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Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Checks not cashed ### Answer: You're certainly still responsible to pay what you owe the company given that: 1. for whatever reason, the recipient never received the checks. and 2. the money was credited back to you, albeit in a less than timely manner. However, if you take the time to explain the situation to the business, and show them proof that you sent the payments I would guess they would probably be willing to work with you on removing any late fees you have been assessed or possibly setting up a payment plan. Also, if you have been charged any overdraft or minimum balance fees by your bank while they held your money for the payments that was eventually credited back to your account, you might be able to get them to refund those if you explain what has happened. This is really a perfect example though of why balancing your checking account is as important today as it ever was. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Changing Bank Account Number regularly to reduce fraud ### Answer: Couple of my friends went through a fraud agent who ran off with their money and the landlords were none the wiser. So it always pays to be a bit diligent. Are they a well known letting agents nationally ? Many agents do have different accounts to manage their properties. Yours seems a case as such probably i.e. they manage the property on behalf of the landlord so keeping their monies differentiated. Did you sign an agreement ? If yes go through what is written in the agreement, most of it is same in all agreements but have a look anyway. Check if there is mention of deposit protection scheme. One thing you could do is go to a bank to do the transfer, the same bank where the letting agent holds their account and confirm from them if it is really a personal account or a business account. I am not sure how possible it is, but doesn't hurt to ask. If it is a personal account, then fraud is the most possible cause. The sort code should tell you which branch and which bank. Or the best option is to ask the estate agents to show a recent statement of the bank account, where the money is to be deposited into. Some tips ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Changing Bank Account Number regularly to reduce fraud ### Answer: We change it every so often to reduce fraud. This is idiocy. They receive regular payments. They are asking the people who pay them to regularly change where their money is being sent. This increases their exposure to fraud dramatically as each time the account is changed, there is a risk it will be changed to an account they do not control. This is a huge red flag. Confirm that this is authentic and, if so, insist that they sign an agreement accepting all liability for the risks this crazy policy causes, otherwise, you should refuse to go through the effort of confirming new accounts and risking typing or communication errors on a regular basis. This is definitely a "what were they thinking?!" kind of thing. If it's not fake entirely. (This answer assumes that you were given a correct explanation, that they change it regularly believing that will reduce fraud.) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Changing Bank Account Number regularly to reduce fraud ### Answer: To be absolutely sure you should call the agent and check That said I have been renting accommodation through both agencies and directly through landlords for seven years (I live in London) and this is quite a common situation. It normally means that the deposit is being securely held by a third party so that it cannot be taken or depleted without the agreement of both parties. The deposit protection scheme ( https://www.depositprotection.com/ ) is one way that deposits are securely held in this manner. As a third party they will have different account details. It may be the case that the agency is protecting the deposit and you are paying rent to the landlord directly. This means that your deposit goes to the agency's account and the rent goes to the landlord's account. Obviously your landlord and agency have different accounts. A little colour to brighten your day: I am currently paying my rent to the agency who also took the deposit but, because of the way they handle deposits versus rent, the deposit was sent to a different account held by the same agent. In my previous flat I paid the deposit to an agency and the rent directly to the landlord. This resulted in an issue one time where I got the two accounts confused and paid rent to the agency who, after giving me a small slap on the wrist, transferred it to my landlord. In the flat before that I paid rent and the deposit to my landlords' holding company. That is one of the few times that I paid rent and the deposit into the same account. Again check with the agent that one of these situations is the case but this is absolutely normal when renting through an agency. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Changing Bank Account Number regularly to reduce fraud ### Answer: We change it every so often to reduce fraud. If you're absolutely sure you didn't just send money to a scammer impersonating a landlord, this has nothing to do with fraud-- they're playing a game with you. By changing the account number frequently, it makes it more likely you make a mistake in entering the payment account. When they come back to you a few days past due saying "we never received your rent," you'll eventually realize it got sent to the wrong account. Now you owe them late fees, and there's really nothing you can do about it-- you did not in fact pay them on time; you sent it to the wrong account! It's an easy way for them to collect an additional few thousand dollars a year. Anytime a small business or landlord says they have to do something "weird" to reduce fraud, chances are it's a pretense to you getting hosed in some way. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is it wise to invest small amounts of money short-term? ### Answer: You can expect about a 7% return when investing in the general market if your horizon is ten years or more. The market fluctuates, which means that you should be absolutely fine with losing 10% or more of your invested money during this period. You say yourself that: I have been setting aside money (...) into a savings account earmarked for that purpose (repairs/maintenance) so that I don't have to take out loans. It's obvious from your question that the purpose of this money is not savings, this is money that you are already investing, not in stocks or bonds but in your house. While this money sits around, of course you could put it into the market and hope that it grows. It all depends on your horizon, which in your case sounds like about 1 year. Is that long enough to be fairly sure you will make a profit? From what I've written so far, hopefully you can gather that the answer is no. If you choose to invest $6,000 but you need that money back in one year, you need to be aware of the risk that you'll instead end up with $5,400 or even less. Your options are then to: If you're asking for personal advice, my opinion would be this: you're already investing in your house. The housing market, like most markets, fluctuate. Whether you like it or not, you're already a victim (or benefactor) of this value fluctuation. The difference is that a house is something you'll live in for a long time (probably), that will give you daily joy in a way stocks and bonds won't. Of course, saving up money and investing them is always a good idea anyway. You should still save a small amount every month and put it into low/medium risk bonds, in my opinion. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is it wise to invest small amounts of money short-term? ### Answer: This is slightly opinion based. Is it appropriate to invest small amounts for short periods of time? At your age and the time period, I would say NO. This is because although the index fund do return 6-7% on average, there are several times it blips and goes negative as well. Stock Markets in short periods like 6 months can be unpredictable. At times a downturn will remain stagnant for periods of 2-3 years before suddenly zoom ahead. If you are not to particular about the time when you need the changes done; i.e. the changes can in worst case wait for few years; then yes investing in Index fund would make sense. Else you are well off keeping this in savings. Try CD's if they can offer better rates for such durations. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is it wise to invest small amounts of money short-term? ### Answer: Even straight index funds grow at about 6-7%. on average, or over long periods of time. In short time periods (quarters, years), they can fluctuate anywhere from -10% to +20%. Would you be happy if your bank account lost 10% of its value the week before you had to pay the bill for the repairs? Is it appropriate to invest small amounts for short periods of time? In general, no. Most investments are designed for long term appreciation. Even sophisticated financial companies can't do any better than 1 or 2% (annualized) on short-term cash reserves. Where you can make a huge difference is on the cost side. Bargain with suppliers, or wait for sales on retail items. Both will occasionally forego their margin on certain items in order to try to secure future business, which can make a difference of 20% or more in the cost of repairs. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is it wise to invest small amounts of money short-term? ### Answer: I would agree with the other answers about it being a bad idea to invest in stocks in the short term. However, do consider also long-term repairs. For example, you should be prepared to a repair happening in 20 years in addition to repairs happening in a couple of months. So, if it is at all possible for you to save a bit more, put 2% of the construction cost of a typical new house (just a house, not the land the house is standing on) aside every year into a long-term repair fund and invest it into stocks. I would recommend a low-cost index fund or passive ETF instead of manually picking stocks. When you have a long-term repair that requires large amounts of money but will be good for decades to come, you will take some money out of the long-term repair fund. Where I live, houses cost about 4000 EUR per square meter, but most of that is the land and building permit cost. The actual construction cost is about 2500 EUR per square meter. So, I would put away 50 EUR per square meter every year. So, for example, for a relatively small 50 square meter apartment, that would mean 2500 EUR per year. There are quite many repairs that are long-term repairs. For example, in apartment buildings, plumbing needs to be redone every 40 years or so. Given such a long time period, it makes sense to invest the money into stocks. So, my recommendation would be to have two repair funds: short-term repairs and long-term repairs. Only the long-term repair fund should be invested into stocks. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Car Insurance - Black box has broken and insurance company wants me to pay? ### Answer: Unless it is in the contract that you must replace it then this should be replaced by your insurance. They sent you a box that was defective, consumer grade electronics are designed for at least 85 deg C (185F) and unless they can prove your car was hotter than that they sent you a defective unit. That being said, I do not think it would be worth suing them for that low amount, I would suggest you get a new insurance company. The current company clearly values your business less than 185 pounds(?) and this issue will happen multiple times since the company has no incentive to buy better products if customers keep footing the bill. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Car Insurance - Black box has broken and insurance company wants me to pay? ### Answer: First read the fine print. If you have to pay it, pay it and switch company. If you don't have to pay it and there is no proof that you abused the component beyond normal usage, you don't have to sue them, just return the invoice with legal (not so layman) text like "I hereby reject paying invoice number xxxx dated xxx because the black box was used under normal conditions and it stopped working". In this case you wait for them and answer every other letter with the same text until the decide to either sue you, or drop the whole thing. If you choose this path, remember to save all invoice, copies of your rejections, all written/email/phone calls, picutres of the broken item, serial nubmers, contract etc. If they sue you and they loose (can't prove the item was destroied by you), they have to pay you up to one hour of legal advice cost and drop the invoice, if you loose, you do the same (100 pounds) plus the invoice amount according to Swedish law, don't know about your country. Before you follow any advice here, consult your local consumer protection agency, they usually comes up with smart options, they know a bad company with history and give you the right advice. