep told me on the phone after a bit of prodding, but someone else feel free to improve this answer and fix details or disagree; it's hard to believe and quite outrageous if true.) |
Why is the stock market price for a share always higher than the earnings per share? | First, the earnings are per year, not per quarter. Why would you expect to get a 100% per year return on your money? The earnings can go one of two ways. They can be retained, reinvested in the company, or they can be distributed as a dividend. So, the 'return' on this share is just over 5%, which is competitive with the rate you'd get on fixed investments. It's higher, in fact, as there's the risk that comes with holding the stock. |
Retirement formula for annual compound interest with changing principal | The equation is the same one used for mortgage amortization. You first want to calculate the PV (present value) for a stream of $50K payments over 20 years at a10% rate. Then that value is the FV (future value) that you want to save for, and you are looking to solve the payment stream needed to create that future value. Good luck achieving the 10% return, and in knowing your mortality down to the exact year. Unless this is a homework assignment, which need not reflect real life. Edit - as indicated above, the first step is to get that value in 20 years: The image is the user-friendly entry screen for the PV calculation. It walks you though the need to enter rate as per period, therefore I enter .1/12 as the rate. The payment you desire is $50K/yr, and since it's a payment, it's a negative number. The equation in excel that results is: =PV(0.1/12,240,-50000/12,0) and the sum calculated is $431,769 Next you wish to know the payments to make to arrive at this number: In this case, you start at zero PV with a known FV calculated above, and known rate. This solves for the payment needed to get this number, $568.59 The excel equation is: =PMT(0.1/12,240,0,431769) Most people have access to excel or a public domain spreadsheet application (e.g. Openoffice). If you are often needing to perform such calculations, a business finance calculator is recommended. TI used to make a model BA-35 finance calculator, no longer in production, still on eBay, used. One more update- these equations whether in excel or a calculator are geared toward per period interest, i.e. when you state 10%, they assume a monthly 10/12%. With that said, you required a 20 year deposit period and 20 year withdrawal period. We know you wish to take out $4166.67 per month. The equation to calculate deposit required becomes - 4166.67/(1.00833333)^240= 568.59 HA! Exact same answer, far less work. To be clear, this works only because you required 240 deposits to produce 240 withdrawals in the future. |
Comparing IRA vs 401K's rate-of-return with dollar cost averaging | The number you are trying to calculate is called the Internal Rate of Return (IRR). Google Spreadsheets (and excel) both have an XIRR function that can do this for you fairly simply. Setup a spreadsheet with 1 column for dates, 1 column for investment. Mark your investments as negative numbers (payment to invest). All investments will be negative. Mark your last row with today's date and today's valuation (positive). All withdrawals will be positive, so you are pretending to withdrawal your entire account for the purpose of calculation. Do not record dividends or other interim returns unless you are actually withdrawing money. The XIRR function will calculate your internal rate of return with irregularly timed investments. Links: Article explaining XIRR function (sample spreadsheet in google docs to modify) |
Where to park money low-risk on interactivebrokers account? | I would refrain from commenting on market timing strategy, but please don't park extra AUD cash in IB. Park cash in your local bank high interest savings, and get a Margin account at IB. When you want to pull the trigger, use margin loan to buy stocks immediately, then transfer cash from local bank to IB afterwards. |
Is there any drawback in putting all my 401K into a money market fund? | (After seeing your most recent comment on the original question, it looks like others have answered the question you intended, and described the extreme difficulty of getting the timing right the way you're trying to. Since I've already typed it up, what follows answers what I originally thought your question was, which was asking if there were drawbacks to investing entirely in money market funds to avoid stock volatility altogether.) Money market funds have the significant drawback that they offer low returns. One of the fundamental principles in finance is that there is a trade-off between low risk and high returns. While money market funds are extremely stable, their returns are paltry; under current market conditions, you can consider them roughly equivalent to cash. On the other hand, though investing in stocks puts your money on a roller coaster, returns will be, on average, substantially higher. Since people often invest in order to achieve personal financial stability, many feel naturally attracted to very stable investments like money market funds. However, this tendency can be a big mistake. The higher returns of the stock market don't merely serve to stoke an investor's greed, they are necessary for achieving most people's financial goals. For example, consider two hypothetical investors, saving for retirement over the course of a 40-year career. The first investor, apprehensive Adam, invests $10k per year in a money market fund. The second investor, brave Barbara, invests $10k per year in an S&P 500 index fund (reinvesting dividends). Let's be generous and say that Adam's money market fund keeps pace with inflation (in reality, they typically don't even do that). At the end of 40 years, in today's money, Adam will have $10,000*40 = $400,000, not nearly enough to retire comfortably on. On the other hand, let's assume that Barbara gets returns of 7% per year after inflation, which is typical (though not guaranteed). Barbara will then have, using the formula for the future value of an annuity, $10,000 * [(1.07)^40 - 1] / 0.07, or about $2,000,000, which is much more comfortable. While Adam's strategy produces nearly guaranteed results, those results are actually guaranteed failure. Barbara's strategy is not a guarantee, but it has a good chance of producing a comfortable retirement. Even if her timing isn't great, over these time scales, the chances that she will have more money than Adam in the end are very high. (I won't produce a technical analysis of this claim, as it's a bit complicated. Do more research if you're interested.) |
Options “Collar” strategy vs regular Profit/Loss stops | consider capital requirements and risk timeframes. With options, the capital requirements are far smaller than owning the underlying securities with stops. Options also allow one to constrain risk to a timeframe of ones own choosing (the expiration date of the contract). If you own or are short the underlying security, there is no time horizon. |
Basic mutual fund investment questions | You asked 3 questions here. It's best to keep them separate as these are pretty distinct, different answers, and each might already have a good detailed answer and so might be subject to "closed as duplicate of..." That said, I'll address the JAGLX question (1). It's not an apples to apples comparison. This is a Life Sciences fund, i.e. a very specialized fund, investing in one narrow sector of the market. If you study market returns over time, it's easy to find sectors that have had a decade or even two that have beat the S&P by a wide margin. The 5 year comparison makes this pretty clear. For sake of comparison, Apple had twice the return of JAGLX during the past 5 years. The advisor charging 2% who was heavy in Apple might look brilliant, but the returns are not positively correlated to the expense involved. A 10 or 20 year lookback will always uncover funds or individual stocks that beat the indexes, but the law of averages suggests that the next 10 or 20 years will still appear random. |
