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Investing using leverage | Step 2 is wrong. Leverage is NOT necessary. It increases possible gain, but increases risk of loss by essentially the same amount. Those two numbers are pretty tightly linked by market forces. See many, many other answers here showing that one can earn "market rate" -- 8% or so -- with far less risk and effort, if one is patient, and some evidence that one can do better with more effort and not too much more risk. And yes, investing for a longer time horizon is also safer. |
Creating S-Corp: Should I Name My Wife as a Director/Shareholder? | There are many aspects to consider in deciding what sort of company you want to form. Instead of an S-corporation, you should determine whether it would be better to form a Limited Liability Company (LLC), Limited Partnership (LP) or even a professional company (PC). Littleadv is correct: There is minimal benefit in forming an S-corp with you and your wife as the shareholders, if you will be the only contributor-worker. There are costs associated with an S-corporation, or any corporation, that might outweigh benefits from more favorable tax treatment, or personal protection from liability: Filing fees and disclosure rules vary from state to state. For example, my father was a cardiologist who had no employees, other than my grandmother (she worked for free), in a state with income taxes (NM). He was advised that a PC was best in New Mexico, while an S-Corp was better in Florida (there are no personal income taxes in Florida). The only way to know what to do requires that you consult an accountant, a good one, for guidance. |
How do I calculate the dwelling coverage I need from the information I have? | You can't compare the different quotes unless they have the same numbers to work with. The big companies should use similar models to come up with values for the contents. In many cases they will assume some standard values for things like appliances. Yes you have a stove, but unless it is commercial grade they won't care when giving you a quote. If you have very expensive items you may need a rider to cover them. There is not relationship between the county assessment and the cost to rebuild. The insurance doesn't cover the land. You have to make sure that all quotes include the same riders: cost to put you in a motel, flood insurance... and the same deductibles. Your state may have an insurance office that can help answer your question. Here is the one for Virginia. |
My Boss owes money but I am named on letter from debt collection agency (UK) | You havent signed a contract, so you are only an authorised contact so you have nothing to worry about at all. Your credit reference can only be affected if you are a signed party on the contract. I would imagine that they wont remove your details as you may assist them by contacting your emplorer, and effectively chase the debt for them especially if you seem to be family member or a friend of the business owner. How did you find out about the debt, did they phone you? If you really want peace of mind, you could write to them and confirm that you are not authorised to be contacted by phone or in writing regarding the debt, and that you are not in anyway liable for the debt and that your contact details must be put beyond use, and as you are concerned, say that if they take any further action against you such as affect your credit ref etc then you will take them to 'your' local magistrates court to seek compensation. Use strong terms and insist they must do what you ask rather than just say that you would like something done etc. Say that you 'Will' take further action which is generic, and that you 'May' do specific things so that it sounds strong but you haven't have committed to any thing in particular. This would most likely be more than enough to stop further contact. |
When should I start saving/investing for my retirement? | Start as early as possible and you will want to kiss your younger self when you get to retirement age. I know you (and everyone else at that age) thinks that they don't make enough to start saving and leans towards waiting until you get established in your career and start making better money. Don't put it off. Save some money out of each paycheck even if it is only $50. Trust me, as little as you make now, you probably have more disposable income than you will when you make twice as much. Your lifestyle always seems to keep up with your income and you will likely ALWAYS feel like you don't have money left over to save. The longer you wait, the more you are going to have to stuff away to make up for that lost time you could have been compounding your returns as shown in this table (assuming 9.4 percent average gain annually, which has been the average return on the stock market from 1926-2010). I also suggest reading this article when explains it in more detail: Who Wants to be a millionaire? |
Am I understanding buying options on stock correctly | There is a reason why most professional option traders are sellers instead of buyers. Option sellers IMO are analogous to insurance companies that come out ahead in the long run. That is not to say if you are bullish about a stock then you should not buy it. I personally would never buy an option outright and look to reduce my cost basis by selling options around it such as: |
Are car buying services worth it? | I have used car buying services through Costco and USAA. Twice with a Ford, and once with a Honda. In all instances I was directed to sales people that were uncommonly friendly and pleasant to work with. I was given a deep discount without any negotiation. In two of the three cases I did not have a trade. In one case I had a trade, and negotiated a deeper discount then was originally offered. Did I get a good deal? Eh, who knows? Really it depends what your goal is. If your goal is to avoid negotiation, avoid idiot salesmen, and receive a good discount then a quality car buying service may be for you. My research, a few years old, indicated Costco's program was better then the USAA one. If your goal is get a deep as a discount as possible on a new car, well then you have some work cut out for you. Keep some hand sanitizer handy when you meet one of the slime ball salesmen. Keep in mind that not everyone understand the difference between the words value and cheap. If your goal is to pay as little as possible for quality transportation. Avoid most dealers and new cars. But I don't think that is what you are looking for. |
Buying and selling the same stock | Sorry, no, any time you sell for a profit you owe tax. |
Why don't people generally save more of their income? | A person who always saves and appropriately invests 20% of their income can expect to have a secure retirement. If you start early enough, you don't need anything close to 20%. Now, there are many good reasons to save for things other than just retirement, of course. You say that you can save 80% of your income, and you expect most people could save at least 50% without problems. That's just unrealistic for most people. Taxes, rent (or mortgage payments), utilities, food, and other such mandatory expenses take far more than 50% of your income. Most people simply don't have the ability to save (or invest) 50% of their income. Or even 25% of their income. |
Owned house for less than 2 years - 1031 exchange? | Yes, your realtor is a moron. (I am a realtor, and sorry you have such a bad one) Every industry has its good and bad. You really should find a new realtor, a good one. You know the 1031 exchange is for rental property only. And that saving $2000 isn't worth staying in the house to complete the two years required occupancy. |
Why would you elect to apply a refund to next year's tax bill? | If you expect your taxes to be higher next year, it saves you the trouble of sending estimates or changing the withholding levels. But yes, its basically a free loan you're giving to the government. |
How will interest rate changes affect my government bonds ETF? | In general, yes. If interest rates go higher, then any existing fixed-rate bonds - and hence ETFs holding those bonds - become less valuable. The further each bond is from maturity, the larger the impact. As you suggest, once the bonds do mature, the fund can replace them at a market price, so the effect tails off. The bond market has a concept known as "duration" that helps reason about this effect. Roughly, it measures the average time from now to each payout of the bond, weighted by the payout. The longer the duration, the more the price will change for a given change in interest rates. The concept is just an approximation, and there are various slightly different ways of calculating it; but very roughly the price of a bond will reduce by a percentage equal to the duration times the increase in interest rates. So a bond with a duration of 5 years will lose 5% of its value for a 1% rise in interest rates (and of course vice-versa). For your second question, it really depends on what you're trying to achieve by diversifying - this might be best as a different question that gives more detail, as it's not very related to your first question. Short-term bonds are less risky. But both will lose value if the underlying company is in trouble. Gilts (government bonds) are less risky than corporate bonds. |
What is the preferred way to finance home improvements when preparing to sell your house? | You could take on more work. Pizza delivery, lawn work, babysitting, housecleaning, etc. None of those are much fun, but all are better than opening a credit card bill. |
How do credit card payments work? What ensures the retailer charges the right amount? | When you give your credit card number and authorize a merchant to charge your credit card, the merchant then gives the information to their merchant processor which in turns bills the bank that issued the card (it's a little more complex and it all happens instantly unless the merchant is using the very old fasion imprinting gizmos). It is possible for a merchant to attempt to charge you more than you authorized but if they do they risk a fine ($25-$50 for a chargeback) from their processor, the legitimate portion of the charge as well as increasing the processing fees charged by their processor or even the possibility of loosing their merchant account entirely and being permanently blacklisted by Visa/Mastercard. In short no legitimate business is going to intentionally over charge your credit card. There really isn't significant risk in using a reputable online retailer's order forms. There is the possibility that their database could be compromised but that risk is lower than the risk of having an employee steal your credit number when you give it to them in person. Besides in the US at least the most you can legally be held liable for is $50 assuming you notice the discrepancy within 60 days of statement the charge appears on and most banks limit liability to $0. Over the years I have had a number of different credit card numbers stolen and used fraudulently and I have never had to pay any fraudulent charges. |
What kinds of exchange-traded funds (ETFs) should specifically be avoided? | As with ANY investment the first answer is....do not invest in any that you do not fully understand. ETF's are very versatile and can be used for many different people for many different parts of their portfolio, so I don't think there can be a blanket statement of "this" one is good or bad for all. |
My company owed taxes for many years, An accountant asked me to ignore it and register a new one. Is it a right thing to do? | I think the first step is to get an accountant whose advice you believe. Your accountant is far better placed to advise you on what sounds like a fairly complicated, fairly high stakes corporate arrangement than the internet. I would go back to the accountant and get him to explain in writing what his specific advice is. If you still don't like it absolutely get a second opinion. You may also want to speak to a lawyer. |
