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Ethics and investment | There are a number of mutual funds which claim to be 'ethical'. Note that your definition of 'ethical' may not match theirs. This should be made clear in the prospectus of whichever mutual fund you are looking at. You will likely pay for the privilege of investing this way, in higher expenses on the mutual fund. If I may suggest another option, you may want to consider investing in low-fee mutual funds or ETFs and donating some of the profit to offset the moral issues you see. |
How do I know if my mutual fund is compounded? | When we talk about compounding, we usually think about interest payments. If you have a deposit in a savings account that is earning compound interest, then each time an interest payment is made to your account, your deposit gets larger, and the amount of your next interest payment is larger than the last. There are compound interest formulas that you can use to calculate your future earnings using the interest rate and the compounding interval. However, your mutual fund is not earning interest, so you have to think of it differently. When you own a stock (and your mutual fund is simply a collection of stocks), the value of the stock (hopefully) grows. Let's say, for example, that you have $1000 invested, and the value goes up 10% the first year. The total value of your investment has increased by $100, and your total investment is worth $1100. If it grows by another 10% the following year, your investment is then $1210, having gained $110. In this way, your investment grows in a similar way to compound interest. As your investment pays off, it causes the value of the investment to grow, allowing for even higher earnings in the future. So in that sense, it is compounding. However, because it is not earning a fixed, predictable amount of interest as a savings account would, you can't use the compound interest formula to calculate precisely how much you will have in the future, as there is no fixed compounding interval. If you want to use the formula to estimate how much you might have in the future, you have to make an assumption on the growth of your investment, and that growth assumption will have a time period associated with it. For example, you might assume a growth rate of 10% per year. Or you might assume a growth rate of 1% per month. This is what you could use in a compound interest formula for your mutual fund investment. By reinvesting your dividends and capital gains (and not taking them out in cash), you are maximizing your "compounding" by allowing those earnings to cause your investment to grow. |
Are there any statistics that support the need for Title Insurance? | The point of title insurance is that when you buy a house, it is possible that you may eventually find out that the seller didn't actually own the property - either because they were trying to deceive you, or some transfer of ownership in the past wasn't carried out properly. If that happens you can find yourself with no house, and still owing the mortgager the purchase price. Hardly anybody can afford to take that kind of hit, which is why you need some form of protection against it. The traditional way of doing this was to get a lawyer to do a title search, in which they check that everything in order. However this costs tens of dollars at least to do the work for every sale, and hardly ever finds anything. Title Insurance is a company volunteering to take the hit for you if there turns out to be a problem, in return for a payment of less than the title search would cost. In essence they are saying that it's cheaper to take the risk than do the work. What are the statistics? This report seems to indicate that payout is around 5% of premium, but title insurance is a one-off premium and the payout can theoretically happen many years down the line. However it is almost certain that the insurance companies have done the math and believe that selling this insurance will be profitable for them, so they believe that payouts are going to be substantially less than 100%. Is title insurance worth it for you? If the payout is 5% of premiums, the in a purely statistical sense it is not worth it. You would on average gain more by not taking it. However that is true of almost all insurance. The policy is there to protect you in the unlikely but not impossible event where you would otherwise lose a huge amount of money. Unless you can afford to lose the value of your house, you need some form of protection. We've already seen that the only other form of protection is a title search, and they cost more. The other issue is that if you are taking a mortgage, your mortgager will absolutely insist that you have either a title search or title insurance. There is no other way - and title insurance is the cheaper of the two. In this case it is best to look on the title insurance as simply a cost of doing business. It's irrelevant whether it's worth it or not - you can't do the transaction without it. |
What is considered high or low when talking about volume? | The daily Volume is usually compared to the average daily volume over the past 50 days for a stock. High volume is usually considered to be 2 or more times the average daily volume over the last 50 days for that stock, however some traders might set the crireia to be 3x or 4x the ADV for confirmation of a particular pattern or event. The volume is compared to the ADV of the stock itself, as comparing it to the volume of other stocks would be like comparing apples with oranges, as difference companies would have different number of total stocks available, different levels of liquidity and different levels of volatility, which can all contribute to the volumes traded each day. |
Using property to achieve financial independence | Will buying a flat which generates $250 rent per month be a good decision? Whether investing in real estate is a good decision or not depends on many things, including the current and future supply/demand for rental units in your particular area. There are many questions on this site about this topic, and another answer to this question which already addresses many risks associated with owning property (though there are also benefits to consider). I just want to focus on this point you raised: I personally think yes, because rent adjusts with inflation and the rise in the price of the property is another benefit. Could this help me become financially independent in the long run since inflation is getting adjusted in it? In my opinion, the fact that rental income general adjusts with 'inflation' is a hedge against some types of economic risk, not an absolute increase in value. First, consider buying a house to live in, instead of to rent: If you pay off your mortgage before your retire, then you have reduced your cost of accommodations to only utilities, property taxes, and repairs. This gives you a (relatively) known, fixed requirement of cash outflows. If the value of property goes up by the time you retire - it doesn't cost you anything extra, because you already own your house. If the value of property goes down by the time you retire, then you don't save anything, because you already own your house. If you instead rent your whole life, and save money each month (instead of paying off a mortgage), then when you retire, you will have a larger amount of savings which you can use to pay your monthly rental costs each month. By the time you retire, your cost of accommodations will be the market price for rent at that time. If the value of property goes up by the time you retire - you will have to pay more on rent. If the value of property goes down by the time you retire, you will save money on rent. You will have larger savings, but your cash outflow will be a little bit less certain, because you don't know what the market price for rent will be. You can see that, because you need to put a roof over your own head, just by existing you bear risk of the cost of property rising. So, buying your own home can be a hedge against that risk. This is called a 'natural hedge', where two competing risks can mitigate each-other just by existing. This doesn't mean buying a house is always the right thing to do, it is just one piece of the puzzle to comparing the two alternatives [see many other threads on buying vs renting on this site, or on google]. Now, consider buying a house to rent out to other people: In the extreme scenario, assume that you do everything you can to buy as much property as possible. Maybe by the time you retire, you own a small apartment building with 11 units, where you live in one of them (as an example), and you have no other savings. Before, owning your own home was, among other pros and cons, a natural hedge against the risk of your own personal cost of accommodations going up. But now, the risk of your many rental units is far greater than the risk of your own personal accommodations. That is, if rent goes up by $100 after you retire, your rental income goes up by $1,000, and your personal cost of accommodations only goes up by $100. If rent goes down by $50 after you retire, your rental income goes down by $500, and your personal cost of accommodations only goes down by $50. You can see that only investing in rental properties puts you at great risk of fluctuations in the rental market. This risk is larger than if you simply bought your own home, because at least in that case, you are guaranteeing your cost of accommodations, which you know you will need to pay one way or another. This is why most investment advice suggests that you diversify your investment portfolio. That means buying some stocks, some bonds, etc.. If you invest to heavily in a single thing, then you bear huge risks for that particular market. In the case of property, each investment is so large that you are often 'undiversified' if you invest heavily in it (you can't just buy a house $100 at a time, like you could a stock or bond). Of course, my above examples are very simplified. I am only trying to suggest the underlying principle, not the full complexities of the real estate market. Note also that there are many types of investments which typically adjust with inflation / cost of living; real estate is only one of them. |
Why can it be a bad idea to buy stocks after hours? | Unless you want to be a short term day trader, then it is not foolish to be an end of day trader. If you are looking to be a medium to long term trader/investor then it is quite acceptable to put orders in after market close. Some would say it is even less risky, because you are not watching the price fluctuate up and down and letting your emotions getting the best of you. |
When is it better to rent and when is better buy in a certain property market? | No magic answers here. Housing is a market, and the conditions in each local market vary. I think impact on cash flow is the best way to evaluate housing prices. In general, I consider a "cheap" home to cost 20% or less of your income, "affordable" between 20-30% and "not affordable" over 30%. When you start comparing rent vs. buy, there are other factors that you need to think about: Renting is an easy transaction. You're comparing prices in a market that is usually pretty stable, and your risk and liability is low. The "cost" of the low risk is that you have virtually no prospects of recouping any value out of the cash that you are laying out for your home. Buying is more complex. You're buying a house, building equity and probably making money due to appreciation. You need to be vigilant about expenses and circumstances that affect the value of your home as an investment. If you live in a high-tax state like New York, an extra $1,200 in property taxes saps over $16,000 of buying (borrowing) power from a future purchaser of your home. If your HOA or condo association is run by a pack of idiots, you're going to end up paying through the nose for their mistakes. Another consideration is your tastes. If you tend to live above your means, you're not going to be able to afford necessary maintenance on the house that you paid too much for. |
Why do car rental companies prefer/require credit over debit cards? | A hotel can accept the debit card because each night they can withdraw the money. If you don't have sufficient funds they can instantly lock you out of your room. They an also limit your ability to access room service, and other extra expensive options. The rental car can't do that once you have the car. Plus they never know if you will bring the car back with damages, toll charges, and an empty tank of gas. |
What would be a wise way to invest savings for a newly married couple? | I agree with @Pete that you may be well-advised to pay off your loans first and go from there. Even though you may not be "required" to make payments on your own loan based on your income, that debt will play a large factor in your borrowing ability until it is gone, which hinders your ability to move toward home ownership. If you are in a fortunate enough position to totally pay off both your loan and hers from cash on hand then you should. It would still leave you with more than $112,000 and no debt, which is a big priority and advantage for a young couple. Mind you, this doesn't keep you from starting an investment plan with some portion of the remaining funds (the advice to keep six months' income in the bank is very wise) through perhaps a mutual fund if you don't want to directly manage the investments yourself. The advantage of mutual funds is the ability to choose the level of risk you're willing to take and let professionals manage how to achieve your goals for you. You can always make adjustments to your funds as your circumstances change. Again, I'd emphasize ridding yourself of the student loan debt as the first move, then looking at how to invest the remainder. |
Is it common in the US not to pay medical bills? | While it is not common, it is also not "uncommon." A subtle distinction. If you are poor, you almost certainly get some kind of government assistance (not even talking about Obamacare or Trumpcare, but just general assistance.) If you are middle class or rich, that is where you get hit the most. They seem to realize you "can't get blood from a stone" and don't try to get payment out of poor people. But middle class and rich people, yes it just takes longer but they do hang in there with billing. My own experience is that years and years ago (way before Obamacare) I had a time in the hospital with a lot of tests, but I was poor and sleeping on a relatives floor at the time. I got all the tests I needed, and they took great care of me, and the hospital wrote it off as "charity care." |
Do I have to sell worthless stock to claim a loss and clean up? | Generally, to be able to write off worthless securities, you need to show that they're indeed worthless. It's not necessarily easy, as you need to prove that there's no way they will regain any value in the future. What is usually done, instead, is very simple: you sell them. Many brokers are aware of this problem and will assist by buying these securities from you at a nominal price (E*Trade, for example, for $0.01, ScotTrade for $0.00), and providing a proper trade confirmation. This is a bona fide sale, so if the stock does regain value - it will be a profit for the broker. In this case - you just report it as a sale at loss. Check with your broker if they support such a solution. |