How do you determine “excess cash” for Enterprise Value calculations from a balance sheet? | Excess Cash = Cash & Equivalents + Long-Term Investments - Current Liabilities The problem this calculation of excess cash is that "long-term investments" can be illiquid things like real estate. Another flaw is that it gives no credit for Current Assets, like receivables, which can be used to offset Current Liabilities. The first thing I'd do is "net out" Current Assets and Current Liabilities, then add Cash back in. Excess Cash = Current Assets - Current Liabilities + Cash & Equivalents. It would be nice if GAAP would require Long-Term Investments to be broken out as a) liquid long-term investments (stocks, bonds) b) illiquid long-term investments (real estate, private equity, etc) |
Understanding a Trailing Limit if Touched Order | This is rather simple if you understand a trailing limit order but to be sure I am going to explain a limit, trailing limit, and trailing LIT order. I am going to use an example assuming that you already own a stock and want to sell it. Limit Order I place an order to sell 100 PG @ 65.00. This order will only be executed if the bid price of PG is at $65.0000 or greater. Trailing Limit Order I place an order to sell 100 CAT @ 85.25 with a trailing 5%. This order will be executed when CAT drops 5% below the highest point it reaches after you place this order. So if you place this order at 85.25 and the stock drops 5% to $80.9875, your order will be executed. However, if the stock jumps to $98, the order will not be executed until the stock falls to $93.10. The sell point will go up with the stock and will always remain at the specified % or $ amount behind the high point. Trailing Limit If Touched Order I place an order to sell 100 INTC @ 24.75 with a trailing 5% if the stock touches $25.00. Essentially, this is the same as the trailing limit except that it doesn't take effect until the stock first gets $25.00. I think the page they provide to explain this is confusing because I think they are explaining it from the shorting a stock perspective instead of the selling a stock you want to profit from. I could also be wrong in how I understand it. My advice would be to either call their customer support and ask for a better explanation or what I do in my finances, avoid things I don't understand. |
Is Weiss Research, Inc. a legitimate financial research company? | Weiss Ratings is an independent company providing data and analysis for the bank and insurance industries. We’ve published the Weiss Financial Strength Ratings for banking institutions and insurance companies since 1989 and continue to use the methodology praised by the GAO back in 1994. Weiss Ratings has consistently graded failed institutions in the lowest Weiss Rating tier at the time of failure. We invite you to look at the Weiss Ratings' track record. |
Will there always be somebody selling/buying in every stock? | Many people assume that if the price of something is $10 and they have 1,000 of that thing, they should expect to be able to sell them for something around $10,000. Such an assumption may hold much of the time, but it doesn't always. Worse, the cases where it fails to hold are often those where it would be relied upon most heavily. Such an assumption should thus be considered dangerous. In a liquid market, the quantity of a something that people would be willing to buy at something close to the market price will be large relative to the quantity that people would seek to sell in the short term. If at some moment in time one person in the market was willing to immediately buy 500 shares at $9.98 and another was willing to immediately buy 750 at $9.97, someone seeking to sell 1,000 shares could immediately receive $997.50 for them (selling 500 to the first person and 500 to the second, who would then be ready to buy 250 more from the first person who was willing to sell for $9.97). Such behavior would be in line with what many people's assumptions. In an illiquid market, however, the quantity of something that people would be willing to buy near market price could be surprisingly low. This is more often a problem in the marketplace of things like collectibles than of stocks, but the same thing can happen in the stock market. If there's one potential buyer for a stock who thinks it's overpriced but has potential and would be worth $9.50, but that person only has $950 to spend, and nobody else thinks the stock would be worth more than $0.02/share, then until people sold a total of 100 shares the price would be $9.50, but after that the price would drop instantly to $0.02. There would be no "cushioning" of the fall. If the person with 1,000 shares was first in line, he'd get to sell 100 shares for $950 to the aforementioned seller, but would be unable to get more than $18 for the remaining 900. A major danger with markets is that markets which are perceived as liquid attract people to the buying side, while those which are seen as illiquid repel people. The danger in the latter is obvious (having people flee a seemingly-illiquid market will reduce its liquidity further) but the former is just as bad. Having people flock to a market because of its perceived liquidity will increase its liquidity, but can also create a "false price floor", causing demand to appear much stronger than it actually is. Unless real demand increases to match the false price floor, the people who buy at the higher price will never be able to recoup their investment. |
What is the meaning of “writing put options”? | Writing options means "selling" options and "put" options are contracts to sell a defined security (the underlying), at a specific date (expiration date) and at a specific price (strike price). So, writing put options simply mean selling to others contracts to sell. Your profit is limited to the premium but your loss may be unlimited in a falling market. |
Can I work with two or more mortgage brokers at the same time? | While it is possible, it's not a really good use of your time or theirs. Mortgage brokers have access to dozens of lenders, can assemble deals you can't even dream of, and are much more intimately acquainted with the latest lending rule changes than you are. They are paid by the lenders to bring them business, so there is no cost to you. A mortgage broker has the advantage of leverage because he can be placing 10 mortgages per day, while you will be placing one, once. Your mortgage broker is working on your behalf. Get out of his way and let him do his job so you can concentrate on other matters. If your concern is that you want the lowest rate, share that with your broker and let him find the best rate for you. If you want a deal where you can put a larger prepayment down, let him know that and he will find you what you're looking for. |