Starting an investment portfolio | Is this amount an adequate starting amount to begin investing with? Yes. You can open an account at a brokerage with this amount. I'm not sure I would invest in individual stocks at this point. Which services should I use to start buying shares? (Currently my bank offers this service but I'm willing to use other sources) I can't make UK-specific recommendations, but I'd compare your bank's fees to those of a discount broker -- as well as the variety and level of service available. I would like to regularly increase the amount invested in shares. Is it worth doing this in say £200 increments? Take a look at the fees associated with each investment. Divide the fee by the increment to see what percent you'll lose to fees/commissions. Keep in mind that you have to gain more than that percentage to start earning a positive return on your investment. If you have access to fee-free automatic mutual fund investments, and you can commit to the £200 amount on a regular basis going forward, then this can be a completely free way of making these incremental investments. See also this answer on dollar cost averaging, and my comment on the other answer on that question for how fees impact returns. When buying shares should I focus on say two or three companies, or diversify more? I would diversify into two or three different index funds. Read up on asset allocation. For example, you might invest 1/3 of your balance into S&P 500 index fund, bond index fund, and MSCI EAFE index fund (but that's just a rough example, and not necessarily good for you). I highly recommend "The Intelligent Asset Allocator" by William Bernstein for excellent info on diversification and asset allocation. |
What benefits are there to having a Pension (Retirement Account) In Ireland? | As you point out, the main benefits of a pension/retirement account over a traditional cash/taxable account are the legal and tax benefits. Most Western countries establish a specific legal definition for an account which is often taxed less or not at all relative to taxable accounts and which contains some protection for the owner in case of a bankruptcy. The typical drawbacks for investing within such structures are limited investment choice, limited withdrawal rights (either in terms of age or rate of withdrawal), and maximum contributions. The benefits are usually very clear, and your decision whether or not to open a pension/retirement account should depend on a careful weighing of the benefits and drawbacks. As to whether you may end up with less than you started, that depends on what you invest in. As with all of finance, you must take more risk to get more return. Although the choices inside a pension/retirement account may be worded somewhat differently, they are usually fundamentally no different than some of the most popular investments available for ordinary taxable accounts. |
Why are credit cards preferred in the US? | For me, it is mostly for the fraud protection. If I have a debit card and someone makes a fraudulent charge the money is removed from my bank account. From my understanding, I can then file a fraud complaint with the bank to recover my money. However, for some period of time, the money is missing from my bank account. I've heard conflicting stories of money being returned quickly while the complaint is undergoing investigation as well as money being tied up for several days/weeks. It may depend on the bank. With a credit card, it is the banks money that is tied up. |
Is it impossible to get a home loan with a poor credit history after a divorce? | No, it is never impossible to get credit so long as there are no price controls or quotas. In most of the United States, the impetus for housing is so strong that it's one sector of credit that has nearly no price regulation, price in this case being interest rates. Corporate banks will not touch you now because Dodd-Frank now makes them liable to you and investors if you default on the mortgage. Also, Fannie & Freddie, who ultimately finance most mortgages in the US now require banks to buy back loans if they fail, so banks are only financing the most creditworthy. All is not lost because markets are like rivers if not fully dammed: they find a way through. In your case, you can get a fully-financed mortgage if you're willing to pay interest rates probably double what you could otherwise get in the market with good credit. If the foreclosure process is quick and benefits the lender more in your state, the interest rate will be even lower. Your creditors will most likely be individuals you find at mortgage investment clubs and religious institutions. If you shop around, you'll be surprised at how low a rate you might get. Also, since the cost of your prospective home is so low, it's very easy for an investor flush with cash and few investments to take a flier on a mother committed to her children who only needs $50,000. The FHA has been vastly expanded, and since your individual credit is clean, there may be a chance to get financing through it, but be prepared for red tape. |
Missing 401(k) dividends | Your investment is probably in a Collective Investment Trust. These are not mutual funds, and are not publicly traded. I.e. they are private to plan participants in your company. Because of this, they are not required* to distribute dividends like mutual funds. Instead, they will reinvest dividends automatically, increasing the value of the fund, rather than number of shares, as with dividend reinvestment. Sine you mention the S&P 500 fund you have tracks closely to the S&P Index, keep in mind there's two indexes you could be looking at: Without any new contributions, your fund should closely track the Total Return version for periods 3 months or longer, minus the expense ratio. If you are adding contributions to the fund, you can't just look at the start and end balances. The comparison is trickier and you'll need to use the Internal Rate of Return (look into the XIRR function in Excel/Google Sheets). *MFs are not strictly required to pay dividends, but are strongly tax-incentivized to do so, and essentially all do. |
How to motivate young people to save money | As a 20 year old who has just started earning enough to save, I suggest showing them the different types of lifestyles they could live in the future if they started saving now versus what their life would be like if they didn't save at all. Try showing them actual dollar values as well so it's not just an arbitrary idea. |
What does this mean? SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT | SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT 1) we are talking about options, these are a derivative product whose price is based on 6 variables. 2) options allow you to create risk out of thin air, and those risks come with shapes, and the only limit is your imagination (and how much your margin/borrowing costs are). Whereas a simple asset like the shares for $IYR only has a linear risk profile. stock goes up, you make money, stock goes down, you lose money, and that risk graph looks linear. a "vertical" has a nonlinear risk profile 3) a vertical is a type of "spread" that requires holding options that expire at the same time, but at different strike prices. 3b) This particular KIND of vertical is called a bear call spread (BCS). Since you are bearish (this makes money if the stock goes down, or stays in a very specific range) but are using calls which are a bullish options product. 4) -10 means you are selling the vertical. +10 means you are buying the vertical. A "long" vertical is initiated by buying an option closer to the money, and selling an option at a higher strike price. This would be +X A "short" vertical is initiated by selling an option closer to the money and buying an option at a higher strike price. The quantity would be -X 5) 32/34 stands for the strike prices. so you would be selling 10 call options at the 32 strike price, and buying 10 call options at the 34 strike price, both options expire in August 6) LMT stands for limit order, and $.80 is the limit order price that is desired. OPENING a vertical spread requires knowledge of options as well as how to send orders. MANAGING a vertical requires even more finesse, as you can "leg-in" and "leg-out" of spreads, without sending the entire order to the exchange floor at once. There is much to learn. |
What are some examples of unsecured loans | Unsecured loan is any loan that you don't provide an asset as a collateral for. Auto loans are usually secured - by the auto. If you don't pay off the car, it will be repossessed. Credit cards are a good example, personal/business loans are also usually unsecured, and you've pretty much covered it. Majority of loans, especially for large amounts, are usually given for a specific purpose (usually purchase of a large asset) and are secured. |
What exactly can a financial advisor do for me, and is it worth the money? | There are several types of financial advisors. Some are associated with brokerages and insurance companies and the like. Their services are often free. On the other hand, the advice they give you will generally be strongly biased toward their own company's products, and may be biased toward their own profits rather than your gains. (Remember, anything free is being paid for by someone, and if you don't know who it's generally going to be you.) There are some who are good, but I couldn't give you any advice on finding them. Others are not associated with any of the above, and serve entirely as experts who can suggest ways of distributing your money based on your own needs versus resources versus risk-tolerance, without any affiliation to any particular company. Consulting these folks does cost you (or, if it's offered as a benefit, your employer) some money, but their fiduciary responsibility is clearly to you rather than to someone else. They aren't likely to suggest you try anything very sexy, but when it comes to your primary long-term savings "exciting" is usually not a good thing. The folks I spoke to were of the latter type. They looked at my savings and my plans, talked to me about my risk tolerance and my goals, picked a fairly "standard" strategy from their files, ran simulations against it to sanity-check it, and gave me a suggested mix of low-overhead index fund types that takes almost zero effort to maintain (rebalance occasionally between funds), has acceptable levels of risk, and (I admit I've been lucky) has been delivering more than acceptable returns. Nothing exciting, but even though I'm relatively risk-tolerant I'd say excitement is the last thing I need in my long-term savings. I should actually talk to them again some time soon to sanity-check a few things; they can also offer advice on other financial decisions (whether/when I might want to talk to charities about gift annuity plans, whether Roth versus traditional 401(k) makes any difference at all at this point in my career, and so on). |
What are the opportunities/implications of having a designated clearing bank in my home country? | For an individual there will not be much impact immediately. This arrangement will help Corporates and Banks settle payments more easily. - It would typically help companies dealing with Yuan [Buying or selling to China or Countries that accept Yuan as payment] to make payments at a cheaper cost & in less time. - In the near future it would make it easier for companies to invest more into China financial markets - It would also open up / create new market for derivatives and other allied products - It would also make Singapore a market place for Yuan outside China [and Hong Kong] resulting in more money and related product. In a related move this would make it easy for Singapore Central Bank to invest in China. Once the markets matures more, there could be some products for Individuals. |