I spend too much money. How can I get on the path to a frugal lifestyle? | There's plenty of advice out there about how to set up a budget or track your expenses or "pay yourself first". This is all great advice but sometimes the hardest part is just getting in the right frugal mindset. Here's a couple tricks on how I did it. Put yourself through a "budget fire drill" If you've never set a budget for yourself, you don't necessarily need to do that here... just live as though you had lost your job and savings through some imaginary catastrophe and live on the bare minimum for at least a month. Treat every dollar as though you only had a few left. Clip coupons, stop dining out, eat rice and beans, bike or car pool to work... whatever means possible to cut costs. If you're really into it, you can cancel your cable/Netflix/wine of the month bills and see how much you really miss them. This exercise will get you used to resisting impulse buys and train you to live through an actual financial disaster. There's also a bit of a game element here in that you can shoot for a "high score"... the difference between the monthly expenditures for your fire drill and the previous month. Understand the power of compound interest. Sit down with Excel and run some numbers for how your net worth will change long term if you saved more and paid down debt sooner. It will give you some realistic sense of the power of compound interest in terms that relate to your specific situation. Start simple... pick your top 10 recent non-essential purchases and calculate how much that would be worth if you had invested that money in the stock market earning 8% over the next thirty years. Then visualize your present self sneaking up to your future self and stealing that much money right out of your own wallet. When I did that, it really resonated with me and made me think about how every dollar I spent on something non-essential was a kick to the crotch of poor old future me. |
Solo-401k interaction with employer sponsored 401k. Limits of contribution from Schedule C income | Alright, team! I found answers to part 1) and part 2) that I've quote below, but still need help with 3). The facts in the article below seem to point to the ability for the LLC to contribute profit sharing of up to 25% of the wages it paid SE tax on. What part of the SE tax is that? I assume the spirit of the law is to only allow the 25% on the taxable portion of the income, but given that I would have crossed the SS portion of SE tax, I am not 100%. (From http://www.sensefinancial.com/services/solo401k/solo-401k-contribution/) Sole Proprietorship Employee Deferral The owner of a sole proprietorship who is under the age of 50 may make employee deferral contributions of as much as $17,500 to a Solo 401(k) plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up contribution, bringing their annual deferral contribution to as much as $23,000). Solo 401k contribution deadline rules dictate that plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline. Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions. Profit Sharing Contribution A sole proprietorship may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse. Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation. In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (1) the deduction for half of self-employment tax and (2) the deduction for contributions on your behalf to the Solo 401(k) plan. A business entity’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline. Single Member LLC Employee Deferral The owner of a single member LLC who is under the age of 50 may make employee deferral contributions of as much as $17,500 to a Solo 401(k) plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up contribution, bringing their annual deferral contribution to as much as $23,000). Solo 401k contribution deadline rules dictate that plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline. Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions. Profit Sharing Contribution A single member LLC business may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse. Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation. In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (i) the deduction for half of self-employment tax and (ii) the deduction for contributions on your behalf to the Solo 401(k). A single member LLC’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline. |
Pros & cons of buying gold directly vs. investing in a gold ETF like GLD, IAU, SGOL? | Owning physical gold (assuming coins): Owning gold through a fund: |
In a competitive market, why is movie theater popcorn expensive? | While many answers correctly cite the effect of monopoly power.... there is a cost issue that no one has yet posted. I first recall seeing this cost effect in a managerial econ textbook, perhaps Ivan Png's. The theater must clean up the popcorn mess. The sales of popcorn elsewhere does not usually include the costs of disposal because that cost is not borne by the vendor. In a theater the cost of disposal -- which is a variable cost depending on the amount and type of foodstuff sold -- is borne by the vendor, who must pay employees to clean up between shows and at the end of the night. While most people are responsible with popcorn, there is a long tail of more and more costly messes left by the customer... and if the theater shirks the cost of cleaning the messes then rats with long tails will bite into future customer demand for tickets. Whether this cost effect is as large as the monopoly power effect and the synergy in willingness-to-pay between entertainment and refreshments is not clear. All of these effects may be in operation. |
How does owning a home and paying on a mortgage fit into family savings and investment? | 1) How does owning a home fit into my financial portfolio? Most seem to agree that at best it is a hedge against rent or dollar inflation, and at worst it should be viewed as a liability, and has no place alongside other real investments. Periods of high inflation are generally accompanied with high(er) interest rates. Any home is a liability, as has been pointed out in other answers; it costs money to live in, it costs money to keep in good shape, and it offers you no return unless you sell it for more than you have paid for it in total (in fact, as long as you have an outstanding mortgage, it actually costs you money to own, even when not considering things like property taxes, utilities etc.). The only way to make a home an investment is to rent it out for more than it costs you in total to own, but then you can't live in it instead. 2) How should one view payments on a home mortgage? How are they similar or different to investing in low-risk low-reward investments? Like JoeTaxpayer said in a comment, paying off your mortgage should be considered the same as putting money into a certificate of deposit with a term and return equivalent to your mortgage interest cost (adjusting for tax effects). What is important to remember about paying off a mortgage, besides the simple and not so unimportant fact that it lowers your financial risk over time, is that over time it improves your cash flow. If interest rates don't change (unlikely), then as long as you keep paying the interest vigilantly but don't pay down the principal (assuming that the bank is happy with such an arrangement), your monthly cost remains the same and will do so in perpetuity. You currently have a cash flow that enables you to pay down the principal on the loan, and are putting some fairly significant amount of money towards that end. Now, suppose that you were to lose your job, which means a significant cut in the household income. If this cut means that you can't afford paying down the mortgage at the same rate as before, you can always call the bank and tell them to stop the extra payments until you get your ducks back in the proverbial row. It's also possible, with a long history of paying on time and a loan significantly smaller than what the house would bring in in a sale, that you could renegotiate the loan with an extended term, which depending on the exact terms may lower your monthly cost further. If the size of the loan is largely the same as or perhaps even exceeds the market value of the house, the bank would be a lot more unlikely to cooperate in such a scenario. It's also a good idea to at the very least aim to be free of debt by the time you retire. Even if one assumes that the pension systems will be the same by then as they are now (some don't, but that's a completely different question), you are likely to see a significant cut in cash flow on retirement day. Any fixed expenses which cannot easily be cut if needed are going to become a lot more of a liability when you are actually at least in part living off your savings rather than contributing to them. The earlier you get the mortgage paid off, the earlier you will have the freedom to put into other forms of savings the money which is now going not just to principal but to interest as well. What is important to consider is that paying off a mortgage is a very illiquid form of savings; on the other hand, money in stocks, bonds, various mutual funds, and savings accounts, tends to be highly liquid. It is always a good idea to have some savings in easily accessible form, some of it in very low-risk investments such as a simple interest-bearing savings account or government bonds (despite their low rate of return) before you start to aggressively pay down loans, because (particularly when you own a home) you never know when something might come up that ends up costing a fair chunk of money. |
Can my employer limit my maximum 401k contribution amount (below the IRS limit)? | Congratulations on your raise! Is my employer allowed to impose their own limit on my contributions that's different from the IRS limit? No. Is it something they can limit at will, or are they required to allow me to contribute up to the IRS limit? The employer cannot limit you, you can contribute up to the IRS limit. Your mistake is in thinking that the IRS limit is 17K for everyone. That is not so. You're affected by the HCE rules (Highly Compensated Employees). These rules define certain employees as HCE (if their salary is significantly higher than that of the rest of the employees), and limit the ability of the HCE's to deposit money into 401k, based on the deposits made by the rest of the employees. Basically it means that while the overall maximum is indeed 17K, your personal (and other HCE's in your company) is lowered down because those who are not HCE's in the company don't deposit to 401k enough. You can read more details and technical explanation about the HCE rules in this article and in this blog post. |
Why does the biotechnology industry have such a high PE ratio? | I want to elaborate on some of the general points made in the other answers, since there is a lot that is special or unique to the biotech industry. By definition, a high P/E ratio for an industry can stem from 1) high prices/demand for companies in the industry, and/or 2) low earnings in the industry. On average, the biotech industry exhibits both high demand (and therefore high prices) and low earnings, hence its average P/E ratio. My answer is somewhat US-specific (mainly the parts about the FDA) but the rest of the information is relevant elsewhere. The biotech industry is a high-priced industry because for several reasons, some investors consider it an industry with significant growth potential. Also, bringing a drug to market requires a great deal of investment over several years, at minimum. A new drug may turn out to be highly profitable in the future, but the earliest the company could begin earning this profit is after the drug nears completion of Phase III clinical trials and passes the FDA approval process. Young, small-cap biotech companies may therefore have low or negative earnings for extended periods because they face high R&D costs throughout the lengthy process of bringing their first drug (or later drugs) to market. This process can be on the order of decades. These depressed earnings, along with high demand for the companies, either through early investors, mergers and acquisitions, etc. can lead to high P/E ratios. I addressed in detail several of the reasons why biotech companies are in demand now in another answer, but I want to add some information about the role of venture capital in the biotech industry that doesn't necessarily fit into the other answer. Venture capital is most prevalent in tech industries because of their high upfront capital requirements, and it's even more important for young biotech companies because they require sophisticated computing and laboratory equipment and highly-trained staff before they can even begin their research. These capital requirement are only expected to rise as subfields like genetic engineering become more widespread in the industry; when half the staff of a young company have PhD's in bioinformatics and they need high-end computing power to evaluate their models, you can see why the initial costs can be quite high. To put this in perspective, in 2010, "venture capitalists invested approximately $22 billion into nearly 2,749 companies." That comes out to roughly $7.8M per company. The same year (I've lost the article that mentioned this, unfortunately), the average venture capital investment in the biotech industry was almost double that, at $15M. Since many years can elapse between initial investment in a biotech company and the earliest potential for earnings, these companies may require large amounts of early investment to get them through this period. It's also important to understand why the biotech industry, as a whole, may exhibit low earnings for a long period after the initial investment. Much of this has to do with the drug development process and the phases of clinical trials. The biotech industry isn't 100% dedicated to pharmaceutical development, but the overlap is so significant that the following information is more than applicable. Drug development usually goes through three phases: Drug discovery - This is the first research stage, where companies look for new chemical compounds that might have pharmaceutical applications. Compounds that pass this stage are those that are found to be effective against some biological target, although their effects on humans may not be known. Pre-clinical testing - In this stage, the company tests the drug for toxicity to major organs and potential side effects on other parts of the body. Through laboratory and animal testing, the company determines that the drug, in certain doses, is likely safe for use in humans. Once a drug passes the tests in this stage, the company submits an Investigational New Drug (IND) application to the FDA. This application contains results from the animal/laboratory tests, details of the manufacturing process, and detailed proposals for human clinical trials should the FDA approve the company's IND application. Clinical trials - If the FDA approves the IND application, the company moves forward with clinical trials in human, which are themselves divided into several stages. "Post-clinical phase" / ongoing trials - This stage is sometimes considered Phase IV of the clinical trials stage. Once the drug has been approved by the FDA or other regulatory agency, the company can ramp up its marketing efforts to physicians and consumers. The company will likely continue conducting clinical trials, as well as monitoring data on the widespread use of the drug, to