So the vending machine tore my $5 in pieces. What now? | According to the U.S. Bureau of Engraving and Printing, if you have clearly more than one-half of the current bill remaining, you should be able to take it to your bank and exchange it. But if for some reason your bank will not take it, you can submit it to Bureau of Engraving and Printing Office of Currency Standards. Question asked on http://www.moneyfactory.gov/faqlibrary.html I have some currency that was damaged. My bank will not exchange it for undamaged currency. What can I do? The Bureau of Engraving and Printing's Office of Currency Standards processes all requests for reimbursement for damaged United States currency. They decide the redemption value of torn or otherwise unfit currency by measuring the portions of the notes submitted. Generally, they reimburse the full face value if clearly more than one-half of the original note remains. Currency fragments measuring less than one-half are not redeemable. Go to the Damaged Money section of our website for additional information and the procedures to redeem mutilated currency. However take notice of this: Any badly soiled, dirty, defaced, disintegrated, limp, torn, worn, out currency note that is CLEARLY MORE than one-half of the original note, and does not require special examination to determine its value. These notes should be exchanged through your local bank. |
Was this a good deal on a mortgage? | I'm a visual person so the idea of a 30 year mortgage didn't make much sense to me until I could see it This isn't exact but it's pretty close. The green Interest lines represent the money you're giving to the bank as a "thank you" for lending you a large amount of cash up front. As you've already figured out, that's at least the same amount as the price of the home! As much down-payment as is reasonable. Keep one eye on beating the interest Best of luck! |
Good book-keeping software? | You can try Wave Accounting. Its a free software for Small Business and web-based. http://waveaccounting.com/ |
Unmarried couple buying home, what are the options in our case? | You are thinking about this very well. With option one, you need to think about the 5 D's in the contract. What happens when one partner becomes disinterested, divorced (break up), does drugs (something illegal), dies or does not agree with decisions. One complication if you buy jointly, and decide to break up/move, on will the other partner be able to refinance? If not the leaving person will probably not be able to finance a new home as the banks are rarely willing to assume multiple mortgage risks for one person. (High income/large down payment not with standing.) I prefer the one person rents option to option one. The trouble with that is that it sounds like you are in better position to be the owner, and she has a higher emotional need to own. If she is really interested in building equity I would recommend a 15 year or shorter mortgage. Building equity in a 30 year is not realistic. |
Risks associated with investing in dividend paying stocks for short term income. Alternatives? | Your back of the envelope calculation shows an income of about 5.5% per year, which is much better than a bank. The risk of course is that in a few years when you want to sell the stock, the price may not be at the level you want. The question is what are you giving up with this plan. You have 80K in cash, will cutting it to 30K in cash make it harder for your business to survive? If your income from the business starts slowly, having that 50K in cash may be better. Selling the stock when the business is desperate for money may lock in losses. |
Is Amazon's offer of a $50 gift card a scam? | No. Amazon is a reputable company. Many stores have their own credit card. Additionally they have several cards available, through Visa and Discover. Neither would allow their name to be used knowing that a company was using it to scam people. And credit card companies are used to going after people with the full force of the law on their side. It's the only way they stay in business. I would read the terms and conditions, but as is, it is not a scam. But a free $50 seems to good to be true. Nothing is free. Having their credit card is significant. Look into the ownership of a credit card and how credit card companies make money. And "gift cards for credit cards" are common. In fact, some companies give away money just to fill out an application even if you turn down the card. |
How should I prepare for the next financial crisis? | Those ‘crises’ are only an issue if you need your savings during the time of crisis. If you have time to sit it out, you should just do that, and come out of the crisis with a gain. People that lose money during a crisis lose it because they sell their investments during the crisis, either because they had to or because they thought they should. If you look at historic values of investments, the market overall always recovers and goes over the orignal value some time after the crisis. Investing even more right in the crisisis the best way to make a lot of money. |
Is there lesser or no tax on assets? | US federal tax law distinguishes many types of income. For most people, most of their income is "earned income", money you were paid to do a job. Another category of income is "capital gains", money you made from the sale of an asset. For a variety of reasons, capital gains tax rates are lower than earned income tax rates. (For example, it is common that much of the gain is not real profit but inflation. If you buy an asset for $10,000 and sell it for $15,000, you pay capital gains tax on the $5,000 profit. But what if prices in general since you bought the asset have gone up 50%? Then your entire profit is really inflation, you didn't actually make any money -- but you still have to pay a tax on the paper gain.) So if you make your money by investing in assets -- buying and selling at a profit -- you will pay lower taxes than if you made the same amount of money by receiving a salary from a job, or by running a business where you sell your time and expertise rather than an asset. But money made from assets -- capital gains -- is not tax free. It's just a lower tax. It MIGHT be that when combined with other deductions and tax credits this would result in you paying no taxes in a particular year. Maybe you could avoid paying taxes forever if you can take advantage of tax loopholes. But for most people, making money from capital gains could result in lower taxes per dollar of income than someone doing more ordinary work. Or it could result in higher taxes, if you factor in inflation, net present value of money, and so on. BTW Warren Buffet's "secretary" is not a typist. She apparently makes at least $200,000 a year. http://www.forbes.com/sites/paulroderickgregory/2012/01/25/warren-buffetts-secretary-likely-makes-between-200000-and-500000year/#ab91f3718b8a. And side note: if Warren Buffet thinks he isn't paying enough in taxes, why doesn't he voluntarily pay more? The government has a web site where citizens can voluntarily pay additional taxes. In 2015 they received $3.9 million in such contributions. http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm |
Can capital loss in traditional IRA and Roth IRA be used to offset taxable income? | Edited in response to JoeTaxpayer's comment and OP Tim's additional question. To add to and clarify a little what littleadv has said, and to answer OP Tim's next question: As far as the IRS is concerned, you have at most one Individual Retirement Account of each type (Traditional, Roth) though the money in each IRA can be invested with as many different custodians (brokerages, banks, etc.) and different investments as you like. Thus, the maximum $5000 ($6000 for older folks) that you can contribute each year can be split up and invested any which way you like, and when in later years you take a Required Minimum Distribution (RMD) from a Traditional IRA, you can get the money by selling just one of the investments, or from several investments; all that the IRS cares is that the total amount that is distributed to you is at least as large as the RMD. An important corollary is that the balance in your IRA is the sum total of the value of all the investments that various custodians are holding for you in IRA accounts. There is no loss in an IRA until every penny has been withdrawn from every investment in your IRA and distributed to you, thus making your IRA balance zero. As long as you have a positive balance, there is no loss: everything has to come out. After the last distribution from your Roth IRA (the one that empties your entire Roth IRA, no matter where it is invested and reduces your Roth IRA balance (see definition above) to zero), total up all the amounts that you have received as distributions from your Roth IRA. If this is less than the total amount of money you contributed to your Roth IRA (this includes rollovers from a Traditional IRA or Roth 401k etc., but not the earnings within the Roth IRA that you re-invested inside the Roth IRA), you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI limit. This 2% is not a cap (in the sense that no more than 2% of your AGI can be deducted in this category) but rather a threshold: you can only deduct whatever part of your total Miscellaneous Deductions exceeds 2% of your AGI. Not many people have Miscellaneous Deductions whose total exceeds 2% of their AGI, and so they end up not being able to deduct anything in this category. If you ever made nondeductible contributions to your Traditional IRA because you were ineligible to make a deductible contribution (income too high, pension plan coverage at work etc), then the sum of all these contributions is your basis in your Traditional IRA. Note that your deductible contributions, if any, are not part of the basis. The above rules apply to your basis in your Traditional IRA as well. After the last distribution from your Traditional IRA (the one that empties all your Traditional IRA accounts and reduces your Traditional IRA balance to zero), total up all the distributions that you received (don't forget to include the nontaxable part of each distribution that represents a return of the basis). If the sum total is less than your basis, you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI threshold. You can only deposit cash into an IRA and take a distribution in cash from an IRA. Now, as JoeTaxpayer points out, if your IRA owns stock, you can take a distribution by having the shares transferred from your IRA account in your brokerage to your personal account in the brokerage. However, the amount of the distribution, as reported by the brokerage to the IRS, is the value of the shares transferred as of the time of the transfer, (more generally the fair market value of the property that is transferred out of the IRA) and this is the amount you report on your income tax return. Any capital gain or loss on those shares remains inside the IRA because your basis (in your personal account) in the shares that came out of the IRA is the amount of the distribution. If you sell these shares at a later date, you will have a (taxable) gain or loss depending on whether you sold the shares for more or less than your basis. In effect, the share transfer transaction is as if you sold the shares in the IRA, took the proceeds as a cash distribution and immediately bought the same shares in your personal account, but you saved the transaction fees for the sale and the purchase and avoided paying the difference between the buying and selling price of the shares as well as any changes in these in the microseconds that would have elapsed between the execution of the sell-shares-in-Tim's-IRA-account, distribute-cash-to-Tim, and buy-shares-in-Tim's-personal account transactions. Of course, your broker will likely charge a fee for transferring ownership of the shares from your IRA to you. But the important point is that any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts. What happens inside the IRA stays inside the IRA. |
Why small retail stores ask for ID with a credit card while big don't | Because large stores do not pay their cashiers enough that the companies can dock the employees' pay if they allow a bad credit card to go through. So most cashiers at large stores won't take the extra effort to check the card properly. As a result, large stores come up with other ways to handle potential credit card fraud. For example, they calculate a certain amount of fraud as expected and include it in their price calculations. Or they can use cameras to catch fraudsters. At small stores, there is a much higher chance that the cashier is either the owner or a relative of the owner. And even those who are unrelated tend to be hired by the owner directly. The owners do have their pay docked if a bad credit card is accepted, as their pay is the profit from the business. So they tend to create protocols that, at least in their mind, reduce the chance of taking a bad credit card. The cashier is often the only employee in the store to check anything. Another issue is that small stores have a harder time getting approved to accept credit cards. The companies that process the credit cards can take back their machine if there is a lot of fraud. So the companies can require more from small stores than they can from big stores. Those companies can't stop processing cards for Safeway, because they need Safeway as much if not more than Safeway needs them. So the processors have more leverage to make small stores do what they want. And small stores can feasibly fire (non-owner) cashiers who do not comply. Owners of course can't be fired. But they are far more vulnerable to business losses. So it is really important to an owner to keep the credit card machine. And it is pretty important to avoid losses, as it is their money directly. Relatives of owners may be safe from firing, but they are not safe from family retaliation like taking away television privileges. And they may also think of the effect of business losses on the family. Large stores can fire cashiers, but they are chronically understaffed and almost none of their cashiers will consistently follow a strict protocol. Since fraudsters only need to succeed once, an inconsistent application is almost as bad as no application. They might charge the cashiers for fraud, but then they would have to pay the cashiers more than minimum wage specifically for that reason (e.g. a $50 a month bonus for no fraud). For many of them, it's cheaper to risk the fraud. And large stores can't mix owners and relatives of owners into the mix. It's hard to say who owns Safeway. And even if you could, the relationship between one fraud transaction and the dividend paid on one share of stock is tiny. It would take thousands of shares to get up to a penny. |
Is it true that 90% of investors lose their money? | Very likely this refers to trading/speculating on leverage, not investing. Of course, as soon as you put leverage into the equation this perfectly makes sense. 2007-2009 for example, if one bought the $SPX at its highs in 2007 at ~$1560.00 - to the lows from 2009 at ~$683.00 - implicating that with only 2:1 leverage a $1560.00 account would have received a margin call. At least here in Europe I can trade index CFD's and other leveraged products. If i trade lets say >50:1 leverage it doesn’t take much to get a margin call and/or position closed by the broker. No doubt, depending on which investments you choose there’s always risk, but currency is a position too. TO answer the question, I find it very unlikely that >90% of investors (referring to stocks) lose money / purchasing power. Anyway, I would not deny that where speculators (not investors) use leverage or try to trade swings, news etc. have a very high risk of losing money (purchasing power). |