Do developed country equities have a higher return than emerging market equities, when measured in the latter currency? | First of all, the answer to your question depends on your starting dates and ending dates. So developed markets returns are higher over one period, and emerging markets returns over other periods. So far, there does not appear to be a systematic tilt in favor of one or the other. The reasons are as you said. Emerging markets tend to have higher returns in nominal terms, but developed markets currency movements (sometimes) cancel this out. So watch out for periods of strong and weak developed markets (e.g. U.S) currencies. In "strong" currency periods (such as those of the past five years or so), you want U.S. market exposure, and in "weak" currency periods, the larger nominal local returns will be fully reflected in dollar terms as well. |
Understanding the phrase “afford to lose” better | The advice to "Only invest what you can afford to lose" is good advice. Most people should have several pots of money: Checking to pay your bills; short term savings; emergency fund; college fund; retirement. When you think about investing that is the funds that have along lead time: college and retirement. It is never the money you need to pay your bills. Now when somebody is young, the money they have decided to invest can be in riskier investments. You have time to recover. Over time the transition is made to less risky investments because the recovery time is now limited. For example putting all your college savings for your recent high school graduate into the stock market could have devastating consequences. Your hear this advice "Only invest what you can afford to lose" because too many people ask about hove to maximize the return on the down payment for their house: Example A, Example B. They want to use vehicles designed for long term investing, for short term purposes. Imagine a 10% correction while you are waiting for closing. |
Stock portfolio value & profit in foreign currency | I think this will do the trick: |
Should retirement fund be equal to amount of money needed for financial independence? | I want to know ideally how much should a person save for retirement funds? A person should save enough such that your total retirement resources will equal the amount you personally need for a comfortable retirement at the point in time when the person desires to retire. If you want to retire at 40, you may need to save quite a lot each year. If you want to retire at 70, you may need to save less each year. If you will have a pension, you may wish to save somewhat less than someone who won't have a pension. The same is true for Social Security (or your local equivalent). I am getting a feeling retirement funds is equal to financial independence because one can live without needing to borrow money from anyone. Sort of, but it depends on your goals. Some who are financially independent never choose to retire, but choose jobs without regard to financial need. |
How can I determine if my rate of return is “good” for the market I am in? | First add the inflation, then minus your expenses for the year. If you are better than that, you have done "good". For example: - 1.)You have $10,000 in 2014. 2.) You need $1,000 for your expenses in 2014, so you are left with $9000. 3.) Assuming the inflation rate is at 3 percent, the $10,000 that you initially had is worth $10,300 in 2015. 4.) Now, if you can get anything over 10,300 with the $9,000 that you have you are in a better position than you were last year i.e(10300-9000)/9000 - i.e 14.44%. So anything over 14.44 percent is good. Depending on where you live, living costs and inflation may vary, so please do the calculation accordingly since this is just an example. Cheers |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | I'm pretty sure it's merchant-dependent. If a credit card transaction doesn't go through, PayPal will automatically charge your bank account. Some merchants may want that extra insurance. |
Is it accurate to say that if I was to trade something, my probability of success can't be worse than random? | It seems to be that your main point is this: No matter what, my chances cannot be worse than random and if my trading system has an edge that is greater than the percentage of the transaction that is transaction cost, then I am probabilistically likely to make a profit? In general, yes, that is true, but... Consider this very bad strategy: Buy one share of stock and sell it one minute later, and repeat this every minute of the day. Obviously you would bleed your account dry with fees. However, even this horrible strategy still meets your criteria because: if this bad strategy had an edge beyond the transaction fees you would likely still make a profit. In other words, your conclusion reduces to an uninteresting statement: If there were no transactions fees, then if your trading system has an edge then you will likely make a profit. Sorry to be the bearer of bad news, but IMHO, that statement, and others made in the question are just obvious things stated in convoluted ways. I don't want to discourage you from thinking about these things though. I personally really enjoy these type of thought experiments. I just feel you missed the mark on this one... |
What is the preferred way to set up personal finances? | You don't state where you are, so any answers to this will by necessity be very general in nature. How many bank accounts should I have and what kinds You should have one transaction account and one savings account. You can get by with just a single transaction account, but I really don't recommend that. These are referred to with different names in different jurisdictions, but the basic idea is that you have one account where money is going in and out (the transaction account), and one where money goes in and stays (the savings account). You can then later on, as you discover various needs, build on top of that basic foundation. For example, I have separate accounts for each source of money that comes into my personal finances, which makes things much easier when I sit down to fill out the tax forms up to almost a year and a half later, but also adds a bit of complexity. For me, that simplicity at tax time is worth the additional complexity; for someone just starting out, it might not be. (And of course, it is completely unnecessary if you have only one source of taxable income and no other specific reason to separate income streams.) how much (percentage-wise) of my income should I put into each one? With a single transaction account, your entire income will be going into that account. Having a single account to pay money into will also make life easier for your employer. You will then have to work out a budget that says how much you plan to spend on food, shelter, savings, and so on. how do I portion them out into budgets and savings? If you have no idea where to start, but have an appropriate financial history (as opposed to just now moving into a household of your own), bring out some old account statements and categorize each line item in a way that makes sense to you. Don't be too specific; four or five categories will probably be plenty. These are categories like "living expenses" (rent, electricity, utilities, ...), "food and eating out" (everything you put in your mouth), "savings" (don't forget to subtract what you take out of savings), and so on. This will be your initial budget. If you have no financial history, you are probably quite young and just moving out from living with your parents. Ask them how much might be reasonable in your area to spend on basic food, a place to live, and so on. Use those numbers as a starting point for a budget of your own, but don't take them as absolute truths. Always have a "miscellaneous expenses" or "other" line in your budget. There will always be expenses that you didn't plan for, and/or which don't neatly fall into any other category. Allocate a reasonable sum of money to this category. This should be where you take money from during a normal month when you overshoot in some budget category; your savings should be a last resort, not something you tap into on a regular basis. (If you find yourself needing to tap into your savings on a regular basis, adjust your budget accordingly.) Figure out based on your projected expenses and income how much you can reasonably set aside and not touch. It's impossible for us to say exactly how much this will be. Some people have trouble setting aside 5% of their income on a regular basis without touching it; others easily manage to save over 50% of their income. Don't worry if this turns out a small amount at first. Get in touch with your bank and set up an automatic transfer from your transaction account to the savings account, set to recur each and every time you get paid (you may want to allow a day or two of margin to ensure that the money has arrived in your account before it gets taken out), of the amount you determined that you can save on a regular basis. Then, try to forget that this money ever makes it into your finances. This is often referred to as the "pay yourself first" principle. You won't hit your budget exactly every month. Nobody does. In fact, it's more likely that no month will have you hit the budget exactly. Try to stay under your budgeted expenses, and when you get your next pay, unless you have a large bill coming up soon, transfer whatever remains into your savings account. Spend some time at the end of each month looking back at how well you managed to match your budget, and make any necessary adjustments. If you do this regularly, it won't take very long, and it will greatly increase the value of the budget you have made. Should I use credit cards for spending to reap benefits? Only if you would have made those purchases anyway, and have the money on hand to pay the bill in full when it comes due. Using credit cards to pay for things is a great convenience in many cases. Using credit cards to pay for things that you couldn't pay for using cash instead, is a recipe for financial disaster. People have also mentioned investment accounts, brokerage accounts, etc. This is good to have in mind, but in my opinion, the exact "savings vehicle" (type of place where you put the money) is a lot less important than getting into the habit of saving regularly and not touching that money. That is why I recommend just a savings account: if you miscalculate, forgot a large bill coming up, or for any other (good!) reason need access to the money, it won't be at a time when the investment has dropped 15% in value and you face a large penalty for withdrawing from your retirement savings. Once you have a good understanding of how much you are able to save reliably, you can divert a portion of that into other savings vehicles, including retirement savings. In fact, at that point, you probably should. Also, I suggest making a list of every single bill you pay regularly, its amount, when you paid it last time, and when you expect the next one to be due. Some bills are easy to predict ("$234 rent is due the 1st of every month"), and some are more difficult ("the electricity bill is due on the 15th of the month after I use the electricity, but the amount due varies greatly from month to month"). This isn't to know exactly how much you will have to pay, but to ensure that you aren't surprised by a bill that you didn't expect. |
How to calculate the rate of return on selling a stock? | If annualized rate of return is what you are looking for, using a tool would make it a lot easier. In the post I've also explained how to use the spreadsheet. Hope this helps. |
Paying taxes on dividends even though your capital gains were $0? | In the US, and in most other countries, dividends are considered income when paid, and capital gains/losses are considered income/loss when realized. This is called, in accounting, "recognition". We recognize income when cash reaches our pocket, for tax purposes. So for dividends - it is when they're paid, and for gains - when you actually sell. Assuming the price of that fund never changes, you have this math do to when you sell: Of course, the capital loss/gain may change by the time you actually sell and realize it, but assuming the only price change is due to the dividends payout - it's a wash. |