both watch for unforeseen side effects or opportunities for off-label use. I included such detailed information on the drug development process because it's vitally important to realize that each and every step in this process has a cost, both in time and money. Most biopharm companies won't begin to realize profits from a successful drug until near the end of Phase III clinical trials. The vast R&D costs, in both time and money, required to bring an effective drug through all of these steps and into the marketplace can easily depress earnings for many years. Also, keep in mind that most of the compounds identified in the drug discovery stage won't become profitable pharmaceutical products. A company may identify 5,000 compounds that show promise in the drug discovery stage. On average, less than ten of these compounds will qualify for human tests. These ten drugs may start human trials, but only around 20% of them will actually pass Phase III clinical trials and be submitted for FDA approval. The pre-clinical testing stage alone takes an average of 10 years to complete for a single drug. All this time, the company isn't earning profit on that drug. The linked article also goes into detail about recruitment delays in human trials, scheduling problems, and attrition rates for each phase of the drug development process. All of these items add both temporal and financial costs to the process and have the potential to further depress earnings. And finally, a drug could be withdrawn from the market even after it passes the drug development process. When this occurs, however, it's usually the fault of the company for poor trial design or suppression of data (as in the case of Vioxx). I want to make one final point to keep in mind when looking at financial statistics like the P/E ratio, as well as performance and risk metrics. Different biotech funds don't necessarily represent the industry in the same way, since not all of these funds invest in the same firms. For example, the manager of Fidelity's Select Biotechnology Portfolio (FBIOX) has stated that he prefers to weight his fund towards medium to large cap companies that already have established cash flows. Like all biopharm companies, these firms face the R&D costs associated with the drug development process, but the cost to their bottom line isn't as steep because they already have existing cash flows to sustain their business and accumulated human capital that should (ideally) make the development process more efficient for newer drugs. You can also see differences in composition between funds with similar strategies. The ishares Nasdaq Biotech Index Fund (IBB) also contains medium to large cap companies, but the composition of its top 10 holdings is slightly different from that of FBIOX. These differences can affect any metric (although some might not be present for FBIOX, since it's a mutual fund) as well as performance. For example, FBIOX includes Ironwood Pharmaceuticals (IRWD) in its top 10 holdings, while IBB doesn't. Although IBB does include IRWD because it's a major NASDAQ biotech stock, the difference in holdings is important for an industry where investors' perception of a stock can hinge on a single drug approval. This is a factor even for established companies. In general, I want to emphasize that a) funds that invest more heavily in small-cap biotech stocks may exhibit higher P/E ratios for the reasons stated above, and b) even funds with similar mixes of stocks may have somewhat different performance because of the nature of risk in the biotech industry. There are also funds like Vanguard's Healthcare ETF (VHT) that have significant exposure to the biotech industry, including small-cap firms, but also to major players in the pharmaceutical market like Pfizer, Johnson and Johnson, etc. Since buyouts of small-cap companies by large players are a major factor in the biotech industry, these funds may exhibit different financial statistics because they reflect both the high prices/low earnings of young companies and the more standard prices/established earnings of larger companies. Don't interpret anything I stated above as investment advice; I don't want anything I say to be construed as any form of investment recommendation, since I'm not making one. |
institutional ownership — why is it so convoluted | The reason for such differences is that there's no source to get this information. The companies do not (and cannot) report who are their shareholders except for large shareholders and stakes of interest. These, in the case of GoPro, were identified during the IPO (you can look the filings up on EDGAR). You can get information from this or that publicly traded mutual fund about their larger holdings from their reports, but private investors don't provide even that. Institutional (public) investors buy and sell shares all the time and only report large investments. So there's no reliable way to get a snapshot picture you're looking for. |
Obtaining Private Prospectuses | How can I get quarterly information about private companies? Ask the owner(s). Unelss you have a relationship and they're interested in helping you, they will likely tell you no as there's no compelling reason for them to do so. It's a huge benefit of not taking a company public. |
What is the incentive for a bank to refinance a mortgage at a lower rate? | 1- Wells Fargo does not own our current mortgage. They have bundled it and sold it as an investment. 2- They make their money from 'servicing' the loan. Even if they only get $50 per month to service it (3% of our monthly payment), that adds up to $50,000,000 per month if they have a million homes under management. That is $600 million per year for each million homes being serviced 3- Managing the escrow gets them additional profit, because they can invest it and earn 2-3%. If 1,000,000 homes have an average balance of $2,000 in their escrow accounts, they can earn up to $60 per year, or $60,000,000 annually. 4- They make $1,000 every time they refinance the home. This is the approximate profit after paying real closing costs. Refinance those million homes, and you make a cool billion in profit! 5- They also want to be sure that they keep us as a customer. By lowering our payment, they decrease the likelyhood that we will refinance with someone else, and we are less likely to default. (Not that they lose if we default, because they don't own the loan!) 6- they make additional profit by paying off the old loan (they don't own it… remember), then packaging and selling the new mortgage. Since they are selling it as a security, they sell for future value, meaning they sell our $200,000 loan for a valuation of $360,000. This means that they sell for $200,000 PLUS some fraction of the additional $160,000. Let's say they only want a 10% premium of the $360,000 valuation. That means they sell our $200,000 loan for $236,000. They pocket $36,000. If they make a million of these transactions every year, that is $36 billion dollars in profit So… Wells fargo refinances one million homes every year, and they make: $36,000,000,000 initial profit for selling the loan (with absolutely no risk!), plus $1,000,000,000 for doing the loan $660,000,000 annually to service the loan (Very little risk, since it is being paid by the owner of the loan as a service fee) If they can retain the loans for their entire life (keep us from refinancing with someone else…), they can make $19,800,000,000 (that is 19.8 billion dollars in servicing fees) The profit they make in a refinance is much greater than the money then can make by holding the loan for 30 years. |
Cash out 401k for house downpayment | As @AlexKuhl says, ever? yes, but generally? no. If your 401k is invested in stocks and bonds, the long term return is very likely higher than the interest on a mortgage. Long term return on the stock market is around 7%. Mortgage rates these days are around 4%. Add the tax penalty on top of that and you're almost surely better to keep your money in the 401k. There's also the psychological/budgeting factor. People very often say, "I'll pull money out of my retirement fund for this important purchase and then put it back later." And then later comes and there are other expenses and things they want to do and they never put the money back. |
Resources to begin trading from home? | A good place to start is to read, such as : Robert T. Kiyosaki : poor dad rich dad. It is quite simple but it gives the good mindset to start. But moreover it is stated in the book : "the best investement you can make is educate yourself". You current situation is quite difficcult, but don't give up on your study. From your post i didn't understand : do you have a master degree? If you love math, learn coding and find a job in banking or else. People that know how to code AND have a good level in math worth a lot. |
When to hire an investment professional? | Lifecycle funds might be a suitable fit for you. Lifecycle funds (aka "target date funds") are a mutual fund that invests your money in other mutual funds based on how much time is left until you need the money-- they follow a "glide-path" of reducing stock holdings in favor of bonds over time to reduce volatility of your final return as you near retirement. The ones I've looked at don't charge a fee of their own for this, but they do direct your portfolio to actively managed funds. That said, the ones I've seen have an "acquired" expense ratio of less than what you're proposing you'd pay a professional. FWIW, my current plan is to invest in a binary portfolio of cheap mutual funds that track S&P500 and AGG and rebalance regularly. This is easy enough that I don't see the point of adding in a 1 percent commission. |
Forex vs day trading for beginner investor | This image is an advertisement from this week's Barron's. The broker would want to put himself in the best light, correct? This shows you that of their current accounts, 53.5% are not profitable. And these guys have the best track record of the list. Also keep in mind that their client base isn't random. The winners tend to stay, so even if it were 50/50, the 50% of losers might represent many times that number of people who came to the table, lost their money and left. |
How are stock buybacks not considered insider trading? | Buybacks do not increase the company's value. Cash is traded for outstanding shares. This is similar to a dividend, but instead of cash, investors receive a rising share-price. Whether an investor prefers a cash dividend or capital gains is less important than the outcome that their investment is gaining value for them. |
Low Fee Income Generating Investments for a Trust | If your primary goal is no / minimized fees, there are 3 general options, as I see it: Based on the fact that you want some risk, interest-only investments would not be great. Consider - 2% interest equals only $1,500 annually, and since the trust can only distribute income, that may be limited. Based on the fact that you seem to have some hesitation on risk, and also limited personal time able to govern the trust (which is understandable), I would say keep your investment mix simple. By this I mean, creating a specific portfolio may seem desirable, but could also become a headache and, in my opinion, not desirable for a trust executor. You didn't get into the personal situation, but I assume you have a family / close connection to a young person, and are executor of a trust set up on someone's death. That not be the case for you, but given that you are asking for advice rather than speaking with those involved, I assume it is similar enough for this to be applicable: you don't want to set yourself up to feel emotionally responsible for taking on too much risk, impacting the trustee(s)'s life negatively. Therefore, investing in a few limited index funds seems to match what you're looking for in terms of risk, reward, and time required. One final consideration - if you want to maximize annual distributions to the trustee(s)'s, consider that you may be best served by seeking high-dividend paying stock (although again, probably don't do this on a stock-by-stock basis unless you can commit the time to fully manage it). Returns in the form of stock increases are good, but they will not immediately provide income that the trust can distribute. If you also wish to grow the corpus of the trust, then stock growth is okay, but if you want to maximize immediate distributions, you need to focus on returns through income (dividends & interest), rather than returns through value increase. |
online personal finance software that I can host myself | You can use www.mint.com for most of your requirements. It works great for me, it's free and I'd say is secure. Hosting that kind of service just for your will be time-consuming and not necessarily more secure than most of the stuff that is readily available out there. Good luck. |
Should I sell when my stocks are growing? | You should constantly look at your investment portfolio and sell based on future outlook. Don't get emotional. Selling a portfolio of stocks at once without a real reason is foolish. If you have a stock that's up, and circumstances make you think it's going to go up further, hold it. If prospects are not so good, sell it. Also, you don't have to buy or sell everything at once. If you've made money on a stock and want to realize those gains, sell blocks as it goes up. Stay diversified, monitor your portfolio every week and keep a reserve of cash to use when opportunity strikes. If you have more stocks or funds than you can keep current on every week, you should consolidate your positions over time. |
How much cash on hand should one have? | Less than 2 1/2% of all US currency actually exists. The rest is digital entries. In a financial crisis you'll need lots of rare cash. Twenty dollar bills are the best choice. Stash as many as you can afford to. Best to stash in a anchored security safe. And for goodness sakes, don't tell anyone. |
Capital gains on no-dividend stocks - a theoretical question | You are overlooking the fact that it is not only supply & demand from investors that determines the share price: The company itself can buy and sell its own shares. If company X is profitable over the long haul but pays 0 dividends then either Option (2) is pretty ridiculous, so (1) will hold except in an extreme "man bites dog" kind of fluke. This is connected with the well-known "dividend paradox", which I discussed already in another answer. |
Recourse with Credit Card company after victimized by fraud? | If the business is being investigated by your state's Attorney General's office, then your first call should be to that office. They will be able to help you in a few ways, even if they can't explicitly resolve the situation, and they also would undoubtedly appreciate your information to add to their case as well. First, they may be able to tell you how other victims have had their cases resolved, particularly if any went to court on their own. While they won't be able to provide you with personal information of the other victims unless it is public knowledge (via a court case), the information about how the other victims resolved the cases may be helpful - both to show what to do, and what not to do. Second, they may be able to put you in contact with an attorney who is handling other cases like yours. That may reduce the cost of the attorney (as they'll have already done some of the work), and may mean that the attorney is willing to work with no up front fee on the assumption of winning the case. Third, if there are options for getting your money back without a court case, the AG's office may be able to help provide those as well. If the Attorney General's office is unable to help you, then your best bet is to contact an attorney on your own - look for one who specializes in consumer protection and fraud. This is the purpose attorneys exist for: pursuing your interests against another's. Let them do their job. Do make an effort to find a good, honest attorney; you may find some help on how to do this on law.se if you need it (not actual recommendations, mind you, just help with how you would go about finding one). It sounds like your claim would be above and beyond the level of a small claims court lawsuit, but verify this in your jurisdiction; if small claims court goes up to $10,000, you may be able to pursue it there on your own - but I would still get some help from an attorney, at least finding out what you would need to win. |