Should I invest in real estate to rent, real estate to live in, or just stocks and bonds to earn 10-15%? | You are in your mid 30's and have 250,000 to put aside for investments- that is a fantastic position to be in. First, let's evaluate all the options you listed. Option 1 I could buy two studio apartments in the center of a European capital city and rent out one apartment on short-term rental and live in the other. Occasionally I could Airbnb the apartment I live in to allow me to travel more (one of my life goals). To say "European capital city" is such a massive generalization, I would disregard this point based on that alone. Athens is a European capital city and so is Berlin but they have very different economies at this point. Let's put that aside for now. You have to beware of the following costs when using property as an investment (this list is non-exhaustive): The positive: you have someone paying the mortgage or allowing you to recoup what you paid for the apartment. But can you guarantee an ROI of 10-15% ? Far from it. If investing in real estate yielded guaranteed results, everyone would do it. This is where we go back to my initial point about "European capital city" being a massive generalization. Option 2 Take a loan at very low interest rate (probably 2-2.5% fixed for 15 years) and buy something a little nicer and bigger. This would be incase I decide to have a family in say, 5 years time. I would need to service the loan at up to EUR 800 / USD 1100 per month. If your life plan is taking you down the path of having a family and needed the larger space for your family, then you need the space to live in and you shouldn't be looking at it as an investment that will give you at least 10% returns. Buying property you intend to live in is as much a life choice as it is an investment. You will treat the property much different from the way something you rent out gets treated. It means you'll be in a better position when you decide to sell but don't go in to this because you think a return is guaranteed. Do it if you think it is what you need to achieve your life goals. Option 3 Buy bonds and shares. But I haven't the faintest idea about how to do that and/or manage a portfolio. If I was to go down that route how do I proceed with some confidence I won't lose all the money? Let's say you are 35 years old. The general rule is that 100 minus your age is what you should put in to equities and the rest in something more conservative. Consider this: This strategy is long term and the finer details are beyond the scope of an answer like this. You have quite some money to invest so you would get preferential treatment at many financial institutions. I want to address your point of having a goal of 10-15% return. Since you mentioned Europe, take a look at this chart for FTSE 100 (one of the more prominent indexes in Europe). You can do the math- the return is no where close to your goals. My objective in mentioning this: your goals might warrant going to much riskier markets (emerging markets). Again, it is beyond the scope of this answer. |
When a company liquidates, are earlier investors paid back first? | Assuming no debt, as you've specified in the comments to your question, the assets should generally be distributed proportional to ownership share. BUT, without any sort of agreement, there might be contention on what each investor's share is and that might get fought out in court. With a corporation issuing shares, the corporate charter probably defines the relationship between different classes of shares (or specifies only one class). For a partnership though, you could conceivable have people making claims of ownership stake based on labor in addition to any cash that they put up. Messy if there's no up-front agreement. |
Settlement of Shares Underlying a Covered Call Option | It's a covered call. When I want to create a covered call position, I don't need to wait before the stock transaction settles. I enter it as one trade, and they settle at different times. |
Which practice to keep finances after getting married: joint, or separate? | My wife and I maintain seperate accounts. We have the bills split between us so that certain bills are paid by one of us, and other bills by the other. This is not a perfect 50/50 split as we don't make the same amount of money, but comparable enough that neither feels like they're doing all the bills alone. Our investments are similar. That means we each have a pool of money that we can spend on toys or entertainment as we see fit without overspending. Once my bills are paid and my savings are paid for the month, if I want to go buy some DVDs and my wife wants to buy a new lens for the camera, we don't have to agree. We just use our own money and do it. For us that's led to minimal friction or arguments over what to spend money on, simply because we aren't using the same pool. Getting it work requires getting the split right AND having the mindset that the other person is just as entitled to spend their share of the money as you are to spend yours. It really helps to eliminate issues where she spent money that I expected to be able to spend before I could, which can happen in a joint account. (We have no joint accounts, only things like the mortgage are in both our names.) I've been told by more then one person that how we're doing it is "wrong", but it works a lot better for us then trying to combine finances ever did. I think it also helps that we're younger, and this seems far less common amongst older couples. |
Forex vs day trading for beginner investor | Are you in the US? Because if so, there are tax discrepancies. Gains from sale of stocks held for less than one year are subject to ordinary income tax, so probably around 30%. If you hold those stocks for a year or more, gains will be taxed as capital gains tax, 15%. For Forex, taxes on your earnings will be split 60/40. 60% will be traded at the lower 15% rate, while the remaining 40& will be taxed at a higher rate, approximately 30%. So purely short-term, there is a tax advantage to dabbling in Forex. HOWEVER - these are both incredibly risky things to do with your money! I never would recommend anyone invest short-term looking to make quick cash! In fact, the tax code DISCOURAGES people from short-term investments. |
Will Short Sale Prevent Me From Getting VA Home Loan Later? | From MyFICO: A foreclosure remains on your credit report for 7 years, but its impact to your FICO® score will lessen over time. While a foreclosure is considered a very negative event by your FICO score, it's a common misconception that it will ruin your score for a very long time. In fact, if you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as 2 years. The important thing to keep in mind is that a foreclosure is a single negative item, and if you keep this item isolated, it will be much less damaging to your FICO score than if you had a foreclosure in addition to defaulting on other credit obligations. (personal note - I tip my hat to you, sir. Regardless of party, we owe our Vets a debt of gratitude. If I had my way, a VA loan would ignore the past short sale. I wish you well. And thank you for serving) |