How do credit card banks detect fraudulent transactions without requiring a travel advisory? | One bank is more willing to risk losses and customer hassle in exchange for lower processing costs than the other bank is. It's strictly a business decision. Regarding how they detect suspicious transactions: Patten detection based on your past usage history. I've gotten calls asking me to confirm that I just placed a large order with a company I'd never bought from before, or in a country that I haven't previously visited, or... |
ESPP (Employee Stock Purchase Plan) Funds on Mortgage Loan Application | The problem is that you don't have the money now; so they can't know with 100% certainty that you will have it on settlement day. What happens if you don't file the paperwork in time? or you change your mind because you think the company stock is going to go through the roof next quarter? They would have to pull the funding for the loan. The seller would be upset, and could even file for damages if the deal falls through. It could even snowball because if they delay the sale then they can't buy the new place, which impacts another closing... Frequently lenders want to see the money for the down payment long before settlement. They want to know the money is there, and it isn't a hidden loan. While you can point to the money in the ESPP, they would still like to see the money in a regular bank account. Even if you do convince them to delay their evaluation you can count on being asked to prove the existence of the funds in the days before closing, or they will delay giving the loan. |
Using simple moving average in Equity | One of the most obvious uses of SMAs is the detection of a trend reversal. A trend reversal happens when a short term SMA crosses over a longer term SMA. For example, if a 20 day moving average was, previously, above a 200 day moving average, but has crossed over the 200 day and is currently below the 200 day then the security has performed a 'death cross' and the trend is for lower and lower prices. Stockcharts.com has excellent 'chart school' for the beginning chart user. They also provide excellent charts. Here is a link: http://stockcharts.com/school/doku.php?id=chart_school I like to use a 20 day SMA, a 200 day SMA, and a 21 day EMA. |
Currently sole owner of a property. My girlfriend is looking to move in with me and is offering to pay 'rent'. Am I at risk here? | With regard to worries about ownership: I'll point you towards this - The Cohabitants Rights Bill currently in First Reading at the House of Lords. Without a date for even the second reading yet. In short the Bill is attempting to redress is the lack of rights when a non-married relationship ends when compared to married relationships; that is that one of the "cohabitants" can end up with basically nothing that they don't have their name on. So currently you're in the clear and (Part 2) Section 6.2.a says the Bill cannot be used retroactively against you if your relationship is over before it becomes law (I expect with Brexit etc, this Bill isn't a high priority - it's been a year since the first reading). Section 6.2.a: This Part does not apply to former cohabitants where the former cohabitants have ceased living together as a couple before the commencement date; However, if you're still together if/when this Bill becomes Law then basically all of (Part 1) Section 2 may be relevant as it notes the conditions you will fall into this bill: Section 2.1.a: live together as a couple and Section 2.2.d: have lived together as a couple for a continuous period of three years or more. and the "have lived together" at that point counts from the start of your cohabitation, not the start of the Bill being law: Section 2.4.a: For the purposes of subsection (2)(d), in determining the length of the continuous period during which two people have lived together as a couple - any period of the relationship that fell before the commencement date (of the Bill) is to be taken into account If you have kids at some point, you'd also fall under 2.2.a through 2.2.c too. After that, the financial parity decided upon by the court depends on a whole bunch of conditions as outlined in the Bill, but Section 8.1.b is pretty clear: Section 8.1.b: (b)the court is satisfied either— (i)that the respondent has retained a benefit; or (ii)40that the applicant has an economic disadvantage, as a result of qualifying contributions the applicant has made I'm not qualified to say whether your partner helping to pay off your mortgage in lieu of paying rent herself would count as just paying rent or giving you an economic benefit. Sections 12, 13, and 14 discuss opt-outs, also worth a read. The a major disclaimer here in that Bills at this early stage have the potential to be modified, scrapped and/or replaced making this info incorrect. As an additional read, here's an FT article from Feb 2016 discussing this lack of rights of a cohabitant which should alleviate any current concerns. |
Indian equivalent of Vanguard S&P 500 | Also, when they mean SP500 fund - it means that fund which invests in the top 500 companies in the SP Index, is my understanding correct? Yes that is right. In reality they may not be able to invest in all 500 companies in same proportion, but is reflective of the composition. I wanted to know whether India also has a company similar to Vanguard which offers low cost index funds. Almost all mutual fund companies offer a NIFTY index fund, both as mutual fund as well as ETF. You can search for index fund and see the total assets to find out which is bigger compared to others. |
Owning REIT vs owning real estate - which has a better hypothetical ROI? | Your question may have another clue. You are bullish regarding the real estate market. Is that for your city, your state, your nation or for the whole world? Unless you can identify particular properties or neighborhoods that are expected to be better than the average return for your expected bull market in real estate, you will be taking a huge risk. It would be the same as believing that stocks are about to enter a bull market, but then wanting to put 50% of your wealth on one stock. The YTD for the DOW is ~+7%, yet 13 of the 30 have not reached the average increase including 4 that are down more than 7%. Being bullish about the real estate segment still gives you plenty of opportunities to invest. You can invest directly in the REIT or you can invest in the companies that will grow because of the bullish conditions. If your opinion changes in a few years it is hard to short a single property. |
Should I pay off my credit card online immediately or wait for the bill? | I'm really going to go against the crowd here--paying it too fast could be a problem. The thing is you want them reporting that you paid the bill as agreed. To do that you need to pay the bills--which means you need to leave the charges there to get billed for. Paying less than the total is fine, paying as soon as they bill you but before you even get the bill is fine. |
Why would a company care about the price of its own shares in the stock market? | The fact you are asking this question, the number of up votes, uncovers the real cause of the banking crisis. Answers which mention that shareholders will fire a public company board are on the bottom. It is obvious that a company owners are interested in company value. And should have direct and easy impact on a directors board if management doesn't increase shareholders wealth. With large number of passive shareholders and current stock market system that impact is very limited. Hence your question. So bank directors, upper management aren't that interested in company value. They are mostly interested in theirs bonuses, their wealth increase, not shareholders. And that's the real problem of capitalism. Public companies slowly drift to function like companies in former socialistic countries. These is no owner, everything is owned by a nation. |
Foreign Earned Income Exclusion - Service vs. Product? | As the name says, its for income earned in a Foreign country. If you have been paying US income tax on this while living in the US, nothing is going to change here. You should be informing yourself on how to avoid double taxation in your new country of residence. Passive income earned abroad (dividends, interest) also do not fall under this exemption. The purpose of the Foreign Earned Income Exclusion is to make it easy for expats who work abroad to avoid double income taxation without going through the complicated process of applying for tax credits. The US is the only industrial country that taxes its residents regardless of where they reside. That is also why it only goes to about $100,000 a year. If you are a high earner, they want to make it more difficult. Also as a side note, since you are going to be abroad for a year. I will point out that if you have more than $10,000 in foreign accounts at any point in the year you need to declare this in an FBAR form. This is not advertised as well as it should be and carries ridiculous penalties for non-compliance. I can't count the number of times I have heard a US expat say that they were unaware of this. |
What are “preferred” stocks? How are they different from normal (common) stocks? | I know this has already been answered and I know its frowned upon to dump a link, however, when it comes to investments it's best to get data from an 'official' source to avoid misinterpretations and personal opinions. The attached pdf is from the S&P and provides detailed, but not overwhelming, information regarding the types of preferreds, the risks & common terminology: http://us.spindices.com/documents/education/practice-essentials-us-preferreds.pdf Page 1: PREFERRED SECURITIES DEFINED Borrowing from two worlds, a preferred security has both equity and fixed income characteristics. As such, the preferred structure offers a flexible approach to structuring a preferred offering for an issuer. Companies have many reasons to issue preferred securities. Financial institutions, for example, need to raise capital. Many times they will use the preferred market because of any required regulatory requirements, in addition to cost considerations. Banks and financial institutions are required to maintain a certain level of Tier 1 capital—which includes common equity and perpetual non-cumulative preferreds—as protection against the bank’s liabilities. Issuing more common equity comes at a cost, including the dilution of existing shares, which a company may not want to bear. Preferred securities are a cheaper alternative approach to raising the capital. Companies often use preferred stock for strategic reasons. Some of these uses include: |
Why would you ever turn down a raise in salary? | There is currently a bill in Washington that will change the limit for salaried employees receiving overtime pay. It will be raised to $50400. I work 4 hours of overtime each week, which if the bill is passed, equates to an additional $7800 annually. If my company raises my salary to just above the limit then they would not have to pay the overtime. That would only be a raise of approx. $3000. Why would I want to take the raise, and still have to work the overtime, when I can choose to not take the raise and possibly not have to work it any longer. I would rather have the time off, but if I'm going to have to work it, then I'll take the more than double overtime pay. |
Is there a Yahoo Finance ticker for NYMEX Crude Oil Front Month? | Yahoo Finance doesn't offer this functionality; I remember looking for this exact feature a couple of years ago for coffee futures. Your best option is to look at the futures chain. However, Yahoo Finance's future chains aren't always complete, since you'll notice that the futures chain for NYMEX crude oil omit the June contract. The contract still exists, but Yahoo doesn't list it in its own futures chain or in the future chain for May. |
