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15 year mortgage vs 30 year paid off in 15 | All of the answers given so far are correct, but rather narrow. When you buy a 30-year-mortgage, you are buying the right to pay off the debt in as long as 30 years. What you pay depends on the interest rate and how long you actually take to pay it off (and principal and points and so on). Just as you are buying that right, the mortgager is selling you that right, and they usually charge something for it, typically a higher rate. After all, they, and not you, will be exposed to interest risk for 30 years. However, if some bank has an aneurism and is willing to give you a 30-year loan for the same price as or lower than any other bank is willing to go for a 15-year loan, hey, free flexibility. Might as well take it. If you want to pay the loan off in 15 year, or 10 or 20, you can go ahead and do so. |
Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other? | As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies. SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index: |
How smart is it to really be 100% debt free? | Keep in mind that you NEED to have a cash reserve. Blindly applying all stray cash to debt reduction is a bad idea. Your lenders do not care about your balance. All they care about is your NEXT payment. It is therefore imperative that you have a cash reserve that can carry these payments for several months. Having zero cash reserves puts you at high risk for such simple things as the payroll clerk at work missing the monthly deposit (Rare, but it happens.) I've also been in situations where a major client had a cash flow issue and delayed payment, and our company had to borrow to meet payroll that month. Fortunately, we were in good standing with the bank and had low debt, but it could have been catastrophic for any employees living paycheque to paycheque. |
Are prepayment penalties for mortgages normal? | Mortgages with a prepayment penalty usually do not charge points as a condition of issue. The points, usually in the range 1%-3% of the amount borrowed, are paid from the buyer's funds at the settlement, and are effectively the prepayment penalty. Once upon a time (e.g. 30 years ago), in some areas, buyers had a choice of This last option usually had a higher interest rate than the first two. It was advantageous for a buyer to accept this option if the buyer was sure that the mortgage would indeed be paid off in a short time, e.g. because a windfall of some kind (huge bonus, big inheritance, a killing in the stock market, a successful IPO) was anticipated, where the higher interest charged for only a few years did not make much of a difference. Taking this third option and hanging on to the mortgage over the full 15 or 20 or 25 or 30 year term would have been a very poor choice. I do not know if all three options are still available in the current mortgage market. The IRS treats points for original morttgages and points for re-financed mortgages differently for the purposes of Schedule A deductions. Points paid on an original mortgage are deductible as mortgage interest in the year paid, whereas points paid on a refinance must be amortized over the life of the loan so that the mortgage interest deduction is the sum of the interest paid in the monthly payments plus a fraction of the points paid for the refinance. The undeducted part of the points get deducted in the year that the mortgage is paid off early (or refinanced again). Prepayment penalties are, of course, deductible as mortgage interest in the year of the prepayment. |
Stocks given by company vest if I quit? | You were probably not given stock, but stock options. Those options have a strike price and you can do some more research on them if needed. Lets assume that you were given 5K shares at a strike of 20, and they vest 20% per year. Assume the same thing in your second year and you are going to leave in year three. You would have 2K shares from your year 1 grant, and 1K shares from your year 2 grant, so 2K total. If you leave no more shares would be vested. If you leave you have one of two options: To complicate matters subsequent grants may have different strike prices, so perhaps year two grant is at $22 per share. However, in pre-public companies that is not likely the case. For a bit of history, I worked at a pre-ipo company and we were all going to get rich. I was given generous grants, but decided to leave. I really wanted to buy my options but simply didn't have the money. Shortly after I left the company folded, so the money would have been thrown away anyway. When a company is private the motivate their employees with tales of riches, but they are not required to disclose financial data. This company did a very good job of convincing employees that all was fine, when it wasn't. Also I received options in a publicly traded company. Myself and other employees received options that were "underwater" or worth far less than the strike price. You could let them expire so one did not owe money, but they were worthless. Hopefully that answers your question. |
Saving up for an expensive car | I've read online that 20% is a reasonable amount to pay for a car each month - Don't believe everything you read on the internet. But, let me ask, does your current car have zero expense? No fuel, no oil change, no repairs, no insurance? If the 20% is true, you are already spending a good chunk of it each month. My car just celebrated her 8th birthday. And at 125,000 miles, needed $3000 worth of maintenance repairs. The issue isn't with buying the expensive car, you can buy whatever you can afford, that's a personal preference. It's how you propose to budget for it that seems to be bad math. Other members here have already pointed out that this financial decision might not be so wise. |