Is it legal if I'm managing my family's entire wealth? | Assuming you and your family always get along and everyone is happy with the situation... Should you become ill, die, or go on government benefits for some catastrophe, the government will look at all those funds as YOURS, and now your wonderful family is hurt by the estate tax and/or expectations of how much of the bill you handle before support kicks in. Additionally, should you ever reach a point where you are married and then facing divorce (even if no fault of your own), all that investment is now up for grabs in equitable distribution. So your family's entire investment fund is at risk. |
If I short-sell a dividend-paying stock, do I have to pay the dividend? | You could hold a long position in some company XXXX and then short your own shares (assuming your broker will let you do that). The dividend that would have gone to you would then go to whoever is holding the shares you short sold. You just don't get a dividend. If you're going to short in a smart way... do it on a stock you otherwise believe in, but use it to minimize the pull-backs on the way up. |
what does “private equity structures” mean? | Private equity firms have a unique structure: The general partners (GP's) of the firm create funds and manage the investments of those funds. Limited partners (LP's) contribute the capital to the funds, pay fees to the GP's, and then make money when the funds' assets grow. I believe the article is saying that ultra high net worth individuals participate in the real estate market by hiring someone to act as a general partner and manage the real estate assets. They and their friends contribute the cash and get shares in the resulting fund. Usually this GP/LP structure is used when the funds purchase or invest in private companies, which is why it is referred to as "private equity structure," but the same structure can be used to purchase and manage pools of real estate or any other investment asset. |
What is the “point” (purpose) of the S&P 500? | I hate to point to Wikipedia as an answer, but it does describe exactly what you are looking for... The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock market exchanges; the New York Stock Exchange and the NASDAQ. The components of the S&P 500 are selected by committee... The committee selects the companies in the S&P 500 so they are representative of the industries in the United States economy. In addition, companies that do not trade publicly (such as those that are privately or mutually held) and stocks that do not have sufficient liquidity are not in the index. The S&P is a capitalization weighted index. If a stock price goes up, then it comprises more of the total index. If a stock goes down, it comprises less, and if it goes down too much, the committee will likely replace it. So to answer your question, if one stock were to suddenly skyrocket, nothing would happen beyond the fact that the index was now worth more and that particular stock would now make up a larger percentage of the S&P 500 index. |
Where to find the full book of outstanding bids/asks for a stock? | For starters, that site shows the first 5 levels on each side of the book, which is actually quite a bit of information. When traders say the top of the book, they mean just the first level. So you're already getting 8 extra levels. If you want all the details, you must subscribe to the exchange's data feeds (this costs thousands of dollars per month) or open an account with a broker who offers that information. More important than depth, however, is update frequency. The BATS site appears to update every 5 seconds, which is nowhere near frequently enough to see what's truly going on in the book. Depending on your use case, 2 levels on each side of the book updated every millisecond might be far more valuable than 20 levels on each side updated every second. |
My wife and I are selling a house worth $230k-$260k. Its a rental. Should we use an agent, limited service listing agent, or FSBO? | The answers you'll receive are going to be largely subjective. I can't tell you which option would be best for you, but there are plenty of things to consider. Do you know how to sell a home? If your market is hot enough, FSBO may make sense as you won't need the marketing power and expertise of an agent. In very hot markets, you'll end up with potential bidding wars if you price your house correctly. But that's where things start getting tricky. Do you know what your house is realistically worth in your market, or are you making assumptions based on Zillow (or similar)? Do you know what paper work is needed to complete a FSBO sale? Are you any good at negotiating? There are certainly plenty of resources out there for FSBO sellers to learn how to do it, but it can be overwhelming. FSBO isn't really fee free. If the buyer has an agent, they'll want a percentage (3%) for setting up their part of the sale. Without experience in negotiation, you may be leaving a decent amount of money on the table. Also, in negotiations, an experienced agent may nickel & dime you with contingencies all the way up until closing. Then there's anything you might need to pay for marketing materials and time off from work (if needed) to have the house shown. However, if you're in a market where people are literally walking up to your door to ask if you'd consider selling and for how much (which just happened to a friend of mine), then it might actually be a pretty painless process. Traditional agents charge a fee, but that fee goes towards marketing and their experience in sales and negotiations. They do the work of getting your property in front of the right people and setting up house showings. The work is done on your behalf, and you won't need to alter your personal work schedule anywhere near as much as you would with FSBO. They only get paid if the house sells. Limited service agents are a bit of an unknown to me, but it's more than likely the buyer will have an agent, so assume the higher fee. It also appears that the LSA gets paid at least $500 no matter what happens, so they're certainly not putting in any extra effort to help get your house sold. It appears that you're simply paying to get on their list of homes and get some marketing from them, but that's about it. I'd imagine you could get the same exposure as a well educated FSBO seller. |
As an employee, when is it inappropriate to request to see your young/startup company's financial statements? | This is several questions wrapped together: How can I diplomatically see the company's financial information? How strong a claim does a stockholder or warrantholder have to see the company's financials? What information do I need to know about the company financials before deciding to buy in? I'll start with the easier second question (which is quasi implicit). Stockholders typically have inspection rights. For example, Delaware General Corporate Law § 220 gives stockholders the right to inspect and copy company financial information, subject to certain restrictions. Check the laws and corporate code of your company's state of incorporation to find the specific inspection right. If it is an LLC or partnership, then the operating agreement usually controls and there may be no inspection rights. If you have no corporate stock, then of course you have no statutory inspection rights. My (admittedly incomplete) understanding is that warrantholders generally have no inspection rights unless somehow contracted for. So if you vest as a corporate stockholder, it'll be your right to see the financials—which may make even a small purchase valuable to you as a continuing employee with the right to see the financials. Until then, this is probably a courtesy and not their obligation. The first question is not