Dealing with event driven market volatility | If you are worried about an increase in volatility, then go long volatility. Volatility itself can be traded. Here in the US there is an index VIX that is described as tracking volatility. What VIX actually tracks is the premium of S&P 500 options, which become more expensive when traders want to hedge against volatility. In the US you can trade VIX options or invest in VIX tracking ETFs like VXX. Apparently there are similar ETFs listed in Canada, such as HUV. Volatility itself is quite volatile so it is possible that a small volatility long position would cover the losses of a larger long position in stocks. If you do choose to invest in a volatility ETF, be aware that they experience quite a lot of decay. You will not want to hold it for very long. |
What is a good way to save money on car expenses? | Replace your own brake pads Disc brake pads are usually snap-in replacement parts. YouTube has tons of videos showing how to do it. Find one with a car similar to your own. And it cannot be over-emphasized... Keep up on the routine maintenance. You can look up the schedule on your car manufacturer's website. |
How to send money from europe to usa EUR - USD? | The website http://currencyfair.com/ provides a service which gives you both a decent exchange rate (about 1% off from mid-market rate) and a moderately low fee for the transfer: 4 USD for outgoing ACH in the US, 10 USD for same-day US wire. For the reverse (sending money from the US to EU) the fees are: 3 EUR for an ACH, 8 EUR for a same-day EUR wire. It has been online for quite a while, so I assume its legit, but I'd do a transfer for a smaller sum first, to see if there are any problems, and then a second transfer for the whole sum. |
If something is coming into my account will it be debit or credit in my account? | It sounds like you're mixing a simple checkbook register with double-entry bookkeeping. Do you need a double-entry level of rigor? Otherwise, why not have two columns, one for income (like a paycheck) and one for expenses (like paying a cable bill)? Then add up both columns and then take the difference of the sums to get your increase or decrease for the time period. If you want to break up income and expenses further, then you can do that too. |
I'm 23 and was given $50k. What should I do? | Here are some possibilities: avoid buying a car for as long as you can; if forced to own one, buy a used dependable car like a Toyota Corolla- 4 cyl and don't abuse it. open a Roth IRA, depositing max possible, the plan on doing so until you've investing the remaining balance. A Roth IRA, while not tax deductible now (you're in a low tax bracket now) will provide for tax-free distributions when you are both older and not in a low bracket. of course, invest in low cost equity funds. Come back for more ideas once the dust settles, you've got money left over and some of the above accomplished. You've got one asset many of us don't have: time. |
Calculating the total capital of a company? | Total Capital This is a very old fashioned term that really is mostly only used in the finance industry today, like when everyone was obsessed with "bank capital". Total Capital = Preferred Equity + Common Equity + Liabilities True blue preferred shares are almost only used by financial companies, banks specifically. The more modern ones that convert to common are used by all other companies. Notes Payable This is another old fashioned term that now carries a different meaning in Generally Accepted Account Principles (GAAP). The oldest definition of a note or a promissory note is a promise to pay a fixed amount of money on a specific date. This has been modified to resemble more a bond and evolved into the zero coupon bond, a bond that makes no cash interest payments but makes one final payment that includes principal & interest. A bank note, like a One Dollar bill, is a note that pays something, in this case One Dollar, never (technically, the repayment date is simply not specified in the contract). While it pays One Dollar, it never pays it back, so it has a constant value of One Dollar. The constant nature, inflation notwithstanding, is what makes bank notes the preferred medium of exchange. GAAP has taken its' own definition to mean any debt payable within 12 months, as it is a current (<12 months) liability. |
What is market capitalization? [duplicate] | Market Capitalization is the product of the current share price (the last time someone sold a share of the stock, how much?) times the number of outstanding shares of stock, summed up over all of the stock categories. Assuming the efficient market hypothesis and a liquid market, this gives the current total value of the companies' assets (both tangible and intangible). Both the EMH and perfect liquidity may not hold at all times. Beyond those theoretical problems, in practice, someone trying to buy or sell the company at that price is going to be in for a surprise; the fact that someone wants to sell that many stocks, or buy that many stocks, will move the price of the company stock. |
Stocks vs. High-yield Bonds: Risk-Reward, Taxes? | nan |
How secure is my 403(b)? Can its assets be “raided”? | I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what "pension" means. So let me explain. 403(b) is not a pension account. Pension account is generally a "defined benefit" account, whereas 403(b)/401(k) and similar - are "defined contribution" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands "give me the pension money". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired. |
Is there a simple strategy of selling stock over a period of time? | Yes, there is an analogous strategy for selling: it's to sell a fixed number of shares per period of time. |
Where should I invest my savings? | Basically the first thing you should do before you invest your money is to learn about investing and learn about what you want to invest in. Another thing to think about is that usually low risk can also mean low returns. As you are quite young and have some savings put aside you should generally aim for higher risk higher return investments and then when you start to reach retirement age aim for less risky lower return investments. In saying that, just because an investment is considered high risk does not mean you have to be exposed to the full risk of that investment. You do this by managing your risk to an acceptable level which will allow you to sleep at night. To do this you need to learn about what you are investing in. As an example about managing your risk in an investment, say you want to invest $50,000 in shares. If you put the full $50,000 into one share and that share price drops dramatically you will lose a large portion of your money straight away. If instead you spent a maximum of $10,000 on 5 different shares, even if one of them falls dramatically, you still have another 4 which may be doing a lot better thus minimising your losses. To take it one step further you might say if anyone of the shares you bought falls by 20% then you will sell those shares and limit your losses to $2000 per share. If the worst case scenario occurred and all 5 of your shares fell during a stock market crash you would limit your total losses to $10,000 instead of $50,000. Most successful investors put just as much if not more emphasis on managing the risk on their investments and limiting their losses as they do in selecting the investments. As I am not in the US, I cannot really comment whether it is the right time to buy property over there, especially as the market conditions would be different in different states and in different areas of each state. However, a good indication of when to buy properties is when prices have dropped and are starting to stabilise. As you are renting at the moment one option you might want to look at is buying a place to live in so you don't need to rent any more. You can compare your current rent payment with the mortgage payment if you were to buy a house to live in. If your mortgage payments are lower than your rent payments then this could be a good option. But whatever you do make sure you learn about it first. Make sure you spend the time looking at for sale properties for a few months in the area you want to buy before you do buy. This will give you an indication of how much properties in that area are really worth and if prices are stable, still falling or starting to go up. Good luck, and remember, research, research and more research. Even if you are to take someone elses advice and recommendations, you should learn enough yourself to be able to tell if their advice and recommendations make sense and are right for your current situation. |
Can individual investors buy precious metals at the spot price? | The futures market allows you to take delivery at the lowest cost. Most people don't deal in 100oz gold bars and 5000oz of 1000oz silver bars though, especially at the retail level. That said, when you are at the retail level, often times you will find reputable Internet dealers offering the lowest cost of ownership. Keep in mind brand name though when you're doing this. Reputable refiners/mints will often see higher premiums versus generic, and this does matter to some extent. Quantity and weights also matter in terms of pricing; the more you buy the lower the premium. |
What's the catch in investing in real estate for rent? | More possible considerations: Comparability with other properties. Maybe properties that rent for $972 have more amenities than this one (parking, laundry, yard, etc) or are in better repair. Or maybe the $972 property is a block closer to campus and thus commands 30% higher rent (that can happen). Condition of property. You know nothing about this until you see it. It could be in such bad shape that you can't legally rent it until you spend a lot of money fixing it. Or it may just be run down or outdated: still inhabitable but not as attractive to renters, leading to lower rent and/or longer vacancy periods. Do you accept that, or spend a lot of money to renovate? Collecting the rent. Tenants don't necessarily always pay their rent on time, or at all. If a tenant quits paying, you incur significant expenses to evict them and then find a new tenant, and all the while, you collect no rent. There could be a tenant in place paying a much lower rent. Rent control or a long lease may prevent you from raising it. If you are able to raise it, and the tenant doesn't want to pay, see above. Maintenance and more maintenance. College students could be hard on the property; one good kegger could easily cause more damage than their security deposits will cover. Being near a university doesn't guarantee you an easy time renting it. It suggests the demand is high, but maybe the supply is even higher. Renting to college students has additional issues. They are less likely to have incomes large enough to satisfy you that they can pay the rent. Are you willing to deal with cosigners? If a student quits paying, are you willing to try to collect from their cosigning parents in another state? And you'll probably have many tenants (roommates) living in the house. They will come and go separately and unexpectedly, complicating your leasing arrangements. And you may well get drawn in to disputes between them. |
Does Degiro charge per order or per transaction? | An order is not a transaction. It is a request to make a transaction. If the transaction never occurs (e.g. because you cancel the order), then no fees should be charged. will I get the stamp duty back (the 0.5% tax I paid on the shares purchase) when I sell the shares? I'm not a UK tax expert, but accorging to this page is seems like you only pay stamp tax when you buy shares, and don't get it back when you sell (but may be responsible for capital gains taxes). That makes sense, because there's always a buyer and a seller, so if you got the tax back when you sold, the tax would effectively be transferred from the buyer to the seller, and the government would never collect anything. |