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I deduct equipment that I'm required to purchase by my employer? ### Answer: It looks like you can. Take a look at these articles: http://www.googobits.com/articles/1747-taking-an-itemized-deduction-for-job-expenses.html http://www.bankrate.com/finance/money-guides/business-expenses-that-benefit-you.aspx http://www.hrblock.com/taxes/tax_tips/tax_planning/employment.html But of course, go to the source: http://www.irs.gov/publications/p529/ar02.html#en_US_publink100026912 From publication 529: You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). You can claim the amount of expenses that is more than 2% of your adjusted gross income. You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 36. I hope that helps. Happy deducting! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: For a single company listed in multiple exchanges in different countries, are the shares being offered the same? ### Answer: Yes and no. There are two primary ways to do this. The first is known as "cross listing". Basically, this means that shares are listed in the home country are the primary shares, but are also traded on secondary markets using mechanisms like ADRs or Globally Registered Shares. Examples of this method include Vodafone and Research in Motion. The second is "dual listing". This is when two corporations that function as a single business are listed in multiple places. Examples of this include Royal Dutch Shell and Unilever. Usually companies choose this method for tax purposes when they merge or acquire an international company. Generally speaking, you can safely buy shares in whichever market makes sense to you. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is there any instrument with real-estate-like returns? ### Answer: Similarly to buying property on your own, REITs cannot get to good returns without leveraging. If you buy an investment property 100% cash only - chances are that 10% ROI is a very very optimistic scenario. If you use leveraging (i.e.: take out a mortgage) - you're susceptible to interest rate changes. REITs invest in properties all around all the time. They invest in mortgages themselves as well (In the US, that's the only security REITs can hold without being disqualified). You can't expect all that to be cash-only, there have to be loans and financing involved. When rates go up - financing costs go up. That brings net income down. Simple math. In the US, there's an additional benefit to investing in REIT vs directly holding real estate: taxes. REITs pay dividends, which have preferential (if qualified) taxation. You'll pay capital gains taxes on the dividends if you hold the fund long enough. If you own a rental property directly, your income after all the expenses is taxed at ordinary rates, which would usually be higher. Also, as you mentioned, you can use them as margin, and they're much much more liquid than holding real estate directly. Not to mention you don't need to deal with tenants or periods where you don't have any, or if local real-estate market tanks (while REITs are usually quite diversified in kinds of real estate they hold and areas). On the other hand, if you own real estate, you can leverage it at lower rates than margin (with HELOCs etc), and it provides some safety net in case of a stock market crash (which REITs are somewhat susceptible to). You can also live in your property, if needed, which is something that's hard to do with REITs.... ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is there any instrument with real-estate-like returns? ### Answer: nan ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What does “Settling your Debt” entail, and how does it compare to other options? ### Answer: If you are struggling with debt and cannot realistically pay your debts off with your current level of income, these businesses offer, for a fee, to negotiate with your debt providers a sum that you can realistically afford to pay. The debt providers will consider the offer because they would rather get some money back rather than nothing (as these are usually unsecured loans). For you it can be a better deal than going bankrupt or trying to struggle endlessly to pay off something you can't afford to pay off. Note, that even though you won't be bankrupt, you will be treated (by lenders) very similar to being bankrupt. In other words, it will be very hard for you to get new loans in the near future. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What does “Settling your Debt” entail, and how does it compare to other options? ### Answer: Basically, these guys break all your eggs then try to make an omelet. Your lender(s) must really believe that you have no ability to pay before they'll settle, which generally entails not paying them until your creditworthiness is in the tank. Bankruptcy laws exist for a reason. If your credit is in the tank, you can't make your payments and you're shopping to settle your debts, it's not likely a bankruptcy would worsen your situation; in fact, quite the opposite. But, people have hugely negative feelings toward bankruptcy and don't want to be called a "deadbeat", these services prey on those people. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What does “Settling your Debt” entail, and how does it compare to other options? ### Answer: These agencies consolidate your debt and make it an easy monthly instalment for you. They also try to negotiate with credit cards. They do so for a fee. Other option is to not pay the debt. During this time , expect credit cards to keep sending you bills and reminders and ways to contact you. Once it is not paid for a significant amount of time ( 18 months ) , the lender will "sell" your debt to a collection agency. You will start getting bills from collection agencies. Collection agencies can settle for up to 40 % of the actual debt. So if you had 5 credit cards , you would have 5 different collection agencies trying to get in touch with you. You can call them and tell them that you cannot pay the full amount. They will offer you settlements which you can accept or decline. The longer the unpaid debt , the more the discount they will offer. One very important thing to remember is that the unpaid amount will be sent to you on a 1099-c form . This means you have to recognize this as income. It is applicable to the year when the debt is settled. In a nut shell , you owe 120,000. You don't pay. Credit cards keeps calling you. You don't pay. After 12-18 months , they handover your debt to collection agencies. Collection agencies will try to get in touch with you. Send you lawsuit letters. You call and settle for say 50,000. You pay off 50,000 in 2016. Your debt is settled. But wait you will get 1099-C forms from different agencies totaling 70,000 ( unpaid debt ). You will have to declare that as income and you will owe tax on that. Assuming say 30 % tax you will have to pay up 21,000 as tax to IRS assuming no other income for simplicity. SO what you did was pay up 50 + 21 = 71,000 and settled the debt of 120,000. Your credit score will be much better than if you never paid at all. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Stocks taxed just for selling, or just when withdrawing? ### Answer: Outside of a tax sheltered IRA or 401(k) type of account your transactions may trigger tax liability. However, transactions are not taxed immediately at the time of the transaction; and up to a certain limits capital gains can be offset by capital losses which can mitigate your liability at tax time. Also, remember that dividend receipts are taxable income as well. As others have said, this has nothing to do with whether or not money has been moved out of the account. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Stocks taxed just for selling, or just when withdrawing? ### Answer: It is not a dump question because it concerns your most important invisible financial partner:the taxman. The answer depends of the legal status of this account. If your account is 401(k) in USA or RRSP in Canada, the answer is no. No capital gain taxes if your money is registered for retirement. You'll pay later on, as taxes are like death, unavoidable. Yes capital gain if your money is not in an retirement account. As soon as you realize a capital gain, it becomes taxable in that fiscal year. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Stocks taxed just for selling, or just when withdrawing? ### Answer: Taxes are triggered when you sell the individual stock. The IRS doesn't care which of your accounts the money is in. They view all your bank and brokerage accounts as if they are one big account mashed together. That kind of lumping is standard accounting practice for businesses. P/L, balance sheets, cash flow statements etc. will clump cash accounts as "cash". Taxes are also triggered when they pay you a dividend. That's why ETFs are preferable to mutual funds; ETFs automatically fold the dividends back into the ETF's value, so it doesn't cause a taxable event. Less paperwork. None of the above applies to retirement accounts. They are special. You don't report activity inside retirement accounts, because it would be very hard for regular folk to do that reporting, so that would discourage them from taking IRAs. Taxes are paid at withdrawal time (or in Roth's, never.) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Mexican Index Mutual Funds ### Answer: The recommendations you read were, very probably, talking about US listed funds in US dollars. The mexican Bolsa de Valores says that they list over 600 mutual funds so "Yes" you can invest in Mexico using Pesos if that is what you want. You need a Corredor de Bolsa or mexico broker. Here they are. Most international investors use exchange traded funds ETF because theirs fees are cheaper than mutual funds. The ETF are mostly listed and traded in us stock exchange. Here they are. US mutual funds are in dollars and, because you are living in Mexico, you will have a currency risk and probably taxes. Mexico mutual funds in Pesos do not carry any currency exposure unless the companies involved do business in the United States. You have to think about your currency exposure. B. Veo ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What would the broker do about this naked call option? ### Answer: The broker would give you a margin call and get you to deposit more funds into your account. They wouldn't wait for the stock price to reach $30, but would take this action much earlier. More over it is very unrealistic for any stock to go up 275% over a few hours, and if the stock was this volatile the broker would be asking for a higher margin to start with. What I am really worried about is that if there were any situation like this you are not considering what you would do as part of your risk management strategy. Before writing the option you should already have an exit point at which you would buy back the option to limit your losses. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What would the broker do about this naked call option? ### Answer: If the underlying is currently moving as aggressively as stated, the broker would immediately forcibly close positions to maintain margin. What securities are in fact closed depends upon the internal algorithms. If the equity in the account remains negative after closing all positions if necessary, the owner of the account shall owe the broker the balance. The broker will close the account and commence collections if the owner of the account does not pay the balance quickly. Sometimes, brokers will impose higher margin requirements than mandated to prevent the above eventuality. Brokers frequently close positions that violate internal or external margin requirements as soon as they are breached. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What would the broker do about this naked call option? ### Answer: Yes, it can buy back the call, but much before stock hits the $30 mark. Let us say you got 1$ from selling the call. So the total money in your account is 4$ + 1 $ = 5 $. When stock hits 10$ (your strike), the maintenance margin is 5$. As soon as stock goes past 10, your maintenance margin is violated. So broker will buy back your call (at least IB does that, it does not wait for a margin call). Now if the stock gapped up from 8 to 30,then yes, broker will buy it back at 30, so your account will have a negative balance. Assume the call cost 20$ when stock hit 30, your balance is: 5 - (30-10) = -15. Depending on broker, I suppose they will ask you to bring your account balance back up to positive. If they don't do that, they risk going out of business. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Simple loan with a mortage as collateral ### Answer: Obligatory "Don't do it" remarks: If the guy isn't trusted enough to even show up to work, and can't get a personal loan directly from a bank (Home Equity Line of Credit would suffice), this is really setting things up for failure. What if he quits? What if you need to fire him (you know, for not showing up for weeks)? </rant> In order to be able to place a lien on his home should he default on the loan, you'll need to draft up a loan agreement or promissory note stating specifically that you have the right to do so. Get a lawyer involved. Here's an article that talks about setting up a Private Home Loan, which is geared more at helping someone buy a home, but may prove useful in this case as well: https://www.nolo.com/legal-encyclopedia/borrowing-from-family-friends-buy-29649.html It's pretty lengthy, so I won't quote it out here, but the gist of it is: Get everything in writing in a legally binding contract. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Simple loan with a mortage as collateral ### Answer: Assuming United States; answer may be different elsewhere. The best instructions I have seen for this were on the webpage of one of the law firms making an organized business out of intra-family loans, but any lawyer who can deal with normal bank loans should be able to help you set this up and get it filed with the appropriate authorities to make it a legally binding mortgage. Shouldn't cost you much in legal time to do it. You will have to charge interest; your lawyer can tell you what the minimum and maximimum interest rates would be where you are. Your interest income will be taxable. The borrower may or may not be able to deduct the interest paid from their taxes. Of course if the borrower has any sense they'll want to get their own lawyer to review the terms of the agreement, and to tell them whether they can deduct it from taxes or not. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why do employer contributions count against HSA limits? ### Answer: am I comparing apples and oranges? Yes - different purposes, different laws, different regulations. One rationale could be that HSA benefits are immediate while retirement benefits are deferred, so the benefit of employer contributions are not felt until retirement and thus do not need as stringent a limit, but that's a complete guess. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why do employer contributions count against HSA limits? ### Answer: It's going to be quite a challenge to give a definitive answer to any "Why" question about law, and especially so for a question about tax law. One would need to try to dig up statements made by the legislators (and/or their aides) crafting and debating the law. As it is, tax law is already inconsistent in many ways. (Why are there people who can't contribute to a Roth IRA directly but can contribute to a Traditional and then immediately convert it to Roth? Why are maximum limits for 401(k) plans and IRAs separate rather than being one combined "retirement" savings maximum?) In the absence of some specific legislative statements saying that it was set up this way for some specific purpose, one must assume that it was written with the some goals as all tax law: As a compromise between various ideas, trying to accomplish some specific purpose. Feel free to add in some level of inefficiency and it being hard to completely understand the entirely of the tax law, which leads to things perhaps not being as "tidy" as one might hope for. But there's no reason to think that the people crafting the tax advantages for HSA plans had any reason to use 401(k) plans as a template, or wanted them to accomplish the same goals. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why do employer contributions count against HSA limits? ### Answer: Just like all employee benefits there is a focus on removing or limiting owners of businesses' ability to abuse tax preferences under the guise of an employee benefit. As you point out there is an overall plan maximum 401(k) for employer contributions and match contributions. There is a nondiscrimination test for FSA programs (there is also a nondiscrimination test for medical plans under sections 125 and 105(h)). Employer contributions are counted toward the total of HSA contributions. Why an HSA has a different maximum arrangement than 401(k) is anyone's guess. But the purpose of the limit is to prevent owners of companies from setting up plans that do little more than funnel tax free funds to themselves. An owner/employee could pay themselves a wage, contribute the maximum, then have the "employer" also match the maximum, so there are limits in place. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: Does it make sense for stocks to earn a premium indefinitely? Yes. There is good reason to think that the stock market will make money indefinitely: the stock market is the primary mechanism through which investors bear market risk, which requires compensation. If you think of all the owners of firms (stockholders and bondholders, generally) the risk premium that stocks earn stocks is the way bondholders pay equityholders to bear the risk that they do not wish to. Will stock prices always go up in the long run? As long as companies pay out less in dividends than their profit, prices will go up. That could change if we were to change our corporate culture and/or tax practices so that firms paid out more in dividends. However, for the purposes of your question, I think it doesn't matter much whether the investor makes money as dividends or capital gains. Does the 5-7% guess apply only to the US market? I didn't write (nor read) the books in question, but most likely that is a global number. The US dominates the global equity market, so it's often a good proxy. However, international returns taken together have no less risk and earn no less over long horizons in general. The particular examples you have pointed out are special cases that only apply to a part of the global economy and a particular time period. There are plenty of examples of stock markets and time periods that did much better than the US market to offset your examples. Is 5-7% a reasonable long-term estimate of equity returns? Equity will always earn more in expectation than risk-free securities will. How much more depends on major economic factors. 5-7% has been a good estimate for the market risk premium for many, many decades (stocks should earn this plus whatever the risk-free rate is). However, that is just an empirical observation, not a rule. It can change. Some day technological progress could slow down or stop, we could run out of important resources in a way that we can't compensate for, our population permanently could stop growing, aliens could invade, etc. Down the road it is certainly possible for expected equity returns to go down and never go back up again. This would result from a permanent, global, economic shift that I think would be pretty obvious. That is, you wouldn't have to look at stock prices to know it was happening. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: I have read in many personal finance books that stocks are a great investment for the long term, because on average they go up 5-7% every year. This has been true for the last 100 years for the S&P500 index, but is there reason to believe this trend will continue indefinitely into the future? It has also been wrong for 20+ year time periods during those last 100 years. It's an average, and you can live your whole career at a loss. There are many things to support the retention of the average, over the next 100 years. I think the quip is out of scope of your actual investment philosophy. But basically there are many ways to lower your cost basis, by reinvesting dividends, selling options, or contributing to your position at any price from a portion of your income, and by inflation, and by the growth of the world economy. With a low enough cost basis then a smaller percentage gain in the index gives you a magnified profit. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: I feel something needs to be addressed The last 100 years have been a period of economic prosperity for the US, so it's no surprise that stocks have done so well, but is economic prosperity required for such stock growth? Two world wars. The Great Depression. The dotcom bust. The telecom bust. The cold war. Vietnam, Korea. OPEC's oil cartel. The Savings and Loans crisis. Stagflation. The Great Recession. I could go on. While I don't fully endorse this view, I find it convincing: If the USA has managed 7% growth through all those disasters, is it really preposterous to think it may continue? ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: The total value of the stock market more or less tracks the total value of the companies listed in the stock market, which is more or less the total value of the US economy (since very few industries are nationalized or dominated by privately held companies). The US economy has consistently grown over time, thanks to the wonders of industrialization, the discovery of new markets, new natural resources, etc. Thus, the stock market has continued to grow as well. Will it forever? No. The United States will not exist for ever. But there's no obvious reason it won't continue to grow, at least for a while, though of course if I could accurately predict that I would be far richer than I am. Why do other countries not have the same result? China is its own ball of wax since it's a sort-of-market-sort-of-command economy. Japan has major issues economically right now and doesn't really have the natural or people resources; it also had a huge market bubble a while back that it's never recovered from. And many European countries are doing fine. German's DAX30 index was at around 2500 in 2004 and is now at nearly 13000. That's pretty fast growth. If you go back further (there was a crash ending in around 2004), you can see around the fall of the Berlin wall it was still around 2000; even going that far back, that's about an 8% annual bump. The FTSE was also around 2000 back then, around 8000 now, which is around 5% annual growth. Many of these indexes were more seriously hurt than the US markets in the two major crashes of this millenium; while the US markets fell a lot in 2008, they didn't fall nearly as much as many smaller markets in 2002, so had less to recover from. Both DAX and FTSE suffered similar falls in 2002 to 2008, and so even though during good periods they've grown quite quickly, they haven't overall done as well as they could have given the crashes. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: Stocks "go up 5-7% every year. This has been true for the last 100 years for the S&P500 index...." This was true in the 20th century in America. It was not true (over the whole century) for other major countries like Germany, Russia, Japan, or China. (It was more or less true for Britain and certain Commonwealth countries like Australia and Canada.) A lot of this had to do with which countries were occupied (or not) during the two world wars. In one of his company's annual reports, Warren Buffett pointed out that the U.S. standard of living went up 6-7 times in the 20th century, that this was unprecedented (and might not be repeatable in the 21st century). The performance of the U.S. stock market in the past century is representative of those (and other) past facts. If a different set of facts prevails going forward, the U.S. stock market would be reflective of those "different" facts. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: Companies are expected to make a profit, otherwise there is no point to their existence and no motivation for investment. That profit comes back to shareholders as growth and/or dividend. If a company is doing well and has a healthy profit to turn back into investment to facilitate increased future earnings, it increases shareholder equity and share price. If a company is doing well and has a healthy profit to pay out in dividend, it makes the shares more attractive to investors which pushes the price up. Either way, shares go up. Share prices drop when companies lose money, or there are market disturbances affecting all companies (recessions), or when individual companies fail. Averaged over all companies over the long term (decades), stocks can be reasonably expected to go up. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: The last 300 years of civilization have been amazingly atypical. We have experienced industrial revolution after industrial revolution. Economic revolutions that would have changed the world in 1000 AD show up as noise. Coal, Canal, Rail, Trade, Electricity, Refrigeration, Oil, Gas, Nuclear, Assembly Line, Vacuum Tube, Mass Education, Transistor, Integrated Circuit, Nano-tech, Antibiotics, Slaying of absolute Poverty, Democratic, Feminism, Superhighway, Automobile, Airplane, and on and on and on. A cascade of miracles and world-shaking events that have intertwined and together generated a many century long economic singularity that has upended the entire world and generated today's world. The question you should ask, is tomorrow going to be like today? And the answer is yes; in weather, and in economics, the most likely bet bet is always "things keep on going like they have in the short term". But next week? Next month? That is often not much like today. There is reason to believe that the yield on the above revolutions will continue to propel the economy forward, and that there are multiple promising new revolutions on the horizon. But barring that kind of world-shaking revolution, you are not going to maintain a 5% real return on investment over another centuries for the stock market. The value of investments has to go up by a factor of over 100 in order for that to happen, and the US stock market is already close to 20 trillion dollars. For it to have a market cap of 2 quadrillion dollars the world economy will have to be much larger than it is today. And to be that much larger, the world would have to be a much stranger place that values very different things. We are currently roughly a K-type 0.72 civilization. A simple linear expansion of our power of 100x brings us up to K-type 0.92, which is going to cook the planet from waste heat (not from CO2, but just from the waste heat of the energy it uses!) Efficiency can mitigate this, but only to a degree. 100x more efficient technology is going to less believable than a beanstalk and space colonies. If you believe that the stock market is going to continue to grow at 5%/year for the next century, start investing in really out-there technologies. Gene editing, virtual and augmented reality, space beanstalks and private lift, miraculously cheap energy storage, etc. Because simply refining the technology of today won't get us there. Modern industrial civilization has been a miracle factory. That is what pulled off that growth rate. If the miracles stop coming, so does the growth. There is a road to it. It would involve clean energy, mass personal automation and friendly (not smarter than human) AI, and the entire world lifted up to the standard of living of the top 3% of the USA on average. But it is far from guaranteed. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: Stock returns cannot be evaluated on its own. You need to take into account inflation and the return of other investment vehicles. Over the long run, you want to earn more than your peers (ie inflation), or lose less than them. Stock lets you buy into the profits of a company managed by others. So the fundamental question is "do those company managers make better decision than average person?" Of course there are times when they make awful decisions (eg just before dotcom bubble), and sometimes the best decision is to close the business. But overall those people are much better educated, have higher IQ, more resourceful, etc, and so over long time and across all the companies, this is correct and hence the stock market premium. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why should we expect stocks to go up in the long term? ### Answer: A lot of these answers are strong, but at the end of the day this question really boils down to: Do you want to own things? Duh, yes. It means you have: By this logic, you would expect aggregate stock prices to increase indefinitely. Whether the price you pay for that ownership claim is worth it at any given point in time is a completely different question entirely. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: 2008-2009 Stock Market Crash — what caused the second drop? ### Answer: The second drop was part of the same event. The short-term resurgence is often called a "dead cat bounce". Mongus Pong's answer is a great answer, I'm going to approach from a more anecdotal POV. Think about the fear that was in the air in Fall 2008. From my recollection, that short-term stabilization came from the Fed, President, Congress, etc standing up and saying that the government would do everything in its power to maintain liquidity in the marketplace. So the fear of a broader collapse of investment banks (beyond Lehman Brothers, Merrill Lynch, etc) due to the Fed behaving as it did in 1929 was abated. By the time you got to Q1 of 2009, it became clear that business vaporized -- nothing was happening. No cars were selling, Christmas was dismal, vacations were cancelled. (example: I went on vacation to a fancy resort in December 2008 and paid $60/night for a $450/night room! The place was half empty.) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: 2008-2009 Stock Market Crash — what caused the second drop? ### Answer: Ultimately no one really knows what causes the markets to rise and fall beyond supply and demand. If more people want to buy then sell, prices go up. And if more people want to sell, prices go down. The news channels will often try to attribute a specific reason to the price move, but that is largely just guess work to fill up the news pages so people have something to read. You may find it interesting to read up on the Elliot wave principle. The crash of 2008 was a perfect Elliot Wave fit. Elliot Wave theory states that social moods (which ultimately drive the stock market) generally occur in a relatively predictable pattern. The crash in September was a Wave 3 down. This is where the majority of people give up hope. However there are still a few people who are still holding on. The markets tend to meander about during wave 4. Finally the last few people give up hope and sell out. This causes the final crash of wave 5. Only when the last person has given up hope can the markets start to go up again.. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: 2008-2009 Stock Market Crash — what caused the second drop? ### Answer: First, I would like to use a better chart. In my opinion, a close of day line chart obscures a lot of important information. Here is a daily OHLC log chart: The initial drop from the 1099.23 close on Oct 3 was to 839.8 intraday, to close at 899.22 on Oct 10. After this the market was still very volatile and reached a low of 747.78 on Nov 20, closing only slightly higher than this. It traded as high as 934.70 on Jan 6, 2009, but the whole period of Nov 24 - Feb 13 was somewhat of a trading range of roughly 800-900. Despite this, the news reports of the time were frequently saying things like "this isn't going to be a V shaped recovery, it is going to be U shaped." The roughly one week dip you see Feb 27 - Mar 9 taking it to an intraday low of 666.79 (only about 11% below the previous low) on first glance appears to be just a continuation of the previous trend. However... The Mar 10 uptrend started with various news articles (such as this one) which I recall at the time suggested things like reinstating the parts of the Glass–Steagall Act of 1933 which had been repealed by the Gramm–Leach–Bliley Act. Although these attempts appear to have been unsuccessful, the widespread telegraphing of such attempts in the media seemed to have reversed a common notion which I saw widespread on forums and other places that, "we are going to be in this mess forever, the market has nowhere to go but down, and therefore shorting the market is a good idea now." I don't find the article itself, but one prominent theme was the "up-tick" rule on short selling: source From this viewpoint, then, that the last dip was driven not so much by a recognition that the economy was really in the toilet (as this really was discounted in the first drop and at least by late November had already been figured into the price). Instead, it was sort of the opposite of a market top, where now you started seeing individual investors jump on the band-wagon and decide that now was the time for a foray into selling (short). The fact that the up-tick rule was likely to be re-instated had a noticeable effect on halting the final slide. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Accounting equation: does income really decrease equity? ### Answer: If your income stream goes up, it would usually increase both your "income" term and your "assets" term since that money sits in your bank account as an asset. (Even more likely a combination of assets and expenses go up if you have cost associated with the increase in income.) In this case, they balance in the equation and your equity doesn't change. The question as you posed it is true mathematically, but the "paradox" happens because you're not taking into account where the money form the increased income falls in other terms of the equation. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Accounting equation: does income really decrease equity? ### Answer: Equity is the term to make things balance. In a simple transaction, you get $100 paid to you. Income goes up by $100 and the asset of whatever bank account or petty cash drawer you put it into also goes up by $100. Equity is unchanged. If for some reason you had to take some income into your books, but no asset increased, no debt decreased, and you had no way to take an offsetting expense into your books, then this would lower your equity. How else to explain having "earned" $100 but having nothing to show for it? ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Accounting equation: does income really decrease equity? ### Answer: The accounting equation, in short, is: This can be further broken down into: Which can be further broken down into: The GnuCash equation is right, though I would substitute the word equity in that equation with a more-specific paid-in capital. Equity is (simply put) made up of 2 parts: shareholders' equity and retained earnings. Shareholders' equity is the amount invested by shareholders. Retained earnings is the amount earned by the business on behalf of the shareholders. Retained earnings is directly affected by your net income (which is income minus expenses). An increase in income will result in an increase in retained earnings. This must be balanced somewhere. Usually an increase in an asset. It may also be balanced by a decrease in equity. Likewise, increase in expenses will result in a decrease in retained earnings, which must also be balanced. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Am I putting myself at any security risks by putting all my money in one bank institution? ### Answer: For small amounts I wouldn't be too concerned. There are two factors I can think of: For relatively small amounts and when dealing with reputable banking institutions there should be little concern of banking with a single bank. It's what most people do. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: UK Ltd taxation on stocks/bonds income and real estate rent income ### Answer: For stocks, bonds, ETF funds and so on - Taxed only on realised gain and losses are deductible from the gain and not from company's income. Corporate tax is calculated only after all expenses have been deducted. Not the other way around. Real estate expenses can be deducted because of repairs and maintenance. In general all expenses related to the operation of the business can be deducted. But you cannot use expenses as willy nilly, as you assume. You cannot deduct your subscription to Playboy as an expense. Doing it is illegal and if caught, the tours to church will increase exponentially. VAT is only paid if you claim VAT on your invoices. Your situation seems quite complicated. I would suggest, get an accountant pronto. There are nuances in your situation, which an accountant only can understand and help. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can anyone else make an online payment for me? ### Answer: Your relative in the US could buy a pre-paid Visa (aka Visa gift card) and give you the numbers on that to pay. They're available for purchase at many grocery/convenience stores. In most (all??) cases there'll be a fee of a several dollars charged in addition to the face value of the card. The biggest headache I can think of would be that pre-paid cards are generally only available in $25/50/100 increments; unless the current SAT price matches one of the standard increments they'll have to buy the next card size up and then get the remaining money off it in a separate transaction. A grocery store would be one of the easier places for your relative to do this because cashiers there are used to splitting transactions across multiple payment sources (something not true at most other types of business) due to regularly processing transactions partially paid for via welfare benefits. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Splitting Hackathon Prize Money to minimize tax debt ### Answer: I would deduct all the other payments out as subcontractors, but I typically have all the paperwork and entities set up to make that applicable. In Turbotax I do this with as subcontracting expense under my business entity, but for the IRS the categories of the deductions do not matter This isn't tax advice, it is what I would do, and how I would defend it under an audit. Everyone else that was paid also needs to report it. The lack of reciprocal filing (you deducted income paid to someone else, the person did not report that income, or reported it in a different way) is a number one thing to trigger IRS scrutiny. Although accurate, you need to be aware that you are shifting the tax burden away from yourself, by deducting it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Splitting Hackathon Prize Money to minimize tax debt ### Answer: A simple option is to ask your teammates to send you their portion of the tax bill. This option makes everyone's taxes easier, especially since it is very likely that they have already sent in their tax returns. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Splitting Hackathon Prize Money to minimize tax debt ### Answer: I would just take $2000 and multiply by your marginal tax rate, weight that between the 5 other people according to their share of the prize money and ask them to give you that. From your question it seems like you all have a good working relationship, I'm sure the other partners would agree to that. I think it's the simplest solution that is also fair and equitable. Basically, you pay the tax on 2000 and they pay you back for their share of the tax. Much easier than trying to pass it through your tax return for 5 separate people for a minimal amount of $'s. In hindsight, the best way to do it would have been to 1099 the person with the lowest marginal tax rate for the year to minimize the total tax paid on the 2000. Probably only would've been a few dollars difference but still the most efficient way to do it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: RRP/list price/retail price and cars? ### Answer: The retailer can sell for whatever price they like, with the caveats that if they consistently sell at a loss they will go out of business and if they set the price too high they will not sell anything! As you mentioned, RRP is only a recommended price, the manufacturer cannot enfore it at all for legal reasons. Having said that I used to work in retail (not cars) and if we discounted a certain manufacturers products and they found out about it, we would find they had suddenly run out of stock when we tried to order more. So manufacturers do have some control over this type of thing depending on how "underhand" they want to be about it. My background is in retail management but not selling cars, but my understanding is the law regards RRP is the same. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's a good free checking account? ### Answer: The best bank with least amount of gotchas is Alliant Credit Union. I did a lot of research and finally decided on this bank. I did a comparative study between ING, Ally and Alliant and found Alliant to be superior than the the other two. More about my study: http://www.moneycone.com/a-bank-thats-better-than-ally-and-ingdirect/ If you do find a better bank than this, please update this post, I'd definitely like to know! Disclaimer: I have no relationship with either of the three banks. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's a good free checking account? ### Answer: Check with a small local bank or credit union, they might offer better terms. That said, my local credit union still charges $6/month for a checking account if you don't have a direct deposit into it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's a good free checking account? ### Answer: Here's a hack for getting the "free" checking that requires direct deposit. Some effort to set up, but once everything is in place, it's all autopilot. (If your transfer into savings is higher than your transfer out of savings, you'll build up a nice little stash over time.) I don't know if there are deposit amounts or frequencies that you must have to qualify for the free account, if these are public or secret, or if this works everywhere. If anyone else has experience using this kind of hack, please leave a comment. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's a good free checking account? ### Answer: If you want to deposit checks or conduct business at a window, you should look at a local savings bank or credit union. Generally, you can find one that will offer "free" checking in exchange for direct deposit or a minimum balance. Some are totally free, but those banks pay zippo for interest. If you don't care about location, I would look at Charles Schwab Bank. I've been using them for a couple of years and have been really satisfied with them. They provide free checking, ATM fee reimbursement, free checks and pre-paid deposit envelopes. You also can easily move money between Schwab brokerage or savings accounts. Other brokers offer similar services as well. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's a good free checking account? ### Answer: Capital One 360. No minimums balance, no fees. Everything's online. Make deposits using an app or an image of the check. ATMs are free almost everywhere. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's a good free checking account? ### Answer: Online banks are the future. As long as you don't need a clerk to talk to (and why would you need?) there's nothing you can't do with an online bank that you can with a brick and mortar robbers. I use E*Trade trading account as a checking account (it allows writing paper checks, debit card transactions, ACH in/out, free ATM, etc). If you don't need paper checks that often you can use ING or something similar. You can always go to a local credit union, but those will wave the fee in exchange for direct deposit or high balance, and that you can also get from the large banks as well, so no much difference there. Oh where where did Washington Mutual go.... ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: In India, what is the difference between Dividend and Growth mutual fund types? ### Answer: The difference between dividend and growth in mutual funds has to do with the types of stocks the mutual fund invests in. Typically a company in the early stages are considered growth investments. In this phase the company needs to keep most of its profits to reinvest in the business. Typically once a company gets a significant size the company's growth prospects are not as good so the company pays some of its profits in the form of a dividend to the shareholders. As far as which is the best buy is totally a personal choice. There will be times when one is better then the other. Most likely you will want to "diversify" and invest in both types. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: In India, what is the difference between Dividend and Growth mutual fund types? ### Answer: After searching a bit and talking to some investment advisors in India I got below information. So thought of posting it so that others can get benefited. This is specific to indian mutual funds, not sure whether this is same for other markets. Even currency used for examples is also indian rupee. A mutual fund generally offers two schemes: dividend and growth. The dividend option does not re-invest the profits made by the fund though its investments. Instead, it is given to the investor from time to time. In the growth scheme, all profits made by the fund are ploughed back into the scheme. This causes the NAV to rise over time. The impact on the NAV The NAV of the growth option will always be higher than that of the dividend option because money is going back into the scheme and not given to investors. How does this impact us? We don't gain or lose per se by selecting any one scheme. Either we make the choice to get the money regularly (dividend) or at one go (growth). If we choose the growth option, we can make money by selling the units at a high NAV at a later date. If we choose the dividend option, we will get the money time and again as well as avail of a higher NAV (though the NAV here is not as high as that of a growth option). Say there is a fund with an NAV of Rs 18. It declares a dividend of 20%. This means it will pay 20% of the face value. The face value of a mutual fund unit is 10 (its NAV in this case is 18). So it will give us Rs 2 per unit. If we own 1,000 units of the fund, we will get Rs 2,000. Since it has paid Rs 2 per unit, the NAV will fall from Rs 18 to Rs 16. If we invest in the growth option, we can sell the units for Rs 18. If we invest in the dividend option, we can sell the units for Rs 16, since we already made a profit of Rs 2 per unit earlier. What we must know about dividends The dividend is not guaranteed. If a fund declared dividends twice last year, it does not mean it will do so again this year. We could get a dividend just once or we might not even get it this year. Remember, though, declaring a dividend is solely at the fund's discretion; the periodicity is not certain nor is the amount fixed. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: In India, what is the difference between Dividend and Growth mutual fund types? ### Answer: I wrote about this a while back: http://blog.investraction.com/2006/10/mutual-funds-dividend-option-or-growth.html In short: Growth options of a mutual fund scheme don't pay out any money, they reinvest the dividend they receive. Dividend options pay out some money, at different intervals, based on the surplus they accumulate. In India, the options have very similar underlying portfolios, so HDFC Equity Fund (Growth) and HDFC Equity Fund (dividend) will have the same percentage allocation to each stock. Update: I also have a video you might want to see on the subject: http://www.youtube.com/watch?v=Bx8QtnccfZk ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: In India, what is the difference between Dividend and Growth mutual fund types? ### Answer: A growth fund is looking to invest in stocks that will appreciate in stock price over time as the companies grow revenues and market share. A dividend fund is looking to invest in stocks of companies that pay dividends per share. These may also be called "income" funds. In general, growth stocks tend to be younger companies and tend to have a higher volatility - larger up and down swings in stock price as compared to more established companies. So, growth stocks are a little riskier than stocks of more established/stable companies. Stocks that pay dividends are usually more established companies with a good revenue stream and well established market share who don't expect to grow the company by leaps and bounds. Having a stable balance sheet over several years and paying dividends to shareholders tends to stabilize the stock price - lower volatility, less speculation, smaller swings in stock price. So, income stocks are considered lower risk than growth stocks. Funds that invest in dividend stocks are looking for steady reliable returns - not necessarily the highest possible return. They will favor lower, more reliable returns in order to avoid the drama of high volatility and possible loss of capital. Funds that invest in growth stocks are looking for higher returns, but with that comes a greater risk of losing value. If the fund manager believes an industry sector is on a growth path, the fund may invest in several small promising companies in the hopes that one or two of them will do very well and make up for lackluster performance by the rest. As with all stock investments, there are no guarantees. Investing in funds instead of individual stocks allows you invest in multiple companies to ride the average - avoid large losses if a single company takes a sudden downturn. Dividend funds can lose value if the market in general or the industry sector that the fund focuses on takes a downturn. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does my net paycheck decrease as the year goes on due to tax brackets filling up? ### Answer: Most countries with income tax, including the USA, design their withholding system so that in straightforward cases, tax is withheld from each month's paycheck on an annualized basis: tax for a month is calculated on the assumption that you will keep earning the same monthly amount for the rest of the year, and the withholding is set so that the tax is spread evenly across the year. Another way of putting that is that in practice you only get the tax brackets allocated proportionately throughout the year - so up till the end of August you'll only have been assigned 8/12 of the $37450 bracket, and so on. So if your income doesn't change and your general tax affairs don't change, your paycheck also shouldn't change. If your income is irregular or changes during the year then things can get more complicated. As other answers have noted, withholdings are calculated according to tables that normally just take into account that specific month's income. There are various possible changes to your tax affairs that might cause the withholdings to change. For example there'd be an impact from any change in your contributions to tax advantaged things like health insurance or retirement, health or education savings. You might also use form W-4 to change your withholdings yourself. Note that even with a regular income that doesn't change through the year, you might find yourself either owing money or being owed a refund when you file your taxes after the end of the year. It's worth making sure that your W-4 accurately records the allowances you are entitled to, to minimize or eliminate this adjustment. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does my net paycheck decrease as the year goes on due to tax brackets filling up? ### Answer: If your payroll payments are the same each period, you will generally have the same net pay per period. Some things that can cause variations: If your employer puts special payments in a specific paycheck (such as a quarterly or annual bonus, or a vacation payout) this can increase the percentage held from that specific paycheck. The IRS publishes lookup tables, and your payroll system should withhold the amount in the lookup table. If you get a raise midyear, your new payroll withholding rate may increase based on the gross pay amount. http://www.irs.gov/pub/irs-pdf/p15.pdf ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does my net paycheck decrease as the year goes on due to tax brackets filling up? ### Answer: H.R. basically consults Publication 15 (this is the link to 2015) to determine how much to hold, based on filing status, exemptions, and pay amount. What's described here is a form of estimation, or, in other words, H.R. withholds what would be your actual taxes, dividing across the number of paychecks you receive. Assuming your gross pay and exemptions do not change, this usually results in a zero-sum for taxes owed (you will receive nothing, and owe nothing). As you can see from the charts, the year is basically broken down into equal tax units that reflect how much you would owe if you worked at that bracket all year. This estimation works best when you have steady hours from check to check. In other words, your taxes are based on the estimate of what you'd make if you earned that much all year, scaled down to the time frame (e.g. 1/52 if you are paid weekly, or 1/26 if you paid biweekly). They do not go "up" near the end of the year, because they're estimated in advance. You don't move up a tax bracket, but are instead taxed at a particular bracket every paycheck. There's also other forms of estimation mentioned there, but basically follow the same scheme. Note that all estimation forms are just that-- estimates. It's best to use a calculator and compare your current taxes whenever a significant change occurs-- a raise, a new child, getting married or divorced, etc. You'll want to be able to alter your exemptions so that enough taxes are coming out. That's also the reason for the "withhold extra" box, so that you can avoid owing. For example, if you're making $44 a week for the first 26 weeks, and then you make $764 a week for the second 26 weeks of the year, you'll end up with an actual tax liability of $2,576.6, but end up paying only $2,345.20. You would owe $231.40. Of course, the actual math is a lot more complicated if you're an employee paid by the minute, for example, or you have a child, go to college, etc. Paychecks that vary wildly, like $10,000 one week and $2,000 the next tend to have the hardest-to-predict estimates (e.g. jobs with big commission payouts). You should avoid living check-to-check with jobs that pay this way, because you'll probably end up owing taxes. Conversely, if you've done your estimates right and you're paid salary or exactly the same number of hours every week, you'll find that the taxes are much easier to predict and you can usually easily create a refund situation simply by having the correct exemptions on your check. So, in summation, if your check falls in the 25% category (which is, of course, 25% above the tax bracket break point), you're already paying the correct amount, and no further drop in your check would be expected. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does my net paycheck decrease as the year goes on due to tax brackets filling up? ### Answer: It seems that you are misunderstanding how your taxes are calculated. You seem to be under the impression that once you pass $37,450 annual income, ALL of your income will be taxed at 25%. However, in reality, only the income you earn above that amount will be taxed at 25%. You can use this chart to determine exactly how much federal tax you will pay; As you can see, if you earned, $37,500 in a year, you would only be charged 25% taxes on $50 (and you will pay 15% on the amount between $9226 and $37450, and 10% on the amount from $0 to $9225, which is $5126.25 when summed together). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does my net paycheck decrease as the year goes on due to tax brackets filling up? ### Answer: In general no, if you just have one employer and work there with the same salary for the whole year. Typically an employer does tax withholding by extrapolating your monthly income to the entire year and withholding the right amount so that at the end, what is withheld is what you owe. It's not a surprise to them when your income crosses a tax bracket threshold, because they knew how much they were paying you and knew when you would cross into another bracket, so they factored that in. If you have multiple jobs or only worked for part of the year, or if your income varied from month to month (e.g., you got a raise) there could be a discrepancy between what is withheld and what you owe, because each employer only knows about what it's paying you, not what money you may have earned from other sources. (Even here, though, the discrepancy wouldn't be due to the tax brackets per se.) You can adjust your withholdings on form W-4 if needed, to tell the employer to withhold more or less than they otherwise would. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does my net paycheck decrease as the year goes on due to tax brackets filling up? ### Answer: No, you will (generally speaking) not see a decrease in your net earnings from crossing a tax bracket: This means that your highest marginal rate (the top bracket you fall into) only applies to the portion of your income that is in that bracket, not your total income. This helps ensure that your total tax burden does not increase measurably from crossing a tax bracket. Be aware that you can still see measurable changes in your total taxes due if increases in income make you no longer eligible for certain deductions and/or benefits that were otherwise reducing your tax burden, but this is not the same as how changes in your highest marginal rate affect your overall average tax rate. Note that when you see a rate table such as the one on efile.com's federal income tax rates page or on Wikipedia's Income tax in the United States page, the rates listed are for each segment of income, not for your overall income: In other words the 15% rate below (for 2014, filing single) only applies to the portion of your income falling between the listed numbers, not to income below it or above it: that would be calculated under the respective rates given. You can use the i1040tt tax tables to gain a sense of how this works in practice: (The linked resource is for 2014 taxes) The threshold in 2014 for the 25% rate vs 15% was $36,900. Using the linked table, if you were single and made between 36,850 and 36,900 in gross income, your tax liability before other considerations was $5,078. If you made between 36,900 and 36,950, your base tax liability was $5,088. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I open a Solo 401(k) if I am an independent contractor but also work part-time as an employee? ### Answer: If you have self-employment income you can open a Solo 401k. Your question is unclear as to what your employment status is. If you are self-employed as an independent contractor, you can open a Solo 401k. You can still do this even if you also earn non-self-employment income (i.e., you are an employee and receive a W-2). However, the limits for contributions to a Solo 401k are based on your self-mployment income, not your total income, so if you have only a small amount of self-employment income, you won't be able to contribute much to the Solo 401k. You may be able to reduce your taxes somewhat, but it's not like you can earn $1000 of self-employment income, open a Solo 401k, and dump $5000 into it; the limits don't work that way. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I open a Solo 401(k) if I am an independent contractor but also work part-time as an employee? ### Answer: A Solo 401k plan requires self-employment income; you cannot put wages into it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I open a Solo 401(k) if I am an independent contractor but also work part-time as an employee? ### Answer: I'm in a similar situation as I have a consulting business in addition to my regular IT job. I called the company who has my IRA to ask about setting up the Individual 401k and also mentioned that I contribute to my employer's 401k plan. The rep was glad I brought this up because he said the IRS has a limit on how much you can contribute to BOTH plans. For me it would be $24K max (myAge >= 50; If you are younger than 50, then the limit might be lower). He said the IRS penalties can be steep if you exceed the limit. I don't know if this is an issue for you, but it's something you need to consider. Be sure to ask your brokerage firm before you start the process. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How can I cash out a check internationally? ### Answer: I know someone around there, who might be able to collect it for me.Would I still be able to cash it out in the other country? Or can he/she cash it out for me? Unlikely. Unless they deposit it into a US bank account in your name. You can cash US checks in almost any decent bank anywhere in the world, but it may cost you some and will probably take 2-3 weeks. Since the amount is won in the US, how would I pay the taxes? , since its earned over there. You would file a tax return with the IRS and send them a payment. You can buy drafts in US dollars almost anywhere in the world. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How can I cash out a check internationally? ### Answer: Your friend probably cannot deposit the check to your U.S. bank account. U.S. banks that I've worked with will not accept a deposit from someone who is not an owner of the account. I don't know why not. If some stranger wants to make unauthorized deposits to my account, why should I object? But that's the common rule. You could endorse the check, your friend could then deposit it to his own account or cash it, and then transfer the money to you in a variety of ways. But I think it would be easier to just deposit the check in your account wherever it is you live. Most banks have no problem with depositing a foreign check. There may be a fairly long delay before you can get access to the money while the check clears through the system. I don't know exactly what you mean by a "prize check", but assuming that this is taxable income, yes, I assume the U.S. government would want their hard-earned share of your money. These days you can pay U.S. taxes on-line if you have a credit card. If you have not already paid U.S. taxes for the year, you should make an "estimated payment". i.e. you can't wait until April 15 of the next year, you have to pay most or all of the taxes you will owe in the calendar year you earned it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How can I cash out a check internationally? ### Answer: This question was asked three years ago, but now that it's 2017 there is actually a relatively easy, cheap and fast solution to at least the first half of your question. To cash the check: I've done this a half dozen times while abroad (from the US) without any problems. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How can I cash out a check internationally? ### Answer: I've been a landlord and also a tenant. I have been able to deposit money in an account, where I have the account number, and/or a deposit slip. In a foreign bank you can deposit by a machine if in the bank or someone is there for you and knows the account number. With regards to cashing a check in another country, it is up to the bank and the time is at least 14 to 21 business days, with a fee is added. As of a winning check, since its in your name, if you are in another country sign the check, for deposit only with a deposit slip and send it to your out of country bank by FedEx - you will have a tracking number, where as regular mail it might get there in 3 months. I hope by now you came to your solution. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: I have around 60K $. Thinking about investing in Oil, how to proceed? ### Answer: One possibility would be to invest in a crude oil ETF (or maybe technically they're an ETP), which should be easily accessible through any stock trading platform. In theory, the value of these investments is directly tied to the oil price. There's a list of such ETFs and some comments here. But see also here about some of the problems with such things in practice, and some other products aiming to avoid those issues. Personally I find the idea of putting all my savings into such a vehicle absolutely horrifying; I wouldn't contemplate having more than a small percentage of a much more well diversified portfolio invested in something like that myself, and IMHO it's a completely unsuitable investment for a novice investor. I strongly suggest you read up on topics like portfolio construction and asset allocation (nice introductory article here and here, although maybe UK oriented; US SEC has some dry info here) before proceeding further and putting your savings at risk. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: I have around 60K $. Thinking about investing in Oil, how to proceed? ### Answer: This is only a partial answer to your question #1. If you have a conservative approach to savings (and, actually, even if you don't), you should not invest all of your money in any single industry or product. If you want to invest some money in oil, okay, but don't overdo it. If your larger goal is to invest the money in a manner that is less risky but still more lucrative than a savings account, you should read up on personal finance and investing to get a sense of what options are available. A commonly-recommended option is to invest in low-cost index funds that mirror the performance of the stock market as a whole. The question of "how should I invest" is very broad, but you can find lots of starting points in other questions on this site, by googling, or by visiting your local library. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: I have around 60K $. Thinking about investing in Oil, how to proceed? ### Answer: If you've decided to ignore the sound advice re: oil company stocks, and you want something directly linked to the price of oil, do the following: Understand that oil producers would like avoid the risk of a price drop, and oil consumers (refiners, electric utilities, etc.) would like to avoid the risk of a price rise. Understand that you are about to assume their risk. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: I have around 60K $. Thinking about investing in Oil, how to proceed? ### Answer: Royalty trusts track oil prices (they're a pure play on ownership of a portfolio of mineral rights and do not otherwise have the operations that the oil companies themselves have). Many publicly traded ones listed at the embedded wikipedia link. Oil tankers are having a bang up business right now as described in the article, but that's because of the low prices and flood of product from the middle east. The article notes that inventories are near capacity, so terminals and pipelines may be in for a few good years, though these do not directly track oil price. However, as a way to bet on oil or oil services, many terminals and pipelines are organized as publicly traded master limited partnerships or MLPs, often spun out of a major oil company for tax reasons, allowing fine-grained investment in specific assets. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Question about ex-dividend date timing ### Answer: Here is the definition of Ex-dividend date from the SEC: Once the company sets the record date, the stock exchanges or the National Association of Securities Dealers, Inc. fix the ex-dividend date. The ex-dividend date is normally set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. The linked document discusses weekend, and holidays involved in the calculation. The difference between the record date and the ex-dividend is to allow for the three days of settlement. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can a company donate to a non-profit to pay for services arranged for before hand? ### Answer: Donations need to be with no strings attached. In this case, you make the cash donation, a deduction, and then they pay you, in taxable income. It's a wash. Why not just give them the service for free? Otherwise this is just money going back and forth. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can a company donate to a non-profit to pay for services arranged for before hand? ### Answer: When you say "donate", it usually assumes charitable donation with, in this context, tax benefit. That is not what happens in your scenario. Giving someone money with the requirement of that someone to spend that money at your shop is not donation. It is a grant. You can do that, but you won't be able to deduct this as charitable donation, but the money paid to you back would be taxable income to you. I respectfully disagree with Joe that its a wash. It is not. You give them money that you cannot deduct as an expense (as it is not business expense) or donation (as strings are attached). But you do give them the money, it is no longer yours. When they use the money to pay you back - that same money becomes your taxable income. End result: you provide service, and you're the one paying (taxes) for it. Why would you do that? ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can a company donate to a non-profit to pay for services arranged for before hand? ### Answer: Can a company say "StackExchange" donate to a non-profit company say $5,000 in agreement that they will spend that on paying a designer for a new website? And most importantly is this donation still tax deductible? A non-profit would have to typically create a bucket for IT Services or Website design. As long as "StackExchange" specify they employ a profession service to get it done, there would be no issue. If "StackExchange" were to specify an individula/company it would be an issue. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can a company donate to a non-profit to pay for services arranged for before hand? ### Answer: People put conditions on donations all the time. They donate to the Red Cross for a specific disaster. The donate money to a church for the building fund. They donate money to a hospital to buy a new x-ray machine. They donate money to the scouts for a new dining hall. It is possible to donate money to a non-profit for a specific purpose. If the non-profit doesn't want to accept the money with those strings they can refuse. Generally these specific projects are initiated by the non-profit. But there is no requirement that the idea originate with the non-profit. It is also up to the non-profit and their legal advisers regarding how strictly they view those strings. If you donate money for web design and they don't spend it all, can they pay net years hosting bill with the money, or must they hold it for a few years for when they need a designer again? If the company wants to provide the service, they can structure the project to pay their employees for their time. They pay employees for $100 of labor while deigning the website. The pay and benefits reduce profit thus lowering taxes. Donating money to the non-profit to be given back to the company doesn't seem to be the best way to structure transaction. At best it is a wash. Donating money to a charity and then directing exactly which contractor will perform the service starts to look like money laundering, and most charities will get wary. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I work with two or more mortgage brokers at the same time? ### Answer: While it is possible, it's not a really good use of your time or theirs. Mortgage brokers have access to dozens of lenders, can assemble deals you can't even dream of, and are much more intimately acquainted with the latest lending rule changes than you are. They are paid by the lenders to bring them business, so there is no cost to you. A mortgage broker has the advantage of leverage because he can be placing 10 mortgages per day, while you will be placing one, once. Your mortgage broker is working on your behalf. Get out of his way and let him do his job so you can concentrate on other matters. If your concern is that you want the lowest rate, share that with your broker and let him find the best rate for you. If you want a deal where you can put a larger prepayment down, let him know that and he will find you what you're looking for. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can I work with two or more mortgage brokers at the same time? ### Answer: Obviously mate. Mortgage advisors don't have just one client, similarly why should you have only one advisor? it´s an open market. Don't worry about wasting their time, you are not wasting their time if you are considering a mortgage. then, in case you found a better deal with another mortgage advisor then that´s life - someone was better then them. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to find a reputable company to help sell a timeshare? ### Answer: You are right to be skeptical of timeshare listing companies. As you can imagine, it is very difficult to actually sell a timeshare. You know firsthand how awful they are; it takes trickery to sell them. True story: In my office building years ago, the office across the hall was occupied by a timeshare listing service. One day about a dozen FBI agents showed up and raided the office. As with any service company like this, you can sometimes find reviews on the Better Business Bureau. As an alternative, instead of trying to sell your timeshare, you may want to hire a lawyer to try to get out of it. I have absolutely no experience with this, but I have heard advertisements on the radio for one such firm called Timeshare Exit Team. There may be others that do the same thing. Good luck. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to find a reputable company to help sell a timeshare? ### Answer: The one thing I would like to add to Ben's answer is that you will be lucky to get out of this with no proceeds. So that 30-40K paid for the timeshare maybe a total loss. If this purchase was financed with the timeshare used as collateral you may need to pay it off prior to being released. One tactic I heard used is to offer the sales team, that sold you the timeshare, a bonus for selling yours instead of one out of inventory. Assuming their commission is typically 25% of the sales price, you might consider offering them 40% or some higher figure. Doing it this way, you will have all the slick marketing on your side probably generating the highest amount of revenue possible. Timeshares are really bad deals. If you know this you can score some cheap vacations by attending their seminars and continuing to say no. The wife and I recently got back from a nice trip to Aruba mostly paid for with airline points, and a 2 hour timeshare tour. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to find a reputable company to help sell a timeshare? ### Answer: You own something with very little market value - even if you paid a large price for it initially. Your cost to sell may be more than the price you get. Like any other item that has limited resale value, your best option may be to donate it. A quick Google search will turn up some options. This will likely be less hassle than selling. Also, you have a potential tax write-off. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: These kinds of credit card offers are incredibly common. More often you will get a certain reward if you spend $X within Y days of getting the card. In many cases you can take advantage of them with very little downside. However, are you responsible enough to have a credit card and be able to pay off the balance every month? If not the interest charges could quickly wipe out the $50 bonus you get. And hard inquiries and new accounts could potentially affect your credit score, particularly if you don't have a well-established credit history. There's also the chance you get denied in which case you add a hard inquiry to your credit report for no gain. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: What's going on here is that Amazon/visa thinks that the money they will earn on average from irresponsible credit card users is more value than 50$ each. This is the same logic that is behind the cash back or airplane point bonuses many credit cards offer, or the "apply and get a free 2-liter of soda" that some stores offer. I would need more information about the card to say whether or not you should apply (What are the fees, if any? What is the interest rate? etc). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: The most likely reason for this card is that Amazon has an arrangement with the issuer (I believe that that used to be Chase; may have changed since). Such an arrangement may allow Amazon to take the risk of chargebacks, etc. in return for the issuer handling the mechanics of billing. This is advantageous for Amazon, as otherwise they are subject to both their own procedures and those of the issuer. Amazon would rather take the entire risk than share it with someone else who charges for the privilege. Fees for processing credit cards can be as much as 5%, although 1-2% is more typical. Due to its size, Amazon may already have negotiated fees lower than 1%. But even so, any savings they make are to their benefit. Further, now they can get a share of the fees charged to other merchants. For example, if you buy a book from Barnes & Noble (an Amazon competitor) with the Amazon card, then Amazon gets some money in return, say 1% of the transaction. If the price is the same on Amazon and at Barnes & Noble, you can actually save money with the Amazon card. Amazon gives more "cash back" in the form of gift card balance for an Amazon purchase. So the card may mean that you buy from Amazon when you might otherwise have chosen someone else. If we again assume a 20% margin, they only need $200 of additional purchases to make $40 of profit. Someone who buys $1000 additional on the Amazon site makes them $200 of profit. They're over $160 ahead. Also note that Amazon is only giving you a gift card, which you have to use on Amazon. And it's difficult to spend exactly $50. As a practical matter, most people will buy, say, $60, with $10 of that money. So they sell you $48 of merchandise (their cost, assuming a 20% margin) for $10. They lost $38 on that transaction, but they've lured you into a long term relationship that may return more than that. And they didn't lose the $50 you gained. They only lost $38. Think about it as a marketing cost. Amazon is willing to pay $38 for a long term relationship with you. From their perspective, doing so in such a way that you come out $50 ahead (assuming you would have made the same purchases without this), is a win-win. Because once they have that relationship, they can leverage it to give them savings elsewhere. This is Amazon's approach in general. Originally all their products were drop shipped (from someone like Ingram Micro). They handled the web site and billing while the drop shipper handled inventory and shipping. Then Amazon added their own warehouses. Now they can do all that separately. This is just the same thing for buyers. Amazon manages all the risk of the transaction and thus gets all the profit. Because Amazon is managing the credit card risk, they have access to all the credit history. This helps them better determine if that sudden shipment of a $2000 camera to Thailand is a real transaction (you're a photographer who regularly vacations in Thailand) or a fake (you've never been to Thailand in your life and your phone is camera enough). That additional information may itself be worth enough to make the relationship profitable for Amazon. Amazon certainly gets something out of the relationship. You give them money. And you are likely to give them more money with the Amazon card than they would otherwise receive. But you get products in return. Is that a good deal? If you prefer having the products to the money, then yes. Others have suggested that it's the irresponsible credit card users that generate the real profit. I disagree. They generate more revenue in the short term, but then they overspend and declare bankruptcy. Then Amazon loses its money. Yes, they get more interest and fees in that case, but if they lose $1000, they needed to make $1000 in profit just to break even. It's safer to make the smaller short term profits with responsible customers who will continue to be customers for the long term. A steady profit of $100 or $200 a year is better than a one time profit of $500 followed by a loss of $1000 followed by nothing for ten years. Anyway, your question was if you should sign up for the card. If you are planning on doing a lot of shopping on Amazon, you might as well. It gives you cash back. If shopping on Amazon is inconvenient, then perhaps that outweighs the advantage of the card. The "cash back" is just Amazon money. You can't spend it anywhere but Amazon. If each transaction gives you a little bit of Amazon money, you have to keep going back to spend it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: Every financial services company (and cellphone provider, cable and broadband provider, private energy supplier, and so on and so forth - it's turtles all the way down in a market economy) spends "something" to acquire a new customer. Paying attractive college students minimum wage to hand out brochures and branded fidget toys costs money. A 1 million piece postal mailing for a 1% response rate costs money. A TV ad or billboard costs money. A signup enticement of cash or airplane miles costs money. The question is, what does an organization spend per new customer? The amount a company wants to spend has to do with their medium term outlook and overall margins, so it will vary with the business cycle, but a rule of thumb is $100-200 spent for each customer who signs up. The advantage to this particular offer is that it may involve some payments to Amazon, but it includes less labor or cost-per-wasted-contact than alternatives. So there's more in the budget to entice the prospect. Recall, it's a one-time cost, and you gain a relationship where you get 2% of credit processing turnover for the duration of the account; a chance at 19.99% APR financing or other fees; and an opportunity to upsell a mortgage or life insurance or IRA accounts, etc to a known customer. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: The 'store card' that Amazon offers gives 5% back on Amazon purchases. Some time ago, when I realized how much of my spending was going through Amazon, I chose that card over this one. If you want the card, that's fine, but if you are going to play the reward game, there are far higher bonuses available for card signups. No, it's not a scam. Many stores will offer a discount at the register the day you sign up for there card. In general, the store cards should also give a discount when used at that store, or airline for that matter. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: Amazon has 2 different cards you can apply for, a store card and a credit card. The credit card is through Chase. The deal is not a scam, I can confirm this because I applied for their credit card and got $70 in the form of a digital gift card. By giving customers free money for signing up for their cards they get more people who are willing to give it a try. Once you have a card, you get benefits like 3-5 percent back on Amazon purchases that will entice consumers to use the card. Amazon likely has an agreement with Chase and they are hoping to get you hooked with the free money and benefits. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: No. Amazon is a reputable company. Many stores have their own credit card. Additionally they have several cards available, through Visa and Discover. Neither would allow their name to be used knowing that a company was using it to scam people. And credit card companies are used to going after people with the full force of the law on their side. It's the only way they stay in business. I would read the terms and conditions, but as is, it is not a scam. But a free $50 seems to good to be true. Nothing is free. Having their credit card is significant. Look into the ownership of a credit card and how credit card companies make money. And "gift cards for credit cards" are common. In fact, some companies give away money just to fill out an application even if you turn down the card. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: It's not a scam. They just want you to be an Amazon customer for many years and you'll be advertising Amazon to anyone who sees your credit card. $50 is known as the cost of "customer acquisition" and it is a very good deal for someone who may become a Prime member and spend $1000s a year on Amazon. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: a free $50 looks too good to be true. As others already pointed out, these offers are common to many cards that want you to build loyalty towards a particular company (e.g. airlines cards give lots of mileage for a decent initial spend). Should I get this card for the $50? Why and/or why not? How much do you spend on Amazon, or are planning to do so in future? This offer has been around for ages (earlier they used to offer much smaller amounts of $20 for signing up) and you never saw it. So probably, you won't be really using the site frequently. In that case, its just a matter of whether $50 is worth the hassle for you to sign up and then later cancel (if you don't want to manage another new card). The hit to credit score is likely to be minimal unless you do such offers often. As such, for a person who rarely buys on Amazon I wouldn't advise you to sign up for this card, there are better rewards cards that are not as tied to a particular site (such as Chase Freedom, Discover etc.) If however, you are a regular shopper but just never noticed this prompt earlier; then it is worthwhile to get this - or even consider the Prime version, which you will get or be automatically upgraded to if the account has Prime membership. That gives 5% back instead of 3% on Amazon. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: it's not a scam. it's not even too good to be true. frankly it's the lowest sign up bonus i've ever seen for a credit card. you would be better off signing up for a flagship card from one of the major banks (e.g. chase sapphire, citi double cash, discover it, amex blue). those cards regularly offer sign up bonuses worth between 400$ and 1000$. however, you can't get all the cards at once. noteably chase has a fairly firm limit of 5 new cards per 24 month. the other banks have similar, less publicized limits on who they will approve for a new card. so, by applying for this amazon card you are hurting your chances of getting far more lucrative sign up bonuses. it is however worth noting that those larger bonuses usually come with a minimum spending requirement (e.g. spend 1k$-3k$ in the first 3 months) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is Amazon's offer of a $50 gift card a scam? ### Answer: Based on my personal experience with that particular offer, I can say that it's not really a scam. I signed up for an Amazon Credit Card to get $70 off a purchase, but then never used the card. In fact, I never even called to activate it! After a few months, I then called to cancel it. I did not see a significant hit to my credit. However if you do shop frequently at Amazon it may be in your best interest to use their card, because it has other discounts associated with it. ###end

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