easy to answer, except to say that it's variable and highly personal for small companies. Some people interpret it as prying or accusatory, the implication being that the founders are either hiding something or that you need to examine really closely the mouth of their beautiful gift horse. Other people may be much cooler about the question, understanding that small companies are risky and you're being methodical. And in some smaller companies, they may believe giving you the expenses could make office life awkward. If you approach it professionally, directly, and briefly (do not over-explain yourself) with the responsible accountant or HR person (if any), then I imagine it should not be a problem for them to give some information. Conversely, you may feel comfortable enough to review a high-level summary sheet with a founder, or to find some other way of tactfully reviewing the right information. In any case, I would keep the request vague, simple, and direct, and see what information they show you. If your request is too specific, then you risk pushing them to show information A, which they refuse to do, but a vague request would've prompted them to show you information B. A too-specific request might get you information X when a vague request could have garnered XYZ. Vague requests are also less aggressive and may raise fewer objections. The third question is difficult to say. My personal understanding is some perspective of how venture capitalists look at the investment opportunity (you didn't say how new this startup is or what series/stage they are on, so I'll try to stay vague). The actual financials are less relevant for startups than they are for other investments because the situation will definitely change. Most venture capital firms like to look at the burn rate or amount of cash spent, usually at a monthly rate. A high burn rate relative to infusions of cash suggests the company is growing rapidly but may have a risk of toppling (i.e. failing before exit). Burn rate can change drastically during the early life of the startup. Of course burn rate needs the context of revenues and reserves (and latest valuation is helpful as a benchmark, but you may be able to calculate that from the restricted share offer made to you). High burn rate might not be bad, if the company is booming along towards a successful exit. You might also want to look at some sort of business plan or info sheet, rather than financials alone. You want to gauge the size of the market (most startups like to claim 9- or 10-figure markets, so even a few percentage points of market share will hit revenue into the 8-figures). You'll also have to have a sense for the business plan and model and whether it's a good investment or a ridiculous rehash ("it's Twitter for dogs meets Match.com for Russian Orthodox singles!"). In other words, appraise it like an investor or VC and figure out whether it's a prospect for decent return. Typical things like competition, customer acquisition costs, manufacturing costs are relevant depending on the type of business activity. Of course, I wouldn't ignore psychology (note that economists and finance people don't generally condone the following sort of emotional thinking). If you don't invest in the company and it goes big, you'll kick yourself. If it goes really big, other people will either assume you are rich or feel sad for you if you say you didn't get rich. If you invest but lose money, it may not be so painful as not investing and losing out the opportunity. So if you consider the emotional aspect of personal finance, it may be wise to invest at least a little, and hedge against "woulda-shoulda" syndrome. That's more like emotional advice than hard-nosed financial advice. So much of the answer really depends on your particular circumstances. Obviously you have other considerations like whether you can afford the investment, which will be on you to decide. And of course, the § 83(b) election is almost always recommended in these situations (which seems to be what you are saying) to convert ordinary income into capital gain. You may also need cash to pay any up-front taxes on the § 83(b) equity, depending on your circumstances. |
Tax me more: Can I pay extra to the government so I don't have to deal with all this paperwork? | In a word, no. If your income is high enough to have to file a return, you have to file a return. My accountant has a nice mindset for making it more palatable. I'll paraphrase: "Our tax system is ludicrously complicated. As a result, it is your duty as an American to seek out and take advantage of every deduction and credit available to you. If our politicians and leaders put it into the tax code, use it to your advantage." A friend of mine got a free golf cart that way. It was a crazy combination of credits and loopholes for electric vehicles. That loophole has been closed, and some would say it's a great example of him exercising his patriotic duty. |
What can I replace Microsoft Money with, now that MS has abandoned it? | I use GnuCash which I really like. However, I've never used any other personal finance software so I can't really compare. Before GnuCash, I used an Excel spreadsheet which works fine for very basic finances. Pros Cons |
If stock price drops by the amount of dividend paid, what is the use of a dividend | I'm not a financial expert, but saying that paying a $1 dividend will reduce the value of the stock by $1 sounds like awfully simple-minded reasoning to me. It appears to be based on the assumption that the price of a stock is equal to the value of the assets of a company divided by the total number of shares. But that simply isn't true. You don't even need to do any in-depth analysis to prove it. Just look at share prices over a few days. You should easily be able to find stocks whose price varied wildly. If, say, a company becomes the target of a federal investigation, the share price will plummet the day the announcement is made. Did the company's assets really disappear that day? No. What's happened is that the company's long term prospects are now in doubt. Or a company announces a promising new product. The share price shoots up. They may not have sold a single unit of the new product yet, they haven't made a dollar. But their future prospects now look improved. Many factors go into determining a stock price. Sure, total assets is a factor. But more important is anticipated future earning. I think a very simple case could be made that if a stock never paid any dividends, and if everyone knew it would never pay any dividends, that stock is worthless. The stock will never produce any profit to the owner. So why should you be willing to pay anything for it? One could say, The value could go up and you could sell at a profit. But on what basis would the value go up? Why would investors be willing to pay larger and larger amounts of money for an asset that produces zero income? Update I think I understand the source of the confusion now, so let me add to my answer. Suppose that a company's stock is selling for, say, $10. And to simplify the discussion let's suppose that there is absolutely nothing affecting the value of that stock except an expected dividend. The company plans to pay a dividend on a specific date of $1 per share. This dividend is announced well in advance. Everyone knows that it will be paid, and everyone is extremely confidant that in fact the company really will pay it -- they won't run out of money or any such. Then in a pure market, we would expect that as the date of that dividend approaches, the price of the stock would rise until the day before the dividend