How can I import customers and invoices from a previous year's Gnucash file? | There does not appear to be a way to export the customers and invoices nor a way to import them into another data file if you could export them. However, as said in the comments to your question, your question seems predicated upon the notion that it is 'best practice' to create a new data file each year. This is not considered necessary It should be noted that GnuCash reports should be able to provide accurate year-end data for accounting purposes without zeroing transactions, so book-closing may not be necessary. Leaving books unclosed does mean that account balances in the Chart of Accounts will not show Year-To-Date amounts. - Closing Books GnuCash Wiki The above linked wiki page has several methods to 'close the books' if that is what you want to do - but it is not necessary. There is even a description on how to create a new file for the new year which only talks about setting up the new accounts and transactions - nothing about customers, invoices etc. Note that you can 'close the books' without creating a new data file. In summary: you cannot do it; but you don't need to create a new file for the new year so you don't need to do it. |
What are reasonable administrative fees for an IRA? | Zero. Zero is reasonable. That's what Schwab offers with a low minimum to open the IRA. The fact is, you'll have expenses for the investments, whether a commission on stock purchase or ongoing expense of a fund or ETF. But, in my opinion, .25% is criminal. An S&P fund or ETF will have a sub-.10% expense. To spend .25% before any other fees are added is just wrong. |
Dividends - Why the push to reinvest? | Three major advantages that I can think of (and some of these have been pointed out in comments): |
Why index funds have different prices? | Price, whether related to a stock or ETF, has little to do with anything. The fund or company has a total value and the value is distributed among the number of units or shares. Vanguard's S&P ETF has a unit price of $196 and Schwab's S&P mutual fund has a unit price of $35, it's essentially just a matter of the fund's total assets divided by number of units outstanding. Vanguard's VOO has assets of about $250 billion and Schwab's SWPPX has assets of about $25 billion. Additionally, Apple has a share price of $100, Google has a share price of $800, that doesn't mean Google is more valuable than Apple. Apple's market capitalization is about $630 billion while Google's is about $560 billion. Or on the extreme a single share of Berkshire's Class A stock is $216,000, and Berkshire's market cap is just $360 billion. It's all just a matter of value divided by shares/units. |
Capital gains on no-dividend stocks - a theoretical question | Berkshire Hathaway would be a good example of a company that has yet to pay dividends, yet is a highly valued stock. A couple of key points here to note is how on the first hand you have that the dividend policy will never change, yet couldn't one argue that there will always be new investors wanting more shares and thus the price keeps going up until someone gains control and decides to issue dividends? I'm just pointing out how on the one hand you are claiming a never changing and yet on the other thinking there will be a termination when the reality is that unless there is a zombie apocalypse of some form, life will continue and there will be new people to want to buy the stock and some people be willing to sell at the new prices. |
Can paying down a mortgage be considered an “investment”? | It very much comes down to question of semantics and your particular situation. Some people do not view a house (and most upgrades) as an investment, but rather an expense. I certainly agree that this is probably the case if you pay someone else to make the repairs and upgrades. However, if you are a serious DIYer, that may not be the case. Of course, if the house is a money pit and/or you were unfortunate to buy when prices where ridiculously high, you'll have a hard time making any money on this "investment." To continue this game of semantics, you may also consider the value you extract from your home while you are living in it. On to the mortgage itself. Chances are that it is a long term, relatively low rate loan and that the interest is deductible. So, there are some disadvantages to paying it down early, even without early payment penalties. Paying down early on the principal is a disadvantage from a tax perspective. How much of a disadvantage hinges on the rate. Now, a debt is a liability on your personal balance sheet. It drags down any returns you may have from investing. However, a home lone is not generally subject to the cardinal rule of paying off your high interest debt before investing. It should not be relatively high and it pays for something necessary. It may be that any credit card debt you have may have paid for something considered necessary. However, with the relatively high interest rates, you have to question just how necessary any credit card debt really is. Not to mention that there is no tax advantage. So, it comes down to the fact that a home loan should be relatively low interest, paying for something you must have and that you hopefully have some tax advantage from the interest you pay on it. |
Why buy insurance? | There's an old saying among commodities producers... If it's likely to happen, but won't kill you, you hedge (save/"self-insure", options, futures). If it's not likely to happen, but would kill you, you insure. Hedging and insuring are both about managing risk. If you feel there is no risk at all, you don't need to do either. But feeling that you have no risk at all is somewhat naive. |
Can I trust the Motley Fool? | Hmm.. hey bro, not personal, but is what comes to mind: I guess my answer will be highly down voted... =P |
New 1099 employee with Cobra insurance | For the first four months of the year, when you were an employee, the health insurance premiums were paid for with pre-tax money. When you receive your W-2 at the end of the year, the amount in Box 1 of the W-2 will be reduced by the amount you paid for health insurance. You can't deduct it on your tax return because it has already been deducted for you. Now that you are a 1099 independent contractor, you are self-employed and eligible for the self-employed health insurance deduction. However, as you noted, the COBRA premiums are likely not eligible for this deduction, because the policy is in your old employer's name. See this question for details, but keep in mind that there are conflicting answers on that question. |
Should Emergency Funds be Used for Infrequent, but Likely, Expenses? | Which of these categories are emergency funds meant to cover? Emergency funds are for emergencies, which to me means expenses that are unanticipated and can't be covered out of "normal" cash-flow. Oil changes are not an "emergency" and should be part of your normal budget. Car/house repairs and doctor visits might be an emergency depending on the severity and the urgency (e.g. do I need to fix this now or can I save up and fix it?) For known, predictable expenses that are infrequent (Christmas, birthdays, car insurance, home insurance/taxes if it's not part of your mortgage payment), I use an escrow account. I calculate how much I'll need for all of those things put together over the year and set aside a fixed amount each paycheck to ensure that I have enough to cover each item. You could do something similar for minor doctor visits, car repairs, etc. Estimate how much you might spend and set aside some money each month. If you find you're spending more than you thought, just increase the amount. You can use envelopes for each type of expense, have a separate checking account for those, whatever. The point is to set it aside and make sure you have enough left over to cover your known expenses. The whole point of an emergency fund is to be able to pay cash for emergencies rather than borrowing to pay them and dealing with interest, late fees, etc. |
Why do UK banks require monthly “pay in” into current account? | Banks are not your friends, they are not performing services for you because they like you. They are a business, and they make money by borrowing money from you at low interest and loaning it out at higher interest. They are trying to persuade you to deposit more money (however briefly) in their bank so they can loan out more money. They are probably also counting on the fact that most folks won't go to the trouble of setting up accounts at multiple banks with the interlocking automatic transfers, in order to meet the required deposit threshold. That lets them save on the interest payments to consumers that are individually tiny, but significant in the aggregate. |
Do the tax consequences make it worth it for me to hold ESPP stock? | To try to answer the three explicit questions: Every share of stock is treated proportionately: each share is assigned the same dollar amount of investment (1/176th part of the contribution in the example), and has the same discount amount (15% of $20 or $25, depending on when you sell, usually). So if you immediately sell 120 shares at $25, you have taxable income on the gain for those shares (120*($25-$17)). Either selling immediately or holding for the long term period (12-18 mo) can be advantageous, just in different ways. Selling immediately avoids a risk of a decline in the price of the stock, and allows you to invest elsewhere and earn income on the proceeds for the next 12-18 months that you would not otherwise have had. The downside is that all of your gain ($25-$17 per share) is taxed as ordinary income. Holding for the full period is advantageous in that only the discount (15% of $20 or $25) will be taxed as ordinary income and the rest of the gain (sell price minus $20 or $25) will be taxed at long-term capital gain tax rates, which generally are lower than ordinary rates (all taxes are due in the year you do sell). The catch is you will sell at different price, higher or lower, and thus have a risk of loss (or gain). You will never be (Federally) double taxed in any scenario. The $3000 you put in will not be taxed after all is sold, as it is a return of your capital investment. All money you receive in excess of the $3000 will be taxed, in all scenarios, just potentially at different rates, ordinary or capital gain. (All this ignores AMT considerations, which you likely are not subject to.) |
How to invest 100k | Your question is listed as "How to invest 100k", not how would I find someone without a hidden agenda - so I'll answer that: It depends. I believe the best choices available are essentially as follows: If you are looking to pay for your childrens' college, it might be nice just to put the money in a Roth IRA and have that done right off the bat. If you disciplined enough to keep the money invested in some type of stock indexed fund, that might be good - the stock market has often outperformed almost every other form of investment over the very long haul. But if you could see yourself tapping it for things, then you might not want this. Another option is to put the money against your house. If that doesn't pay it off, refinance the remaining portion into a lower rate for less years. Obviously this knocks down a huge portion of the interest (duh) and gives you a nice cash flow you can use for investing. Also, the money you've put into a primary residence is pretty safe. I believe in some cases, safe even from bankruptcy. But as you've noted, being underwater on the home you are essentially throwing that money away in some way or fashion. And really, all in all, houses are terrible investments. You never really get your money out of your primary home, unless you downsize. The money is essentially "saved" without an equity line. This is a good choice if you're not disciplined. Your choice depends on: Of course, you can do any combination of these things and as Dave Ramsey is apt to remind his listeners and callers: you ought to have your emergency fund set before you do any of these things. |