Should I invest in my house, when it's in my wife's name? | If you are concerned about it being inequitable due to the prenuptial agreement, discuss the idea of amending the prenuptial agreement to give you some consideration for your investments in the house. Prenuptial agreements often get amended over the course of a marriage. How do you proceed? It has to start with discussion. It's not an unreasonable concern given your legal separation of assets, so broach the subject and go from there. Perhaps you'll find there's a good reason for you to invest in the property even without having interest in it, who knows. |
Stock valuation - Volkswagen | The prices dropped because the scandal could mean: This some people estimated that the company could lose money, or have smaller profit. Thus each share was worth less money going forward. The mechanism is that in order to sell their shares the current share owners had to settle for lower prices. |
What are the reasons to get more than one credit card? | I have a fair number of cards floating around some reasons I have opened multiple accounts. I am not saying that it is for everyone but there are valid scenarios where multiple credit cards can make sense. |
Advice on strategy for when to sell | It's impossibly difficult to time the market. Generally speaking, you should buy low and sell high. Picking 25% as an arbitrary ceiling on your gains seems incorrect to me because sometimes you'll want to hold a stock for longer or sell it sooner, and those decisions should be based on your research (or if you need the money), not an arbitrary number. To answer your questions: If the reasons you still bought a stock in the first place are still valid, then you should hold and/or buy more. If something has changed and you can't find a reason to buy more, then consider selling. Keep in mind you'll pay capital gains taxes on anything you sell that is not in a tax-deferred (e.g. retirement) account. No, it does not make sense to do a wash sale where you sell and buy the same stock. Capital gains taxes are one reason. I'm not sure why you would ever want to do this -- what reasons were you considering? You can always sell just some of the shares. See above (and link) regarding wash sales. Buying more of a stock you already own is called "dollar cost averaging". It's an effective method when the reasons are right. DCA minimizes variance due to buying or selling a large amount of shares at an arbitrary single-day price and instead spreads the cost or sale basis out over time. All that said, there's nothing wrong with locking in a gain by selling all or some shares of a winner. Buy low, sell high! |
W2 vs 1099 Employee status | In general What does this mean? Assume 10 holidays and 2 weeks of vacation. So you will report to the office for 240 days (48 weeks * 5 days a week). If you are a w2 they will pay you for 260 days (52 weeks * 5 days a week). At $48 per hour you will be paid: 260*8*48 or $99,840. As a 1099 you will be paid 240*8*50 or 96,000. But you still have to cover insurance, the extra part of social security, and your retirement through an IRA. A rule of thumb I have seen with government contracting is that If the employee thinks that they make X,000 per year the company has to bill X/hour to pay for wages, benefits, overhead and profit. If the employee thinks they make x/hour the company has to bill at 2X/hour. When does a small spread make sense: The insurance is covered by another source, your spouse; or government/military retirement program. Still $2 per hour won't cover the 6.2% for social security. Let alone the other benefits. The IRS has a checklist to make sure that a 1099 is really a 1099, not just a way for the employer to shift the costs onto the individual. |
In a competitive market, why is movie theater popcorn expensive? | To add to Jason's answer; a further mechanism is that of monopoly rents which you mention in your question. Movie theatres are often in shopping complexes (which themselves may offer a particular cinema exclusivity), or physically remote from each other, making price comparison more difficult. Different companies may not offer the same movies (similar to the way phone companies offer difficult-to-compare contract pricing). Once you've paid for your movie ticket, if you're suddenly thirsty or peckish, the theatre is the only place selling snacks. Many theatres (including film theatres) discourage (or refuse) patrons from consuming products purchased elsewhere on site. A sense of "capture" is reinforced with ticket collection at the entrance or some form of barrier (inside vs outside the cordon). A theatre can thus capture their patrons and then leverage that access in order to discriminate amongst the higher-paying consumers mentioned by Jason. |
Long vs. short term capital gains on real estate | No, it's not all long-term capital gain. Depending on the facts of your situation, it will be either ordinary income or partially short-term capital gain. You should consider consulting a tax lawyer if you have this issue. This is sort of a weird little corner of the tax law. IRC §§1221-1223 don't go into it, nor do the attendant Regs. It also somewhat stumped the people on TaxAlmanac years ago (they mostly punted and just declared it self-employment income, avoiding the holding period issue). But I did manage to find it in BNA Portfolio 562, buried in there. That cited to a court case Comm'r v. Williams, 256 F.2d 152 (5th Cir. 1958) and to Revenue Ruling 75-524 (and to another Rev. Rul.). Rev Rul 75-524 cites Fred Draper, 32 T.C. 545 (1959) for the proposition that assets are acquired progressively as they are built. Note also that land and improvements on it are treated as separate assets for purposes of depreciation (Pub 946). So between Williams (which says something similar but about the shipbuilding industry) and 75-524, as well as some related rulings and cases, you may be looking at an analysis of how long your property has been built and how built it was. You may be able to apportion some of the building as long-term and some as short-term. Whether the apportionment should be as to cost expended before 1 year or value created before 1 year is explicitly left open in Williams. It may be simpler to account for costs, since you'll have expenditure records with dates. However, if this is properly ordinary income because this is really business inventory and not merely investment property, then you have fully ordinary income and holding period is irrelevant. Your quick turnaround sale tends to suggest this may have been done as a business, not as an investment. A proper advisor with access to these materials could help you formulate a tax strategy and return position. This may be complex and law-driven enough that you'd need a tax lawyer rather than a CPA or preparer. They can sort through the precedent and if you have the money may even provide a formal tax opinion. Experienced real estate lawyers may be able to help, if you screen them appropriately (i.e. those who help prepare real estate tax returns or otherwise have strong tax crossover knowledge). |
My tenant wants to pay rent through their company: Should this raise a red flag? | Maybe you should consider setting up a Taxpayer Identification Number (TIN) for your business dealings as a landlord and consider providing that instead of your SSN for this type of thing. I am assuming (if this is legitimate) they want it so they can send you a 1099 as they might be obligated to do if they are claiming the rent as a business expense. Also, I'd suggest having the tenant tell their employer to contact you directly. There is no need for the tenant in this situation to also get your SSN/TIN. |
Why don't forced buy-ins of short sold stock happen much more frequently? | Many investors don't invest for the short term and so a stock "nose-diving" in the short run will not affect their long term strategy so they will simply hold on to it until it recovers. Additionally funds that track an index have to hold on to the constituents of that index no matter what happens to its value over the period (within trading limits). Both of these kinds of investors will be able to lend stock in a company out and not trigger a forced buy-in on a short term change. If the underlying long-term health of the company changes or it is removed from indices it is likely that this will change, however. Employee stock plans and other investors who are linked directly to the company or who have a vested interest in the company other than in a financial way will also be unwilling (or unable) to sell on a down turn in the company. They will similarly be able to lend their stock in the short term. |
Why do people always talk about stocks that pay high dividends? | When you invest in stocks, there are two possible ways to make money: Many people speculate just on the stock price, which would result in a gain (or loss), but only once you have resold the shares. Others don't really care about the stock price. They get dividends every so often, and hopefully, the return will be better than other types of investments. If you're in there for the long run, you do not really care what the price of the stock is. It is often highly volatile, and often completely disconnected from anything, so it's not because today you have a theoretical gain (because the current stock price is higher than your buying price) that you will effectively realise that gain when you sell (need I enumerate the numerous crashes that prevented this from happening?). Returns will often be more spectacular on share resale than on dividends, but it goes both ways (you can lose a lot if you resell at the wrong time). Dividends tend to be a bit more stable, and unless the company goes bankrupt (or a few other unfortunate events), you still hold shares in the company even if the price goes down, and you could still get dividends. And you can still resell the stock on top of that! Of course, not all companies distribute dividends. In that case, you only have the hope of reselling at a higher price (or that the company will distribute dividends in the future). Welcome to the next bubble... |
What is the best, low risk investment I can make now? | First of all, bear in mind that there's no such thing as a risk-free investment. If you keep your money in the bank, you'll struggle to get a return that keeps up with inflation. The same is true for other "safe" investments like government bonds. Gold and silver are essentially completely speculative investments; over the years their price tends to vary quite wildly, so unless you really understand how those markets work you should steer well clear. They're certainly not low risk. Repeatedly buying a property to sell in a couple of years time is almost certainly a bad idea; you'll end up paying substantial transaction fees each time that would wipe out a lot of the possible profit, and of course there's always the risk that prices would go down not up. Buying a property to keep - and preferably live in - might be a decent option once you have a good deposit saved up. It's very hard to say where prices will go in future, on the one hand London prices are very high by historical standards, but on the other hand supply is likely to remain severely constrained for years to come. I tend to think of a house as something that I need one of for the rest of my life, and so in one sense not owning a house to live in is a gamble that house prices and rents won't go up substantially. If you own a house, you're insulated from changes in rent etc and even if prices crash at least you still have somewhere to live. However that argument only works really well if you expect to keep living in the same area under most circumstances - house prices might crash in your area but not elsewhere. |
Options on the E-mini S&P 500 Futures at the CME: when were EW3, the weekly Monday options and the weekly Wednesday options introduced? | The traditional E-mini S&P500 options (introduced on 09/09/97) already expire on the 3rd Friday, so there's no need for another "weekly" option that expires at the same time. |
Should I pay off my 50K of student loans as quickly as possible, or steadily? Why? | The definitive answer is: It Depends. What are your goals? First and foremost, you need to have at least 3 months expenses in cash or equivalent. (i.e. an investment that you can withdraw from quickly, and without penalty). The good news is that you don't have to come up with it instantly. Set a time frame - one year - for creating this safety net, and pay towards that goal. This is the single most important piece of financial advice you will receive. Now determine what you need to do. For example, you may need a car. Compare interest rates on your student loan and the car loan. Put your cash towards whichever is higher. If you don't need a car or other big ticket item, then you may consider sticking your surplus into the student loans. 50k at $1650 a month will be paid down in about 3 years, which might be a bit long to live the monastic lifestyle. I'd look at paying down the smallest loan first (assuming relatively similar rates), and freeing up that payment for yourself. So if you can pay off 1650 a month, and free up $100 of that in six months, then you can reward yourself with half that surplus, and apply the other half to the next loan. (This is different than some would suggest because you're talking about entering severe spartan mode, which is not sustainable.) Remember that life happens. You'll meet someone. You'll have an accident, your brother will get sick and you'll give him some money to help out. You've got to be prepared for these events, and for these reasons, I don't recommend living that close to the edge. Remember, you're not in default, and you do have the option of continuing to pay the minimum for a long time. |