is paid, it is $11. Then the day after the dividend is paid the price would fall back to $10. Why? Because the person who owns the stock on the "dividend day" will get that $1. So if you bought the stock the day before the dividend, the next day you would immediately receive $1. If without the dividend the stock is worth $10, then the day before the dividend the stock is worth $11 because you know that the next day you will get a $1 "refund". If you buy the stock the day after the dividend is paid, you will not get the $1 -- it will go to the person who had the stock yesterday -- so the value of the stock falls back to the "normal" $10. So if you look at the value of a stock immediately after a dividend is paid, yes, it will be less than it was the day before by an amount equal to the dividend. (Plus or minus all the other things that affect the value of a stock, which in many cases would totally mask this effect.) But this does not mean that the dividend is worthless. Just the opposite. The reason the stock price fell was precisely because the dividend has value. BUT IT ONLY HAS VALUE TO THE PERSON WHO GETS IT. It does me no good that YOU get a $1 dividend. I want ME to get the money. So if I buy the stock after the dividend was paid, I missed my chance. So sure, in the very short term, a stock loses value after paying a dividend. But this does not mean that dividends in general reduce the value of a stock. Just the opposite. The price fell because it had gone up in anticipation of the dividend and is now returning to the "normal" level. Without the dividend, the price would never have gone up in the first place. Imagine you had a company with negligible assets. For example, an accounting firm that rents office space so it doesn't own a building, its only tangible assets are some office supplies and the like. So if the company liquidates, it would be worth pretty much zero. Everybody knows that if liquidated, the company would be worth zero. Further suppose that everyone somehow knows that this company will never, ever again pay a dividend. (Maybe federal regulators are shutting the company down because it's products were declared unacceptably hazardous, or the company was built around one genius who just died, etc.) What is the stock worth? Zero. It is an investment that you KNOW has a zero return. Why would anyone be willing to pay anything for it? It's no answer to say that you might buy the stock in the hope that the price of the stock will go up and you can sell at a profit even with no dividends. Why would anyone else pay anything for this stock? Well, unless their stock certificates are pretty and people like to collect them or something like that. Otherwise you're supposing that people would knowingly buy into a pyramid scheme. (Of course in real life there are usually uncertainties. If a company is dying, some people may believe, rightly or wrongly, that there is still hope of reviving it. Etc.) Don't confuse the value of the assets of a company with the value of its stock. They are related, of course -- all else being equal, a company with a billion dollars in assets will have a higher market capitalization than a company with ten dollars in assets. But you can't calculate the price of a company's stock by adding up the value of all its assets, subtracting liabilities, and dividing by the number of shares. That's just not how it works. Long term, the value of any stock is not the value of the assets but the net present value of the total future expected dividends. Subject to all sorts of complexities in real life. |
I can't produce a title for a vehicle I just traded | The old truck is collateral for a loan. The place that made the loan expects that if you can't pay they can repossess that old truck. If you sell it they can't repossess it. The dealer needs clean title to be able to buy the truck from you, so they can fix up the truck and sell it to somebody else. I am assuming the the lender has filed paperwork with the state to show their lien on the title. Your options are three: As to option 2: If the deal still makes sense the new car dealer can send the $9,000 to the lender that you forgot about. That will of course increase the amount of money you have to borrow. You will also run into the problem that this loan that you forgot to mention on your credit application may cause them to rethink the decision to loan you the money. |
Basic questions about investing in stocks | What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your "cost basis" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules. |
If I were to get audited, what would I need? | While IANAL (tax or otherwise), I have always found that keeping original receipts is the only way to go. While anything can, at some level, be forged or faked, a photo is one more step removed from the original. A mere listing on a web site isn't much proof of anything. Keep your originals for a suggested seven years; while the IRS is trying to audit much faster than that, and any inkling of fraud can be investigated at any time, you should be well and clear with originals kept that long. |
Should I buy stocks of my current employer because of its high dividend yield? | Dividend yields are a product of the dollar amount paid to shareholders and the stock price. Dividends yields rise when a company is shunned by investors. It may be shunned because the earnings and/or dividend are at risk. Recent examples are SDRL and KMI. Most investors would love an 8% yield so I would wonder why the stock is being ignored or shunned. |
Are marijuana based investments promising, or just another scam? | Any advertisement for a "business opportunity" is nearly always a scam of some kind. In such deals, the seller is the one making the money. They rely on the fantasy of the average person who imagines themself with a profitable business. Real businessmen do not get their businesses from flyers on the sides of telephone poles. Real businessmen already know every aspect and detail of their business already. They do not need to pay some clown $10,000 to "get them started". If you are reading such advertisements, it means you have money, but do not know what to do with it. Although I cannot tell you what to do with your money. I can tell you this: giving it to somebody who advertises a "great business opportunity" would be a mistake. |
Should I collect receipts after paying with a card? | I've seen many people sign a restaurant credit card receipt and walk away. Easy enough for the wait staff to add a tip and total. I doubt this is a high risk area compared to others, but in general, why not take the receipt for verification, or in the case of a good that can be returned, the receipt might be needed. |
$200k in an IRA, unallocated. What's the safest investment? | if you don't intent to touch the money for 10 years or longer, then dumping 100% into a low-expense-ratio index fund seems like a perfectly reasonable thing to do. it is simple, low maintenance and fairly mindless. just remember to reinvest the dividends occasionally (e.g. every 6 months). however, if you are the kind of person who is going to lose their nerve when the market goes down 30%, then putting some of your money into a bond index fund or even a treasury note fund would be better than selling stock in a down market. just figure out how much of your portfolio you are comfortable losing, and put that in stocks. then put the rest in some stable value fund and watch it's value get slowly washed away by inflation while your stock investments rise through violent swings. |
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