How should I be investing in bonds as part of a diversified portfolio? | For most people, you don't want individual bonds. Unless you are investing very significant amounts of money, you are best off with bond funds (or ETFs). Here in Canada, I chose TDB909, a mutual fund which seeks to roughly track the DEX Universe Bond index. See the Canadian Couch Potato's recommended funds. Now, you live in the U.S. so would most likely want to look at a similar bond fund tracking U.S. bonds. You won't care much about Canadian bonds. In fact, you probably don't want to consider foreign bonds at all, due to currency risk. Most recommendations say you want to stick to your home country for your bond investments. Some people suggest investing in junk bonds, as these are likely to pay a higher rate of return, though with an increased risk of default. You could also do fancy stuff with bond maturities, too. But in general, if you are just looking at an 80/20 split, if you are just looking for fairly simple investments, you really shouldn't. Go for a bond fund that just mirrors a big, low-risk bond index in your home country. I mean, that's the implication when someone recommends a 60/40 split or an 80/20 split. Should you go with a bond mutual fund or with a bond ETF? That's a separate question, and the answer will likely be the same as for stock mutual funds vs stock ETFs, so I'll mostly ignore the question and just say stick with mutual funds unless you are investing at least $50,000 in bonds. |
How to take advantage of home appreciation | There are basically two ways to get value out of an appreciating asset such as a home: (a) Sell it and take the profit. In the case of a home, you presumably still have to live somewhere, so unless you buy a cheaper home to replace it, this doesn't get you anywhere. If you can get another house that is just as nice and in just as nice a location -- whatever you consider "nice" to be -- than this sounds like a winning option. If it means moving to a less desirable home, then you are getting the cash but losing the nice home. You'll have to decide if it's worth it. (b) Use it as collateral for a loan. In this case, that means a second mortgage, home equity loan, or a home equity line of credit. But this can be dangerous. House prices are very volatile these days. If the value of the house falls, you could be stuck with debts greater than your assets. In my humble opinion, you should be very careful about doing this. Borrowing against your house to send the kids to college or pay for your spouse's life-saving operation may be reasonable. Borrowing against your house to go on a fancy vacation is almost surely a bad idea. The vacation will be over within a couple of weeks, but you could be paying off the debt for decades. |
Is there a sell-side version of dollar-cost averaging? | None of your options or strategies are ideal. Have you considered looking at the stock chart and making a decision? Is the price currently up-trending, or is it down-trending, or is it going sideways? As Knuckle Dragger mentions, you could just set a limit price order and if it does not hit by Friday you can just sell at whatever price on Friday. However, this could be very damaging if the price is currently down-trending. It may fall considerably by Friday. I think a better strategy would be to place a trailing stop loss order, say 5% from the current price. If the stock starts heading south you will be stopped out approximately 5% below the current price. However, if the price goes up, your trailing stop order will move up as well, always trailing 5% below the highest price reached. If the trailing stop has not been hit by Friday afternoon, you can sell at the current price. This way you will be protected on the downside (only approx. 5% below current price) and can potentially benefit from any short term upside. |
Is there any circumstance in which it is necessary to mark extra payments on a loan as going to “principal and not interest”? | I would always presume that given a choice of doing what is in its own self interest verses in the customer's interest, a bank will ALWAYS do the former rather than the latter. Banks are in the business of making money, always presume that their policies, processes and contractual terms will be slanted to maximize their ability to make money. It's not being evil or anything, it's just business, they are under no obligation to be altruistic or do what's best for you at the expense of their profits. So, especially since it's not exactly a hardship, I would always make extra principal payments using a separate check and clearly mark it as an extra principal payment. |
Should my husband's business pay my business? | I agree with some of the points of the other answers but why not avoid all the guesswork? I highly recommend you not charge him now. Wait until the end of the year when you have much more information about both of your companies and then you can run the numbers both ways and decide if it would benefit you (collectively). If either of your businesses runs on a cash basis and you decide to invoice, just make sure the check is deposited before Dec 31. Update: If you want to do this for 2016, at least your husband's business would have to be using an accrual basis (since it's too late to take the deduction on a cash basis). Simply run the numbers both ways and see if it helps you. If it doesn't help enough to warrant it for 2016 you could rerun the numbers near the end of 2017 to see if it helps then. Diclaimer: I think it's OK to do this type of manipulation for the scenario you described since you have done (or are doing) the work and you are charging a reasonable fee, but realize that you shouldn't manipulate the amount of the invoice, or fabricate invoices. For example, you shouldn't ever think about such things as: "If I invoice $50K instead of $3K, will that help us?" |
Why do consultants or contractors make more money than employees? | All the existing answers are right and the general theme is: contracting is a different kind of relationship. It's a business-to-business relationship rather than a business-to-employee relationship. This has implications such as: Of course, some contractors are effectively just over-paid employees, and some of the above points don't apply to them, but that's the idea behind bona fide contracting. |
Does buying and selling a stock OR holding onto it make a company look better? | I have watched the ticker when I have made a transaction. About ¼ of the time my buy (or sell) actually moves the going price. But that price movement is wiped out by other transactions within two (or so) munites. Is your uncle correct? Yes. Will anyone notice? No. |
How can I have credit cards without having a credit history or credit score? | For instance and to give a comparison to the US - in Austria, almost everybody gets a credit card (without a credit history (e.g. a young person) / with a bad credit history & with a good credit history). The credit history is in the USA much more important than in Austria. In future, the way to assess a credit history will change due to analysis of social networks for instance. This can be considered in addition to traditional scoring procedures. Is your credit history/score like a criminal record? Nope. I mean is it always with you? Not really cause a criminal record will be retained on a central storage (to state it abstract) and a credit history can be calculated by private companies. Also, are there other ways to get credit cards besides with a bank? That depends on the country. In Austria, yes. |
Should I sell my stocks when the stock hits a 52-week high in order to “Buy Low, Sell High”? | Insofar as a 52 week high indicates a peak, yes. However, the truth is that "buying low and selling high" means "Act a Fool!" You see, when you buy low, you are perceived to be buying total garbage - throwing your money away and conversely when selling high you are perceived to be a total idiot - selling a winner. That's how people will see you when you are in fact buying low and/or selling high, right? It's those people that (mis)value the asset, right? An asset is worth what the people will pay for it, right? ...And don't forget that holding a loser is MUCH easier than holding a winner. Good luck! |
What effect does a company's earnings have on the price of its stock? | Your autograph analogy seems relevant to me. But it is not just speculation. In the long run, investing in stocks is like investing in the economy. In the long run, the economy is expected to grow , hence stock prices are expected to go up. Now in theory: the price of any financial instrument is equal to the net present value today of all the future cash flows from the instrument. So if company's earnings improve, shareholders hope that the earnings will trickle down to them either in form of dividends or in form of capital gain. So they buy the stock, creating demand for it. I can try to explain more if this did not make any sense. :) |
what does “private equity structures” mean? | Private equity firms have a unique structure: The general partners (GP's) of the firm create funds and manage the investments of those funds. Limited partners (LP's) contribute the capital to the funds, pay fees to the GP's, and then make money when the funds' assets grow. I believe the article is saying that ultra high net worth individuals participate in the real estate market by hiring someone to act as a general partner and manage the real estate assets. They and their friends contribute the cash and get shares in the resulting fund. Usually this GP/LP structure is used when the funds purchase or invest in private companies, which is why it is referred to as "private equity structure," but the same structure can be used to purchase and manage pools of real estate or any other investment asset. |
How can I improve my credit score if I am not paying bills or rent? | If credit scoring works in the UK like it does in the US, then I think the fact that you own+use a credit card and pay off your everyday expenses will give you perfectly good credit. Just keep doing what you're doing. I have seen people in the United States with very high credit scores based solely upon owning & occasionally using a credit card, paid in full and on time every month. |
In the UK, can authors split a single advance on a book over multiple tax returns? | HMRC calls it: Averaging for creators of literary or artistic works, and it is the averaging of your profits for 2 successive years. It's helpful in situations like you describe, where income can fluctuate wildly from year to year, the linked article has the full detail, but some of the requirements are: You can use averaging if: you’re self-employed or in a partnership, and the business started before 6 April 2014 and didn’t end in the 2015 to 2016 tax year your profits are wholly or mainly from literary, dramatic, musical or artistic works or from designs you or your business partner (if you’re in a partnership) created the works personally. Additionally: Check that your profit for the poorer year, minus any adjusted amounts, is less than 75% of the figure for your better year. If it is, you can use averaging. Then, check if the difference between your profits for the 2 years is more than 30% of your profit for the better year. If it is, work out the average by adding together the profits for the 2 years, and divide the total by 2. |
How does a bank make money on an interest free secured loan? | Most 0% interest loans have quite high interest rates that are deferred. If you are late on a payment you are hit with all the deferred interest. They're banking on a percentage of customers missing a payment. Also, this is popular in furniture/car sales because it's a way to get people to buy who otherwise wouldn't, they made money on the item sale, so the loan doesn't have to earn them money (even though some will). Traditional banks/lenders do make money from interest and rely on that, they would have to rely on fees if interest were not permitted. |
U.S. Mutual Fund Supermarkets: Where are some good places to buy mutual funds? | I personally like Schwab. Great service, low fees, wide variety of fund are available at no fee. TD Ameritrade is good too. |