Why would a car company lend me money at a very low interest rate? | Here I thought I would not ever answer a question on this site and boom first ten minutes. First and foremost I am in the automotive industry, specifically one of our core competencies is finance department management consulting and the sales process both for the sale of the care as well as the financial transaction. First and foremost new vehicle gross profits are nowhere near 20% for the dealership. In an entry level vehicle like say a Toyota Corolla there is only a few hundreds of dollars in markup from invoice to M.S.R.P. There is also something called holdback that dealers get for achieving certain goals such as sales volume. These are usually pretty easy to hit. As a matter of fact I have never heard of a dealer not getting the hold back on a deal. This hold back is there to cover overhead for the car, the cost of getting it ready to sell, having a lot to park it on, making it ready for delivery, offset some of the cost of sales labor etc. Most dealerships consider the holdback portion of the invoice to not be part of the deal when it comes to negotiations. Certain brands such as KIA and Chrysler have something called "Dealer Cash" these payouts are usually stair stepped according to volume and vary by dealer, location, past history, how the guys at the factory feel that day and any number of combinations. Then there is CSI or Customer Service Index payments, these payments are usually made every 1/4 are on the Parts Statement not the Sales Doc and while they effect the dealers bottom line they almost never affect the sales managers or sales persons payroll so they are not considered a part of the cost of the car. They are however extremely important to the dealer and this is why after you have your new car they want you to bring in your survey for a free oil change or something. IF you are going to give a bad survey they want to throw it away and not send it in, if you are going to give a good survey they want to make sure you fill it out correctly. This is because lets say they ask you on a scale of 1-10 how was your sales person and you put a 9 that is a failing score. Dumb I know but that is how every factory CSI score system I have seen worked. According to NADA the average New Vehicle gross profit including hold back and dealer cash is around $1000.00. No where near 20%. Dealerships would love it if they made 20% on your new F250 Supercrew Diesel at around $50,000.00. One last thing there is something on the invoice called Wholesale Finance Reserve. This is the amount of money the factory forwards to the Dealership to offset the cost of financing vehicle on the floor plan so they can have it for you to look at before you buy. This is usually equal to around 3 months of interest and while you might buy a vehicle that has been on the lot for 2 days they have plenty that have been there much longer so this equals out in a fair to middling run store. General Mangers that know what they are doing can make this really pad their net profit to statement. On to incentives, there are basically 3 kinds. Cash to customer in the form of rebates, Dealer Cash in the form of incentives to dealerships based on volume or the undesirability of a vehicle, and incentive rates or Subvented leases. The rates are pretty self explanatory as they advertised as such (example 0% for 60 Months). Subvented Leased are harder to figure out and usually not disclosed as they are hard to explain and also a source of increased profit. Subvented leases are usually powered by lower cost of money called a money factor (think of it as an interest rate) that is discounted from the lease company or a subsidized residual. Subsidized residuals are virtually verboten on domestic vehicles due to their poor resell values. A subsidized residual works like this, you buy a Toyota Camry and the ALG (automotive lease guide) says it has a residual at 36 months of 48%. Well Toyota Motor Credit says we will give you a subvented residual of 60% basically subsidizing a 2% increase in residual. Since they do not expect to be able to sell the car at auction for that amount they have to set aside the 2% as a future expense. What does this mean to you, it means a lower payment. Also a good rule of thumb if you are told a money factor by your salesperson to figure out what the interest rate is just multiply it by 2400. So if a money factor is give of .00345 you know your actual interest rate is a little bit lower than 8.28% (illustration purposes only money factors are much lower than that right now). So how does this save you money well a lease is basically calculated by multiplying the MSRP by the residual and then subtracting that amount from the "Capitalized Cost" which is the Price paid for the car - trade in + payoff + TT&L-Rebate-Down Payment. That is the depreciation. Then you divide that number by the term of the loan and you have the depreciation amount. So if you have 20K CC and 10K R your D = 10K / 36 = 277 monthly payment. For the rest of the monthly payment you add (I think been a long time since I did this with out a computer) the Residual plus the CC for $30,000 * MF of .00345 = 107 for a total payment of 404 ish. This is not completely accurate but you can use it to make sure a salesperson/finance person is not trying to do one thing and say another as so often happens on leases. 0% how the heck do they make money at that, well its simple. First in 2008 the Fed made all the "Captive" lenders into actual banks instead of whatever they were before. So now they have access to the Fed's discounting window which with todays monetary policies make it almost free money. In the past these lenders had to go through all kinds of hoops to raise funds and securitize loans even for super prime credit. Those days are essentially over. Now they get their short term money just like Bank of America does. Eventually they still bundle these loans and sell them. So in the short term YOU pay for the 0% by giving up part or all of your rebate. This is really important DO NOT GIVE up your rebate for 0% unless it makes sense to do so. When you can get the money at 2.5% and get a $7000.00 rebate (customer cash) on that F250 or 0% take the cash. First of all make the finance guy/gal show you the the difference in total cost they can do do this using the federal truth in lending disclosures on a finance contract. Secondly how long will you keep the vehicle? If you come out ahead by say $1500 by taking the lower rate but you usually trade out every three years this is not going to work. Also and this is important if you are involved in a situation with a total loss like a stolen car or even worse a bad wreck before the breakeven point you lose that price break. Finally on judging what is right for you, just know that future value of the vehicle on for resell or trade-in will take into effect all of these past rebates and value the car accordingly. So if a vehicle depreciates 20% a year for the first 3 years the starting point will essentially be $7000.00 less than you actually paid, using rough numbers. How does this help the dealers and car companies? Well while a dealer struggles to make money on new cars the factory makes all of their money on the new cars and the new car financing. While your individual loan might lose money that money is offset by the loss of rebate and I think Ford does actually pay Ford Motor Credit Company the difference in the rate. The most important thing is what happens later FMCC now has 2500 loans with people with perfect credit. They can now use those loans to budle with people with not so perfect credit that they financed at 12%-18% and buy that money with interest rates in the 2%-3% range. Well that is a hell of a lot of profit. 'How does it help the dealership, well the more super prime credit they have in their portfolio the more subprime credit the banks will buy for them. This means they have more loans originated that are more profitable for them. Say you come in for the 0% but have 590 credit score, they get FMCC to buy the deal because they have a good portfolio and you win because the dealer gets to buy the money at say 9% and sell it to you at say 12% making the spread. You win there because you actually qualified for a rate of around 18% with a subprime company like Santander or Capital One (yes that capital one) so you save a ton on your overall cost of the car. Any dealership that is half way well run makes as much or money in the finance and insurance office than the rest of the dealership. When you factor in what a good F&I Director can do to get deals done with favorable terms that really goes up. Think about that the guys sitting a desk drinking coffee making more than the service department guys all put together. Well that was long winded but there I broke down the car business for whoever read this far. |
What is the difference between equity and assets? | Equity does not represent production divisions in a company (i.e. chocolate, strawberry, and vanilla does not make sense). In Sole proprietorship, equity represents 1 owner. In Partnership, equity has at least two sub-accounts, namely Partner 1 and Partner 2. In Corporations, equity may have Common Stockholders and Preferred Stockholders, or even different class of shares for insiders and angel investors. As you can see, equity represents who owns the company. It is not what the company does or manufactures. First and foremost, define the boundary of the firm. Are your books titled "The books of the family of Doe", "The books of Mr & Mrs Doe", or "The books of Mr & Mrs Doe & Sons". Ask yourself, who "owns" this family. If you believe that a marriage is perpetual until further notice then it does not make any sense to constantly calculate which parent owns the family more. In partnership, firm profits are attributed to partner's accounts using previously agreed ratio. For example, (60%/40% because Partner 1 is more hard working and valuable to the firm. Does your child own this family? Does he/she have any rights to use the assets, to earn income from the assets, to transfer the assets to others, or to enforce private property rights? If they don't have a part of these rights, they are certainly NOT part of Equity. So what happens to the expenses of children if you follow the "partnership" model? There are two ways. The first way is to attribute the Loss to the parents/family since you do not expect the children to repay. It is an unrecoverable loss written off. The second way is to create a Debtor(Asset) account to aggregate all child expense, then create a separate book called "The books Children 1", and classify the expense in that separate book. I advise using "The family of Doe" as the firm's boundary, and having 1 Equity account to simplify everything. It is ultimately up to you to decide the boundaries. |
Unmarried Couple Splitting up with Joint Ownership of Home | Because you're not married, its a partnership agreement, and unless there's a written contract, either the two of you agree on how to handle the home, or it's off to court you go. If you were both supposed to pay for the home, and he failed to for a a while, that would put him in breach of contract which I would think gives you a good position in court. On the other hand, if you are at all concerned about your safety from this louse, remember, he knows exactly where the house is. |
Does bull/bear market actually make a difference? | To short: Of course, you may always buy some index correlated ETF that eliminates the above. They use stock futures on the index, and you simply buy the "shorting ETF" in your non-margin account. However, they are surprisingly high cost, and despite the intended correlation, have significant drag. It's a much safer way to short the market (you have great choice in which market ETF) and eliminates the single stock risk. |
Can saving/investing 15% of your income starting age 25, likely make you a millionaire? | Millionaire, Shmillionaire! Let's do this calculation Bruno Mars style (I wanna be a Billionaire...) If my calculations are correct, in the above scenario, at age 80, you would have more than a billion in the bank, after taxes. |
The cost of cleaning the house that we rented far exceeds the security deposit. Should we bother? | I am surprised at the amount of work this contract wants done. I'd question if it's even legal given the high costs. I suspect it's only there to remind abusive tenants of responsibilities they already have in law for extraordinary abuse beyond ordinary wear-and-tear: they are already on the hook to repaint if they trash the paint (think: child writing on walls, happens a lot), and already need to fumigate (and a lot more) if they are a filth-type hoarder who brings in a serious infestation (happens a lot). The landlord can already go after these people for additional money beyond the deposit. But that's not you. So don't freak out about those clauses, until you talk to the landlord and see what he's really after. Almost certainly, he really wants a "fit and ready to rent" unit upon your departure, so he doesn't have to take the unit off the market for months fixing it. As long as that's done, there's no reasonable reason for further work -- a decent landlord wouldn't require that. Nor would a court, IMO. The trouble with living in a place for awhile is you become blind to its deficiencies. What's more, it's rather difficult to "size up" a unit as ready when it's still occupied by your stuff. A unit will look rather different when reduced to a bare room, without furniture and whatnot distracting you. Add to it a dose of vanity and it becomes hard to convince yourself of defects others will easily see. So, tread carefully here. If push comes to shove, first stop is whether it's even legal. Cities and states with heavy tenant populations tend to have much more detailed laws, and as a rule, they favor the tenant. Right off the bat, in most states the tenant is not responsible for ordinary wear-and-tear. In my opinion, 6 years of ordinary, exempt wear would justify a repaint, so that shouldn't be on the tenant at all. As for the fumigation, I'm not in Florida so I don't know the deal, maybe there's some special environmental issue there which somehow makes that reasonable, it sure wouldn't fly in CA. Again that assumes you're a reasonable prudent tenant, not a slob or hoarder. As for the pro carpet cleaning, that's par for the course in any of the tough rent control areas I've seen, so that's gotten a pass from the legislators. Though $600 seems awfully high. Other than that, you can argue the terms are "unconscionable" -- too much of a raw deal to even be fair. However, this will depend on the opinion of a judge. Hit or miss. I'm hoping your landlord will be happy to negotiate based on the good condition of the unit (which he may not know; landlords rarely visit tenant units unless they really need to.) You certainly should make the case that you make here; that the work is not really needed and it's prohibitive. Your best defense against unconscionable deals is don't sign them. Remember, you didn't know the guy when you initially signed... the now-objectionable language should have been a big red flag back then, saying this guy is epic evil, run screaming. (even if that turned out not to be true, you should't have hung around to find out.) You may have gotten lucky this time, but don't make that mistake again. Unless one of the above pans out, though... a deal is a deal. You gave your word. The powerful act here is to keep your word. Forgive me for getting ontological, but successful people say it creates success for them. And here's the thing. You have to read your contracts because you can't keep your word if you don't know what word you gave. It's a common mistake: thinking good business is trust, hope, faith, submission or giving your all. No. In business, you take the time to hammer out mutually beneficial (win-win) agreements, and you set them on paper to eliminate confusion, argument and stress in the future as memories fade and conditions change. That conflict resolution is how business partners remain friends, or at least professional colleagues. |