few question about debit credit and liabilities | Exactly what accounts are affected by any given transaction is not a fixed thing. Just for example, in a simple accounting system you might have one account for "stock on hand". In a more complex system you might have this broken out into many accounts for different types of stock, stock in different locations, etc. So I can only suggest example specific accounts. But account type -- asset, liability, capital (or "equity"), income, expense -- should be universal. Debit and credit rules should be universal. 1: Sold product on account: You say it cost you $500 to produce. You don't say the selling price, but let's say it's, oh, $700. Credit (decrease) Asset "Stock on hand" by $500. Debit (increase) Asset "Accounts receivable" by $700. Credit (increase) Income "Sales" by $700. Debit (increase) Expense "Cost of goods sold" by $500. 2: $1000 spent on wedding party by friend I'm not sure how your friend's expenses affect your accounts. Are you asking how he would record this expense? Did you pay it for him? Are you expecting him to pay you back? Did he pay with cash, check, a credit card, bought on credit? I just don't know what's happening here. But just for example, if you're asking how your friend would record this in his own records, and if he paid by check: Credit (decrease) Asset "checking account" by $1000. Debit (increase) Expense "wedding expenses" by $1000. If he paid with a credit card: Credit (increase) Liability "credit card" by $1000. Debit (increase) Expense "wedding expenses" by $1000. When he pays off the credit card: Debit (decrease) Liability "credit card" by $1000. Credit (decrease) Asset "cash" by $1000. (Or more realistically, there are other expenses on the credit card and the amount would be higher.) 3: Issue $3000 in stock to partner company I'm a little shakier on this, I haven't worked with the stock side of accounting. But here's my best stab: Well, did you get anything in return? Like did they pay you for the stock? I wouldn't think you would just give someone stock as a present. If they paid you cash for the stock: Debit (increase) Asset "cash". Credit (decrease) Capital "shareholder equity". Anyone else want to chime in on that one, I'm a little shaky there. Here, let me give you the general rules. My boss years ago described it to me this way: You only need to know three things to understand double-entry accounting: 1: There are five types of accounts: Assets: anything you have that has value, like cash, buildings, equipment, and merchandise. Includes things you may not actually have in your hands but that are rightly yours, like money people owe you but haven't yet paid. Liabilities: Anything you owe to someone else. Debts, merchandise paid for but not yet delivered, and taxes due. Capital (some call it "capital", others call it "equity"): The difference between Assets and Liabilities. The owners investment in the company, retained earnings, etc. Income: Money coming in, the biggest being sales. Expenses: Money going out, like salaries to employees, cost of purchasing merchandise for resale, rent, electric bill, taxes, etc. Okay, that's a big "one thing". 2: Every transaction must update two or more accounts. Each update is either a "debit" or a "credit". The total of the debits must equal the total of the credits. 3: A dollar bill in your pocket is a debit. With a little thought (okay, sometimes a lot of thought) you can figure out everything else from there. |
How to map stock ticker symbols to ISIN (International Securities Identification Number)? | It is possible to make a REST API call providing the ISIN to get the ticker in the response: Python code for getting ticker for ISIN=US4592001014: import requests url = 'https://api.openfigi.com/v1/mapping' headers = {'Content-Type':'text/json', 'X-OPENFIGI-APIKEY':'myKey' } payload = '[ {"idType":"ID_ISIN","idValue":"US4592001014"}]' r = requests.post(url, data=payload, headers=headers) |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | Between 6 months and a year is normally regarded as the "standard". Plan out what your monthly expenses are and save that money away. One thing to consider is what extras can you give up. If you are currently eating steak and lobster every day can you live with switching to ramen noodles for a period of time? Can you switch from premium cable to basic cable (or cancel it altogether)? Questions like this can greatly impact the amount you have to set aside. I personally have my emergency fund in CDs that mature the first of every month. I know there is less liquidity in this approach but I'm ok with that. My emergency fund is a sum of cash I'll always have so I wanted to reap the benefits of a higher yield. If it comes down to it I can place an expense on a credit card and pay off the credit card when funds become available. |
A-B-C Class Shares: What's the difference? | Classes of shares are not necessarily standardized. Some share classes have preference above others in the event of a liquidation. Some share classes represent a different proportion of ownership interest. Any time you see multiple share classes, you need to research what is different for that specific corporation. |
Can a Company which is listed at OTC and TSX considered to be serious? | The assumption that companies listed OTC are not serious is far from the truth. Many companies on the OTC are just starting off there because they don't meet the requirements to be listed on the NASDAQ or NYSE. Major stock exchanges like the NASDAQ and the NYSE only want the best companies to trade on their exchanges.The NASDAQ, for example, has three sets of listing requirements. A company must meet at least one of the three requirement sets, as well as the main rules for all companies. These include: Now don't assume that the OTC doesn't have rules either, as this is far from the truth as well. While there are no minimum level of revenue, profits or assets required to get listed on the OTC there are requirements for audited financial statements and ongoing filing and reporting to the SEC and NASD. Additionally there are several different levels of the OTC, including the OTCQX, the OTCCB and the OTC Pink, each with their own set of requirements. For more information about what it takes to be listed on OTC look here: http://www.otcmarkets.com/learn/otc-trading A company deciding to trade on the OTC is making the decision to take their company public, and they are investing to make it happen. Currently the fees to get listed on the OTC range from $30,000 to $150,000 depending on the firm you decide to go with and the services they offer as part as their package. Now, I know I wouldn't consider $30K (or more) to not be serious money! When I looked into the process of getting a company listed on the TSX the requirements seemed a lot more relaxed than those of the major U.S. markets as well, consisting of an application, records submission and then a decision made by a TSX committee about whether you get listed. More information about the TSX here: http://apps.tmx.com/en/listings/listing_with_us/process/index.html I think the way that the OTC markets have gotten such a bad reputation is from these "Get Rich on Penny Stock" companies that you see pumping up OTC company stocks and getting massive amounts of people to buy without doing their due diligence and investigating the company and reading its prospectus. Then when they loose a bunch of money on an ill-informed investment decision they blame it on the company being an OTC stock. Whether you decide to trade the OTC market or not, I wouldn't make a decision based on how many exchanges the company is listed on, but rather based on the research you do into the company. |