Best personal finance strategy to control my balance | I started storing and summing all my receipts, bills, etc. It has the advantage of letting me separate expenses by category, but it's messy and it takes a long time. It sounds from this like you are making your summaries far too detailed. Don't. Instead, start by painting with broad strokes. For example, if you spent $65.17 at the grocery store, don't bother splitting that amount into categories like toiletries, hygiene products, food, and snacks: just categorize it as "grocery spending" and move on to the next line on your account statement. Similarly, unless your finances are heavily reliant on cash, don't worry about categorizing each cash expense; rather, just categorize the withdrawal of cash as miscellaneous and don't spend time trying to figure out exactly where the money went after that. Because honestly, you probably spent it on something other than savings. Because really, when you are just starting out getting a handle on your spending, you don't need all the nitty-gritty details. What you need, rather, is an idea of where your money is going. Figure out half a dozen or so categories which make sense for you to categorize your spending into (you probably have some idea of where your money is going). These could be loans, cost of living (mortgage/rent, utilities, housing, home insurance, ...), groceries, transportation (car payments, fuel, vehicle taxes, ...), savings, and so on -- whatever fits your situation. Add a miscellaneous category for anything that doesn't neatly fit into one of the categories you thought of. Go back something like 3-4 months among your account statements, do a quick categorization for each line on your account statements into one of these categories, and then sum them up per category and per month. Calculate the monthly average for each category. That's your starting point: the budget you've been living by (intentionally or not). After that, you can decide how you want to allocate the money, and perhaps dig a bit more deeply into some specific category. Turns out you are spending a lot of money on transportation which you didn't expect? Look more closely at those line items and see if there's something you can cut. Are you spending more money at the grocery store than you thought? Then look more closely at that. And so on. Once you know where you are and where you want to be (such as for example bumping the savings category by $200 per month), you can adjust your budget to take you closer to your goals. Chances are you won't realistically be able to do an about-face turn on the spot, but you can try to reduce some discretionary category by, say, 10% each month, and transfer that into savings instead. That way, in 6-7 months, you have cut that category in half. |
Can I make my savings keep in check with or beat inflation over a long time period via index funds? | For your base question, yes. (Barring some major collapse-of-civilization event, but in that case you're screwed anyway :-)) On the individual points: 1) Depends on whether you choose to invest in index-type funds (where profit is mainly expected from price appreciation), or more value-based investing. But either or a mix of the two (my own choice) should show returns above inflation, over the long term. 2) Yes, in the US anyway. You can invest a few hundred dollars at a time, and (with good companies like Vanguard & T. Rowe Price) there are no transaction fees, either for investing or for redeeming. 3) Long-term, it's crash-proof IF you have the self-discipline not to panic-sell at market lows. In my case, my total fund valuation dropped around 40% in '08. I didn't sell anything (and in fact tried to cut spending and invest more), and now I have nearly double what I had before the crash. Bottom line is that it has worked for me. After ~30 years of investing this way without being fanatic about it, I have enough that I could live moderately without working for the rest of my life. Not - and this is where I part company with MMM and most of the FIRE community - that I'd ever want to actually retire. But my modest financial independence gives me the freedom to work at things I like, rather than because I'm worrying about paying bills. |
Is dividend included in EPS | No, dividends are not included in earnings. Companies with no earnings sometimes choose to pay dividends. Paying the dividend does not decrease earnings. It does of course decrease cash and shows up on the balance sheet. Many companies choose to keep the dividend at a fixed rate even while the business goes through cycles of increased and decreased earnings. |
Why does capital gains tax apply to long term stock holdings? | Why only long term investments? What do they care if I buy and sell shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying "this company will grow". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply capital gains tax to my savings account at my local bank? Or a CD account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do that? During an IPO, the business certainly raises money, but after that I'm just buying and selling shares with other private shareholders. Why does the government give me an incentive to do this (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex. |
Offshore bank account with online International wire-transfer facility for Indians | All Indian Banks are offering USD accounts known as multicurrency account, where you can hold your fund, this account also permits you to book the USD to INR rates in advance if you require. You can keep your money in this account and also can remit the same back to source or other destination country. |
Why is retirement planning so commonly recommended? | If you can afford it, there are very few reasons not to save for retirement. The biggest reason I can think of is that, simply, you are saving in general. The tax advantages of 401k and IRA accounts help increase your wealth, but the most important thing is to start saving at an early age in your career (as you are doing) and making sure to continue contributing throughout your life. Compound interest serves you well. If you are really concerned that saving for retirement in your situation would equate to putting money away for no good reason, you can do a couple of things: Save in a Roth IRA account which does not require minimum distributions when you get past a certain age. Additionally, your contributions only (that is, not your interest earnings) to a Roth can be withdrawn tax and penalty free at any time while you are under the age of 59.5. And once you are older than that you can take distributions as however you need. Save by investing in a balanced portfolio of stocks and bonds. You won't get the tax advantages of a retirement account, but you will still benefit from the time value of money. The bonus here is that you can withdraw your money whenever you want without penalty. Both IRA accounts and mutual fund/brokerage accounts will give you a choice of many securities that you can invest in. In comparison, 401k plans (below) often have limited choices for you. Most people choose to use their company's 401k plan for retirement savings. In general you do not want to be in a position where you have to borrow from your 401k. As such it's not a great option for savings that you think you'd need before you retire. Additionally 401k plans have minimum distributions, so you will have to periodically take some money from the account when you are in retirement. The biggest advantage of 401k plans is that often employers will match contributions to a certain extent, which is basically free money for you. In the end, these are just some suggestions. Probably best to consult with a financial planner to hammer out all the details. |
How smart is it to really be 100% debt free? | The responses here are excellent. I'd add just a couple points. Debt is not generic. It ranges from low (my HELOC is 2.5%) to insane (24% credit card, anyone?). When I read about the obsession to be completely debt free, I ask questions. Are you saving in your 401(k) at least up to the match? I disagree with the "debt is evil" people who advise to ignore retirement savings while paying off every last debt. My company offers a dollar for dollar match on the first 5% of income deposited. So a $60K earner will see a $3000 deposit doubled. 5 years of this, and he has 1/2 a year's income in his retirement account, more with positive returns. (note - for those so fearful of losses, all 401(k) accounts have to offer a fixed income, low risk choice. currently 1% or less, but the opposite of "I can lose it all".) After that, paying off the higher debt is great. When it's time to hack away at student debt and mortgage, I am concerned that if it's at the risk of having no savings, I'd hold off. Consider - Two people in homes worth $250K. One has a mortgage of $250K and $100K in the bank. The other has his mortgage paid down to $150K. When they lose their jobs, the guy with the $100K in the bank has the funds to float himself through a period of unemployment as well as a house the bank is less likely to foreclose on. The guy with no money is in deep trouble, and the bank can sell his house for $150K and run away (after proper foreclosure proceedings of course.) My mortgage is one bill, like any other, and only a bit more than my property tax. I don't lose sleep over it. It will be paid before I retire, and before my 11yr old is off to college. I don't think you stupid for paying your low interest debt at your own pace. |
The Benefits/Disadvantages of using a credit card | An advantage of using a major credit card is that they act as a buffer and source of recourse between you and the merchant. Cheated and the store won’t answer you letters? Call Visa (or more accuratly, call the number on the back of the card). (That is, #2 on this answer, which you can also reference for a whole list of benefits.) |
Should I pay off a 0% car loan? | I struggle with 0% interest things in my personal life. A responsible me that thinks logically says continue to pay it on time and take advantage of the benefit of the interest free loan you got. It will keep your funds liquid in the case of an emergency, build your credit and teach you self control. Paying it off now has little to no benefit. It does however tie up $3,000 worth of capital you could be using for building interest or leveraging against other purchases. |
Options profit calculation and cash settlement | The other two answers seem basically correct, but I wanted to add on thing: While you can exercise an "American style" option at any time, it's almost never smart to do so before expiration. In your example, when the underlying stock reaches $110, you can theoretically make $2/share by exercising your option (buying 100 shares @ $108/share) and immediately selling those 100 shares back to the market at $110/share. This is all before commission. In more detail, you'll have these practical issues: You are going to have to pay commissions, which means you'll need a bigger spread to make this worthwhile. You and those who have already answered have you finger on this part, but I include it for completeness. (Even at expiration, if the difference between the last close price and the strike price is pretty close, some "in-the-money" options will be allowed to expire unexercised when the holders can't cover the closing commission costs.) The market value of the option contract itself should also go up as the price of the underlying stock goes up. Unless it's very close to expiration, the option contract should have some "time value" in its market price, so, if you want to close your position at this point, earlier then expiration, it will probably be better for you to sell the contract back to the market (for more money and only one commission) than to exercise and then close the stock position (for less money and two commissions). If you want to exercise and then flip the stock back as your exit strategy, you need to be aware of the settlement times. You probably are not going to instantly have those 100 shares of stock credited to your account, so you may not be able to sell them right away, which could leave you subject to some risk of the price changing. Alternatively, you could sell the stock short to lock in the price, but you'll have to be sure that your brokerage account is set up to allow that and understand how to do this. |