Tenant wants to pay rent with EFT | You could setup a Ally account to use solely for this. There is no minimum, no opening balance requirement, and you can do up to 6 transfers a month for free. This would partition your money from other accounts, while giving you the flexibility to move it to other accounts with ease. |
What is the incentive for a bank to refinance a mortgage at a lower rate? | In a lot of cases, the bank has already made their money. Shortly after you get your mortgage is sold to investors though the bank is still servicing it for a fee. Therefore, if you refinance, they get to sell it again. |
Are quarterly earnings released first via a press release on the investor website, via conference call, or does it vary by company? | Companies release their earnings reports over news agencies like Reuters, Dow Jones and Bloomberg before putting them on their website (which usually occurs a few minutes after the official dissemination of the report). This is because they have to make sure that all investors get the news at the same time (which is kind of guaranteed when official news channels are used). The conference call is usually a few hours after the earnings report release to discuss the results with analysts and investors. |
Do I need multiple credit monitoring services? | Monitoring your credit doesn't do much. There are some vendors that actually have staff to repair your credit/identity. Substantially all of the credit monitoring services do what they say and monitor. If you have a problem they notify you then point you to the place(s) that you can work with to repair the issue. This is not terribly valuable, definitely not worth having multiples, but the repair aspect of some IS very valuable. You sign a limited power of attorney and set loose someone else to fix the problem. |
US Stock Market - volume based real-time alert | Real-time equity (or any other market) data is not available for free anywhere in the US. It is always delayed by 10-15 minutes. On the other hand, online brokers who target the "day trader" (Interactive Brokers, TD Ameritrade, etc.) offer much closer to real-time data AND feature all the tools/alerts/charts/etc. you could ever possibly dream of. I bet the type of alert you're asking for is available with just a couple of clicks on one of these brokers' platforms. Of course, accounts with these online brokers are not free; you must pay for these sophisticated tools and fast market access. Another down side is that the data feeds sent to you by even the most sophisticated online broker are still delayed by tens of seconds compared to the data feeds used by big banks and professional investors. Not to mention that the investment arm of the broker you use will be making its own trades based on the data feeds before relaying them on to you. So this begs the question: why do you need real-time information? Are you trying to "day trade" -- i.e. profit from minute-to-minute fluctuations in the stock market? (I can't in good conscience recommend that, but best of luck to you.) If on the other hand you don't truly need "real-time" data for your application, then I support @ChrisDegnen's approach -- use public data feeds and write your own software. You probably will not find any free tools for the sort of alerting you're looking for because most folks who want these types of alerts also need faster feeds and are therefore already using an online broker's tools. |
Someone asks you to co-sign a loan. How to reject & say “no” nicely or politely? | Simple and straight-forward. "I'm sorry but I don't co-sign loans. I've heard horror stories (or had bad experiences if you actually have) about these things going bad and ruining friendships. Your friendship is more important to me than you getting this car/stereo/whatever." You could go on to explain that it's not necessarily a lack of trust in them, but the problem could be cause by things beyond either of your control. Let's say there's an error at the bank and his payment doesn't get processed on time and it hits your credit score. Next thing that happens is your credit card company sees the change in your score and jacks up the rate on your card. Neither of you did anything wrong, but now instead of him just fighting with the bank about the payment not getting processed on time, you are having to fight with your credit card company. You are both in an awkward situation. You might get pissed at him (you could make this out to be a failing on your part) even though it wasn't his fault. Or he might be embarassed to come around even though you know it wasn't his fault and aren't pissed at him. |
60% Downpayment on house? | Peace of mind is the key to your question. Just before the US housing bust of 2007, I had someone try to convince me to take all the equity from my house which was overvalued in an overheated market. The idea was to put that money in the stock market for a bigger return than the interest on the house. Many people did that and found themselves out of jobs as the economy crashed. Unfortunately, they couldn't sell their homes because they owed more than they were worth. I never lost a night of sleep over the money I didn't make in the stock market. I did manage to trade up to a house twice the size by buying another when the housing market bottomed out, but waiting for a market recovery to sell the smaller house. The outcome of my good fortune is a very nice house with no mortgage worth about 1/3 of my total net worth. That's probably a larger percentage than most money managers would recommend, but it is steadily decreasing because now, all the money that would go to a mortgage payment instead gets deposited in retirement accounts, and it still has 30 years to grow before I start drawing it down. I almost don't remember the burden of a mortgage hanging over my head each month. Almost. |
Should I avoid credit card use to improve our debt-to-income ratio? | If you pay it off before the cycle closes it will look like you have 100% available credit. So if you credit card statement closes on the 7th pay it off on the 6th in full don't pay it when its due 2/3 weeks later. Then after three months of doing that your credit score will go up based on the fact that your debt ratio is so low. That ratio is 30% of your credit score. It will help quite alot. |
Offsetting the tax on vested RSUs with short term capital loss | No. The gain on RSU is not a capital gain, it is considered wages and treated as part of your salary, for tax purposes. You cannot offset it with capital losses in excess of $3000 a year. If you have RSUs left after they vest, and you then sell them at gain, the gain (between the vesting price and the sale price) is capital gain and can be offset by your prior years' capital losses. |
Is dividend included in EPS | Not quite. The EPS is noted as ttm, which means trailing twelve months --- so the earnings are taken from known values over the previous year. The number you quote as the dividend is actually the Forward Annual Dividend Rate, which is an estimate of the future year's dividends. This means that PFE is paying out more in the coming year (per share) than it made in the previous year (per share). |
Can I estimate other people's credit limit at the grocery store? | What you're referring to is Visa Easy Payment Services (VEPS). Other payment processors have similar programs. Basically, certain merchants (based on merchant category code - or MCC), are not required to obtain a signature under $50. This limit was raised to $50 from $25 last year. Here is the press release from Visa describing the increase, and the program in general. |
Why do stores and manufacturers use mail in rebates? A scam, or is there a way to use them effectively? | It's an effective way to achieve market segmentation without having to ask your customers how rich they are, and you get the benefit of finding out additional information like their address, email etc. The principle is similar to coupons on cereal boxes, anybody can get the rebate/discount if they go to the effort, but people who are cash rich/time poor are less likely to do so than those that really need the money. Joel Spolsky wrote about this and various other pricing mechanisms a while back, I like to reference the article every few weeks. It's well worth a read. Now, if you're retired and living off of social security, $7 an hour sounds pretty good, so you do it, but if you're a stock analyst at Merrill Lynch getting paid $12,000,000 a year to say nice things about piece-of-junk Internet companies, working for $7 an hour is a joke, and you're not going to clip coupons. Heck, in one hour you could issue "buy" recommendations on ten piece-of-junk Internet companies! So coupons are a way for consumer products companies to charge two different prices and effectively segment their market into two. Mail-in rebates are pretty much the same as coupons, with some other twists like the fact that they reveal your address, so you can be direct marketed to in the future. |
Account that is debited and account that is credited | The terms debit and credit come from double-entry book-keeping. In this system, every transaction is applied against two accounts: it debits one and credits the other by equal amounts. (Or more technically, it affects two or more accounts, and the total of the credits equals the total of the debits.) Whether a debit or a credit adds or subtracts from the balance depends on the type of account. The types of accounts were defined so that it is always possible to have these matching debits and credits. Assets, like cash or property that you own, are "debit accounts", that is, a debit is an increase in the balance of the account. Liabilities, like money you owe, are "credit accounts", that is, a credit is an increase. To get into all the details would require giving a tutorial on double-entry book-keeping, which I think is beyond the scope of a forum post. By a quick Bing search I find this one: http://simplestudies.com/double-entry-accounting-system.html. I haven't gone through it so I can't say if it's a particularly good tutorial. There are plenty of others on the Web and in bookstores. Note that the terminology can be backwards when someone you're doing business with is describing the account, because their viewpoint may be the opposite of yours. For example, to me, my credit card is a liability: I owe the bank money. So when I post a charge, that's a credit, and when I pay it off, that's a debit. But to the bank, my account is an asset: the customer (me) owes them money. So to the bank, a charge is a debit and a payment is a credit. |
Paypal website donations without being a charity | Yes, Paypal has such a button you can use, but to be clear, the money you receive is taxable income. Your website is providing 'value' to the readers, and while they may feel they are making a gift to you, it's earned income as far as the IRS is concerned. (This assumes you are in the US, you may wish to add a tag to indicate your country) |
The U.S. National Debt: What is it, where did it come from, and how does it work? | nan |
Related Hedges (How do they work?) | In this type of strategy profit is made when the shares go down as your main position is the short trade of the common stock. The convertible instruments will tend to move in about the same direction as the underlying (what it can be converted to) but less violently as they are traded less (lower volatility and lower volume in the market on both sides), however, they are not being used to make a profit so much as to hedge against the stock going up. Since both the bonds and the preference shares are higher on the list to be repaid if the company declares bankruptcy and the bonds pay out a fixed amount of interest as well, both also help protect against problems that may occur with a long position in the common stock. Essentially the plan with this strategy is to earn fixed income on the bonds whilst the stock price drops and then to sell both the bonds and buy the stock back on the market to cover the short position. If the prediction that the stock will fall is wrong then you are still earning fixed income on the debt and are able to convert it into stock at the higher price to cover the short sale eliminating, or reducing, the loss made on the short sale. Effectively the profit here is made on the spread between the price of the bond, accounting for the conversion price, and the price of the stock and that fixed income is less volatile (except usually in the junk market) than stock. |
Efficient markets hypothesis and performance of IPO shares after lock-up period | That's the way the markets work in THEORY. In actual fact, markets are subject to "real world" pressures. That is, there are so many things going on in the market that the end of the "Lined In" lock up is just one of many. To produce the result you describe, traders would have to hold cash in reserve for this so-called "contingency" to buy at the end of the lock-up. In most cases, they wouldn't want to because of everything else that is going on. To use a real world analogy, would you want to wait until the last possible moment before going to the bathroom? Or would you go now while you had the chance? That's what the decision about "holding cash in reserve for a contingency" is like. |
How do I hedge stock options like market makers do? | How do option market makers actually hedge their positions so that they do not have a price risk? You cannot complete hedge away price risk of a sold call simply by buying the underlying and waiting. As the price of the underlying decreases, the "Delta" (price risk) decreases, so as the underlying decreases, you would gradually sell some of the underlying to reduce your price risk from the underlying to match the price risk of the option. The opposite is true as well - as the price of the underlying increases, you'd buy more of the underlying to maintain a "delta neutral" position. If you want to employ this strategy, first you need to fully understand what "delta" is and how to calculate it. Then you can use delta hedging to reduce your price risk. |
What are the procedures or forms for a private loan with the sale of a vehicle? | The Nebraska DMV web site has a neat page about this. It seems to be fairly simple, and not costly to record a lien and later release it. Just go there with the title and the sales agreement that details the terms, and pay the $7 fee. |
Does Joel Greenblatt's “Magic Formula Investing” really beat the market? | In addition to other answers consider the following idea. That guy could have invented say one thousand formulas many years ago and been watching how they all perform then select the one that happened to be beat the market. |
In a competitive market, why is movie theater popcorn expensive? | With all due respect to economics everywhere and the armchair economist. I think they overlook one very basic fact. The alternative to buying popcorn at the cinema is buying it cheaper at the store, or making your own and bringing it to the cinema. Cinemagoing is something you tend to do with a date (and sometimes your friends) and who wants to look cheap to their date (and perhaps their spouse/friends) bringing popcorn to the cinema? This "cheapo-gentlemens" effect together with convenience is probably the reason why popcorn can remain so expensive at cinemas. |
Is it true that the price of diamonds is based on a monopoly? | Yes, the De Beers Group of Companies is a diamond cartel that had complete control of the diamond market for most of the 20th century. They still control a sizable portion of the market and their effort at marketing (particularly with the slogan "A Diamond is Forever") has done much to inflate the market for diamonds in our society. The intrinsic value of diamonds is much lower than the market prices currently reflect, but with the caveat that there is a rarity factor which does drive up the price of larger diamonds. The larger the diamond, the more likely it is to have flaws, so when it comes to diamonds that are 5 carats or greater, you are not as likely to see a new supply of diamonds disrupt the prices of those larger stones. Some other ways that high end jewelers and suppliers are differentiating themselves is by patenting a specific cut that they design. This is another barrier to entry that works to create some artificial price inflation. One common example is the Lucida cut sometimes referred to as the Tiffany cut. Diamonds can also be manufactured. The same carbon structure can be grown in a lab. These stones have the same carbon structure as natural diamonds but without the flaws and visible impurities. Most manufactured diamonds are used industrially, but processes have improved sufficiently to allow for gemstone quality synthetic diamonds. They sell at a decent discount, so that might be an option to consider if you want a substitute. In the years to come, you can expect prices for synthetic diamonds to continue to decrease which will probably put some further downward pressure on jewelers' prices. |
Close to retirement & we may move within 7 years. Should we re-finance our mortgage, or not? | Think of your mortgage this way - you have a $130K 16 year mortgage, at 6.75%. At 4%, the same payment ($1109 or so) will pay off the loan in 12.4 years. So, I agree with littleadv, go for a 15yr fixed (but still make the higher payment) or 10 yr if you don't mind the required higher payment. Either way, a refinance is the way to go. Edit - My local bank is offering me a 3.5% 15 yr loan with fees totaling $2500. For the OP here, a savings of 3.25% or first year interest savings of $4225. 7 months to breakeven. It's important not to get caught up in trying to calculate savings 15-20 years out. What counts today is the rate difference and looking at it over the next 12 months is a start. If you break even to closing costs so soon, that's enough to make the decision. |
Should I invest in my house, when it's in my wife's name? | The prenup complicates things. The traditional vow of a marriage is "What's mine is yours, what's yours is mine". With such a traditional marriage it doesn't matter too much which partner's name something is in, in the event of a divorce the assets of the couple would be considered as a whole and then split. But you have a prenup which is presumably intended to change this traditional arrangement (and may or may not actually be enforceable). I think you are as such right to be wary. I think your only way forward long term is to amend the prenup and/or the legal status of the house to recognize it as a shared asset that you will both be contributing to and that it's value should be split in some way in the event of a divorce. In exchange you should probably be contributing some or all of the cash pile you have from selling your house to the common pot. Another loan may seem like a good option in the short term but in the long term the appreciation on a house is likely to be worth more than any interest on the loan (assuming you are using an interest rate comparable to commercial mortgage deals), plus any interest may well end up being taxable. |
What could be the harm in sharing my American Express statements online? | Call me overly paranoid, but letting unknown people know your charges and your personal information is asking for trouble. They know who you are and how to find you and how much money you typically make. If they are decent people - okay, but otherwise they have good ground for comitting a crime against you - blackmail you, con you, target thieves on you, steal your identity, anything else which you won't like if it happens. And it has noting to do with being from Philippines - disonest people are everywhere. Crimes happen all the time, just the less you expose yourself the less likely a crime will be committed against you. My suggestion would be to share as little financial and personal data as possible, especially to share as little actual money figures as possible. Also see this question. |
Invest in ESPP Single Stock or General Market | Other than the guaranteed 5% bonus (assuming you sell it right away), no benefits. Keep in mind that the price from which the discount is calculated is not necessarily the market price at the date of the ESPP purchase, so the actual discount may be more than 5% (depending on the volatility of the stock - much more). |
Can everyday people profit from unexpected world events? | In the UK there are spread betting firms (essentially financial bookmakers) that will take large bets 24x7. Plus, interbank forex is open 24x7 anyway. And there are a wide array of futures markets in different jurisdictions. There are plenty of ways to find organizations who are willing to take the opposite position that you do, day or night, provided that you qualify. |
Is the “Bank on Yourself” a legitimate investment strategy, or a scam? | Oddly enough, I started to research the "Bank on Yourself" strategy today as well (even before I'd ran across this question!). I'd heard an ad on the radio for it the other day, and it caught my attention because they claimed that the strategy isn't prone to market fluctuations like the stock market. It seemed in their radio ad that their target market was people who had lost serious money in their 401k's. So I set about doing some research of my own. It seems to me that the website bankonyourself.com gives a very superficial overview of the strategy without truly ever getting to the meat of it. I begin having a few misgivings at the point that I realized I'd read through a decent chunk of their website and yet I still didn't have a clear idea of the mechanism behind it all. I become leery any time I have to commit myself to something before I can be given a full understanding of how it works. It's shady and reeks of someone trying to back you into a corner so they can bludgeon you with their sales pitch until you cry "Mercy!" and agree to their terms just to stop the pain (which I suspect is what happens when they send an agent out to talk to you). There were other red flags that stood out to me, but I don't feel like getting into them. Anyway, through the use of google I was able to find a thread on another forum that was a veritable wealth of knowledge with regard to the mechanism of "Bank on Yourself" how it works. Here is the link: Bank on Yourself/Infinite Banking... There are quite a few users in the thread who have excellent insights into how all of it works. After reading through a large portion of the thread, I came away realizing that this strategy isn't for me. However, it does appear to be a potential choice for certain people depending upon their situation. |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | Something else to consider, even if your friend is on the up and up and never misses a payment: Until the house is paid off, any time you apply for credit banks will count the mortgage payment on your friends house against your ability to pay all your existing debts in addition to whatever new loan you're applying for. If you're renting a home now, this will likely mean that you'll be unable to buy one until your friends house is paid off. |
Are there any benefits to investing with a group of friends vs. by myself? | In most markets, there are fixed fees known as commissions. For instance, with a retail broker in the stock market, you can expect every trade to cost you $7.00 as an example, it is $7.00 regardless of if you place a trade for $25 or $25,000. You will see that just opening the trade, with a smaller amount, will eat up all of your profits and a majority of your capital, but if you opened the trade with more capital through the investment group, then the $7.00 commission will be much less of a tax on your trade. Basically, the only advantage is that the tax of commissions will be less if you have a larger account, if the commission is a fixed dollar value, which is not always true either. regardless, at $25 per month, not many markets will be accessible. There is also the possible educational aspect of investing with a group of people, or it can simply be clashing ideals. |
Why isn't money spent on necessities deductible from your taxes? | Another way to look at it is that deductibles are intended as incentives or subsidies to particular industries (in this case the healthcare industry). Guaranteeing a decent standard of living and making sure everybody can meet the costs of “necessities” can be achieved much more easily by a low tax rate on the first XXX$ of income and/or generic welfare benefits rather than any measure focused on making healthcare, food or whatnot cheaper or free under certain conditions. Incidentally, many countries do have different forms of benefits or tax breaks for accommodation-related expenses. |
Not paying cash for a house | The common opinion is an oversimplification at best. The problem with buying a house using cash is that it may leave you cash-poor, forcing you to take out a home equity loan at some point... which may be at a higher rate than the mortgage would have been. On the other hand, knowing that you have no obligation to a lender is quite nice, and many folks prefer eliminating that source of stress. IF you can get a mortgage at a sufficiently low rate, using it to leverage an investment is not a bad strategy. Average historical return on the stock market is around 8%, so any mortgage rate lower than that is a relatively good bet and a rate MUCH lower (as now) is that much better a bet. There is, of course, some risk involved and the obligation to make mortgage payments, and your actual return is reduced by what you're paying on the mortage... but it's still a pretty good deal. As far as investment vehicles: The same answers apply as always. You want a rate of return higher than what you're paying on the mortgage, preferably market rate of return or better. CDs won't do it, as you've found. You're going to have to increase the risk to increase the return. That does mean picking and maintaining a diversified balance of investments and investment types. Working with index funds makes diversifying within a type easy, but you're probably going to want both stocks and bonds, rebalancing between them when they drift too far from your desired mix. My own investments are a specific mix with one each of bond fund, large cap fund, small cap fund, REIT, and international fund. Bonds are the biggest part of that, since they're lowest risk, but the others play a greater part in producing returns on the investments. The exact mix that would be optimal for you depends on your risk tolerance (I'm classified as a moderately aggressive investor), the time horizon you're looking at before you may be forced to pull money back out of the investments, and some matters of personal taste. I've been averaging about 10%, but I had the luxury of being able to ride out the depression and indeed invest during it. Against that, my mortgage is under 4% interest rate, and is for less than 80% of the purchase price so I didn't need to pay the surcharge for mortgage insurance. In fact, I borrowed only half the cost of the house and paid the rest in cash, specifically because leveraging does involve some risk and this was the level of risk I was comfortable with. I also set the duration of the loan so it will be paid off at about the same time I expect to retire. Again, that's very much a personal judgement. If you need specific advice, it's worth finding a financial counselor and having them help you run the numbers. Do NOT go with someone associated with an investment house; they're going to be biased toward whatever produces the most income for them. Select someone who is strictly an advisor; they may cost you a bit more but they're more likely to give you useful advice. Don't take my word for any of this. I know enough to know how little I know. But hopefully I've given you some insight into what the issues are and what questions you need to ask, and answer, before making your decisions. |
Portfolio Diversity : invest $4000 into one account or $1000 into 4 accounts? | You spread money/investment across different accounts for different reasons: All this is in addition to diversification reasons. Investing all your money into one stock, bond, Mutual fund, ETF is risky if that one segment of the economy/market suffers. There is a drawback to diversification of accounts. Some have minimum amounts and fee structures. In the original question you asked about 1,000 per account. That may mean that some accounts may be closed to you. In other cases they will charge a higher percentage for fees for small accounts. Those issues would disappear long before you hit the 1,000,000 per account you mentioned in your comment. One problem can occur with having too much diversification. Having dozens of funds could mean that the overlap between the funds might result in over investing in a segment because you didn't realize that one stock segment appeared in 1/3 of the funds. |
What percentage of my money should I invest outside my country? | Your definition of 'outside your country' might need some redefinition, as there are three different things going on here . . . Your financial adviser appears to be highlighting the currency risk associated with point three. However, consider these risk scenarios . . . A) Your country enters a period of severe financial difficulty, and money markets shut down. Your brokerage becomes insolvent, and your investments are lost. In this scenario the fact of whether your investments were in an overseas index such as the S&P, or were purchased from an account denominated in a different currency, would be irrelevant. The only thing that would have mitigated this scenario is an account with an overseas broker. B) Your country's stock market enters a sustained and deep bear market, decimating the value of shares in its companies. In this scenario the fact of whether your investments were made in from a brokerage overseas, or were purchased from an account denominated in a different currency, would be irrelevant. The only thing that would have mitigate this scenario is investment in shares and indices outside your home country. Your adviser has a good point; as long as you intend to enjoy your retirement in your home country then it might be advisable to remove currency risk by holding an account in Rupees. However, you might like to consider reducing the other forms of risk by holding non-Indian securities to create a globally diversified portfolio, and also placing some of your capital in an account with a broker outside your home country (this may be very difficult to do in practice). |
How did I end up with a fraction of a share? | It's not that uncommon but it doesn't usually come from standard purchases. Investopedia explains: Definition of 'Fractional Share' A share of equity that is less than one full share. Fractional shares usually come about from stock splits, dividend reinvestment plans (DRIPs) and similar corporate actions. Normally, fractional shares cannot be acquired from the market. However, there is at least one investment firm that markets itself as offering fractional shares. Fractional investing makes more sense, since an investor's perspective is to invest a certain number of dollars into equity, not to buy a certain number of shares that closely mirror the dollar commitment. |
What is a formula for calculating equity accumulated while repaying car loan? | Here is a simple way to analyze the situation. Go to your bank or credit union website and use their loan calculator with their current real interest rates and down payment requirements. Enter the rate, and number of years. Enter different values for the loan amount to get the monthly payment to the level you want ($400). Today for my credit union, the max loan would be about $9,500. Keep in mind there may be taxes, registration fees, and down payment on top of this. Jump ahead two years. The loan is paid off, the car is owned free and clear. You will be able to sell it and get some money in your pocket. If you go for a longer term loan to keep the payments under your goal the issue is that in two years you might be upside down on the loan. The car may be worth less than the remaining balance on the loan. Your equity would be negative. |
High Leverage Inflation Hedges for Personal Investors | Look into commodities futures & options. Unfortunately, they are not trivial instruments. |
Why would this FHA refinance cause my mortgage insurance payment to increase so much? | The PMI premium you pay is dependent on a very large number of variables in the finance market. Mortgage insurance, at the higher inter-bank levels, is handled with credit default swaps (the ones you've been hearing about on the news for the past 4 years), where the lender bundles a block of mortgages, takes them to a guarantor like AIG or Freddie Mac, and says "We bet you that these mortgages will default this month, because the homeowners have little or no equity to deter them; if we win, you agree to swap these debts for their current face value". The lender examines the mortgages, calculates the odds of a default severe enough that the bank would come to collect, using complex environmental heuristics, multiplies by the value of the potential payout, adds a little for their trouble, and says "well, we'll take that bet if you pay us $X". The bank takes the deal, then divvies up that cost among the mortgages and bills the homeowner for their share. The amount you pay for PMI can therefore depend on pretty much anything in this entire process; the exact outstanding amount and equity status of your loan, the similar status of other mortgages your loan will be bundled with for assessment, who the guarantor is, what exact heuristic they use to come up with an amount, the weighting the bank uses to divvy it up, and how much they actually pass on to you. Most of these same variables are at play when you shop for actual insurance for your car or home, which is why your premiums will go up or down with the same insurer and why someone else always seems to have a better deal (pretty much every insurer can say that "drivers who switched saved an average of $X"; of course they did, otherwise they wouldn't have switched). Thinking of it in those terms, it's easy to see how this number can vary widely based on numbers you can't see. You're free to say no, and it will cost you nothing right up until you sign something that says you agree to be penalized for saying no. While the overall amount of the payments does decrease, the PMI has gone up, and that's money you'll never see again just like interest (except you can deduct interest; not PMI). I would do the tax math; find out how much you could deduct over the next year in interest on your current loan, then on their proposed terms, and what the resulting tax bills will be from both. You may save monthly only to pay more than you saved to Uncle Sam at the end of the year. You're also free to negotiate. The worst they can do is stay firm on their offer, but they may take a second look and say "you're right, that PMI is rather high, we'll try again and see if we can do better". They can either negotiate with their insurer, or they can eat some of the PMI cost that they're currently passing on to you. |
Free service for automatic email stock alert when target price is met? | You can do it graphically at zignals.com and freestockcharts.com. |
Ballpark salary equivalent today of “healthcare benefits” in the US? | Equation: (M x 12) + MOOP = Worst case scenario cost Where M equals the monthly cost and MOOP is the maximum out of pocket amount. So, if a plan costs $500 a month and the maximum out of pocket amount is $12,000 - which in a worst case scenario you would pay (it's almost always over the deductible) ... ($500 x 12) + 12,000 = $18,000 Most people look at the deductible, but be aware this is incorrect in a worst case. The last one (maximum out of pocket) really hurts most people because they overlook it: Deductible vs. out-of-pocket maximum The difference between your deductible and an out-of-pocket maximum is subtle but important. The out-of-pocket maximum is typically higher than your deductible to account for things like co-pays and co-insurance. For example, if you hit your deductible of $2,500 but continue to go for office visits with a $25 co-pay, you’ll still have to pay that co-pay until you’ve spent your out-of-pocket maximum, at which time your insurance would take over and cover everything. New in 2016: embedded out-of-pocket maximums One change in 2016 is that, even with an aggregate deductible, one person cannot pay more than the individual out-of-pocket maximum within a family plan, even if the aggregate deductible is more than the individual out-of-pocket maximum, which is $6,850 for 2016. For instance, even if the overall aggregate deductible was $10,000, a single person in that family plan could not incur more than $6,850 in out-of-pocket expenses. (In 2017, the out-of-pocket maximum will increase to $7,150.) After they hit that number, insurance covers everything for that person, even as the rest of the family is still subject to the deductible. From your question: Thanks - not sure I totally follow you. My question is, essentially: "Say a typical large employer X gives you 'healthcare' as a benefit on top of your salary. In fact, how much does that cost corporation X each year?" ie, meaning, in the US, about how much does that typically cost a corporation X each year? That's a good question because they may qualify for tax advantages by offering to a number of employees and there may be other benefits if they encourage certain tests (like blood work and they waive the monthly fee). More than likely, using the above equation may be the maximum that they'll pay each year per employee and it might be less depending on the tax qualifications. You can read this answer of the question and it appears they are paying within the range of these premiums listed above this. |
Why do people buy stocks that pay no dividend? | people buy stocks because there is more to Return on Investment than whether dividends are issued or not. Some people want ownership and the ability to influence decisions by using the rights associated with their class of stock. Another reason would be to park capital in a place that would grow faster than the rate of inflation. these are only a few of many reasons why people would buy stock. |
I'm 13. Can I buy supplies at a pet store without a parent/adult present? | As long as your money is green and you aren't buying something prohibited to youngsters (booze, cigarettes, etc.) I doubt any store is going to refuse your business. |
Should I use regular or adjusted close for backtesting? | You would have to compare your backtesting to what you will be doing in real trading, and try to have the backtesting as close to your real trading as possible. Note: you may never get the backtesting to match your real trading exactly but you need to get as close as possible. The whole purpose of backtesting is to check if your trading strategies - your signals, entries and exits, and your stops - are profitable over various market conditions. As you would be using actual closes to do your real trading you should be using this to also do your backtesting. Rather than using adjusted data to get an idea of your total return from your backtesting, you can always add the value of the dividends and other corporate actions to the results from using the actual data. You may even find a way to add any dividends and other corporate action to your results automatically, i.e. any dividend amount added to your total return if the stock is held during the ex-dividend date. If you are using adjusted data in your backtesting this may affect any stops you have placed, i.e. it may cause your stop to be triggered earlier or later than in real trading. So you will need to determine how you will treat your stops in real trading. Will you adjust them when there is corporate action such as dividends? Or will you leave them constant until actual prices have gone up? If you will be leaving your stops constant then you should definitely be using actual data in your backtesting to better match your real trading. |
Are traders 100% responsible for a stock's price changes? | Yes traders, living or algorithmic, are the only direct factors that can cause a change in the price of a marketable item. Traders can be affected by news, broken exchanges ;), emotional cycles, lunar cycles, time the trader goes to lunch (or a power cycle if you are an algo running on that unfortunate OS), anything. |
How does the person lending shares to the short selller protect themselves if the short sellers are correct? | It is true, as farnsy noted, that you generally do not know when stock that you're holding has been loaned by your broker to someone for a short sale, that you generally consent to that when you sign up somewhere in the small print, and that the person who borrows has to make repay and dividends. The broker is on the hook to make sure that your stock is available for you to sell when you want, so there's limited risk there. There are some risks to having your stock loaned though. The main one is that you don't actually get the dividend. Formally, you get a "Substitute Payment in Lieu of Dividends." The payment in lieu will be taxed differently. Whereas qualified dividends get reported on Form 1099-DIV and get special tax treatment, substitute payments get reported on Form 1099-MISC. (Box 8 is just for this purpose.) Substitute payments get taxed as regular income, not at the preferred rate for dividends. The broker may or may not give you additional money beyond the dividend to compensate you for the extra tax. Whether or not this tax difference matters, depends on how much you're getting in dividends, your tax bracket, and to some extent your general perspective. If you want to vote your shares and exercise your ownership rights, then there are also some risks. The company only issues ballots for the number of shares issued by them. On the broker's books, however, the short sale may result in more long positions than there are total shares of stock. Financially the "extra" longs are offset by shorts, but for voting this does not balance. (I'm unclear how this is resolved - I've read that the the brokers essentially depend on shareholder apathy, but I'd guess there's more to it than that.) If you want to prevent your broker from loaning out your shares, you have some options: |
Do stock option prices predicate the underlying stock's movement? | Options reflect expectations about the underlying asset, and options are commonly priced using the Black-Scholes model: N(d1) and N(d2) are probability functions, S is the spot (current) price of the asset, K is the strike price, r is the risk free rate, and T-t represents time to maturity. Without getting into the mathematics, it suffices to say that higher volatility or expectation of volatility increases the perceived riskiness of the asset, so call options are priced lower and put options are priced higher. Think about it intuitively. If the stock is more likely to go downwards, then there's an increased chance that the call option expires worthless, so call options must be priced lower to accommodate the relative change in expected value of the option. Puts are priced similarly, but they move inversely with respect to call option prices due to Put-Call parity. So if call option prices are falling, then put option prices are rising (Note, however, that call prices falling does not cause put prices to rise. The inverse relationship exists because of changes in the underlying factors and how pricing works.) So the option action signifies that the market believes the stock is headed lower (in the given time frame). That does not mean it will go lower, and option traders assume risk whenever they take a particular position. Bottom line: gotta do your own homework! Best of luck. |
Should I pay my Education Loan or Put it in the Stock Market? | For the sake of sanity, pay off your debt maybe not all but some part of it. You never know what the monster, the stock market may turn out to be. It may gobble up all your money without belching or it may gift you with a bounty. But if you pay off all your debt and the stock market monster is rewarding everybody else, you may rue your decision. So put some part of it the markets too, but a more safer one would be a good bet. The proportions of money for loan repayment and for investing in markets is your decision, after you evaluate all your future predictions. |
Can one be non-resident alien in the US without being a resident anywhere else? | You may be considered a resident for tax purposes. To meet the substantial presence test, you must have been physically present in the United States on at least: 31 days during the current year, and 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count: All of the days you were present in the current year, and One-third of the days you were present in the first year before the current year, and One-sixth of the days you were present in the second year before the current year. If you are exempt, I'd check that ending your residence in Germany doesn't violate terms of the visa, in which case you'd lose your exempt status. If you are certain that you can maintain your exempt status, then the income would definitively not be taxed by the US as it is not effectively connected income: You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an "F," "J," "M," or "Q" visa. The taxable part of any U.S. source scholarship or fellowship grant received by a nonimmigrant in "F," "J," "M," or "Q" status is treated as effectively connected with a trade or business in the United States. and your scholarship is sourced from outside the US: Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. I would look into this from a German perspective. If they have a rule similiar to the US for scholarships, then you will still be counted as a resident there. |
How can rebuilding a city/large area be considered an economic boost? | It certainly creates an opportunity for the re-distribution of wealth. Money will be transferred from insurance companies to construction companies. Businesses that go under will be replaced by ones that survived. Some companies will make a profit out of this, but as you have already figured out, no new wealth is created by the disaster. (Although lots has been destroyed, so we are looking at a net loss.) |
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