How is stock price determined? | Stock price is determined by what's being asked for it, and what's being paid for it. The reported price is either a recent average, or is the last price at which a sale actually took place, depending on which you've asked for. Limit orders are an agreement between you and your brokerage, and have no direct effect on price. When and if their condition is triggered and the transaction takes place, the transaction is what's significant. |
Calculate investment's interest rate to break-even insurance cost [duplicate] | I wouldn't call it apples and oranges. This is literally an opportunity cost calculation. You can safely assume S&P500 will perform at least 11% over any 10 year period. Since failing companies are delisted and replaced with new growing companies, the market should continue to grow. No, it's not guaranteed. Lets use an aggressive number for inflation, 4%, leaving a 7% ROR estimate for S&P500. I assume OP has better credit than me, assume a rate around 3.5%. So it looks like net 3.5% ROR. The PMI erases that. You have to continue paying it until you pay off the loan. Put 20% down, get a 15 year fixed at lowest rate. Pay it off quicker. |
What is the pitfall of using the Smith maneuver | The catch is that you're doing a form of leveraged investing. In other words, you're gambling on the stock market using money that you've borrowed. While it's not as dangerous as say, getting money from a loan shark to play blackjack in Vegas, there is always the chance that markets can collapse and your investment's value will drop rapidly. The amount of risk really depends on what specific investments you choose and how diversified they are - if you buy only Canadian stocks then you're at risk of losing a lot if something happened to our economy. But if your Canadian equities only amount to 3.6% of your total (which is Canada's share of the world market), and you're holding stocks in many different countries then the diversification will reduce your overall risk. The reason I mention that is because many people using the Smith Maneuver are only buying Canadian high-yield dividend stocks, so that they can use the dividends to accelerate the Smith Maneuver process (use the dividends to pay down the mortgage, then borrow more and invest it). They prefer Canadian equities because of preferential tax treatment of the dividend income (in non-registered accounts). But if something happened to those Canadian companies, they stand to lose much of the investment value and suddenly they have the extra debt (the amount borrowed from a HELOC, or from a re-advanceable mortgage) without enough value in the investments to offset it. This could mean that they will not be able to pay off the mortgage by the time they retire! |
First job: Renting vs get my parents to buy me a house | Say the price is $200K. Would I, as a real estate investor, want to buy such a house? If the rent is $600, that's $7200/yr. "the local property tax rate is levied on the tax base, and the applicable tax rate ranges from 0.40% to 0.76%" so, I'll assume .5%, just $1,000. There are rules of thumb that say half the rent will go to maintenance and other costs, if that seems high, say just $2000. We're left with $4000/yr. Less than 2% on the $200K investment. Italian bonds are yielding 8%. As an investor, if I couldn't get more than $2000/mo gross rent, I would not buy the house for $200K. As a parent, I'd have the money invested, have $16K/yr of income and help support you without taking all the risk the real estate investor has. Note: your question and my answer are in dollars, but I acknowledge the Italy tag, and used Italy property tax. My tax is 1.6% of home value in my US city. Edit: per the comment below, the 8% is incorrect. The return on the house purchase doesn't change, of course, but the safe yields are not that high, currently, 1%. |
Pay down on second mortage when underwater? | I'd split whatever cash flow you have between saving money and paying down the 20% loan. The fact that you are carrying an unrealized loss isn't really too relevant -- unless you have plans to walk away from the loan or go bankrupt, it doesn't really matter until you sell. You're either going to repay now or later. |
What is the dividend tax rate for UK stock | FYI, I am assuming you are an individual investor.. The rates on the website may change, if the government decides so. Anyway it is a UK government website, so it would reflect the changes immediately. |
Is selling put options an advisable strategy for a retiree to generate stable income? | As you move toward retirement, your portfolio is supposed to move toward low risk, stable investments, more bonds, less stocks, etc. Your question implies that you want to increase your income, most likely because your income is not satisfying your desires. First, any idea that you have that risks your savings, just eliminate it. You are not able to replace those savings. The time for those kind of plays has passed. However, you can improve your situation. Do random odd jobs. Find a part time job that you're willing to do for 10 hours a week or something. Keep this money separate from your retirement savings. Research the stock trades you would like to make and use that 'extra' money to play in the market. Set a rule that you do not touch your nest egg for trading. You may find that being retired gives you the time to do the #1 thing that helps investors make good investments -- research. Then when you make your first million doing this, write a book. If you call it Retire - And Then Get Rich, I expect royalties and a dedication. |
Why does Charles Schwab have a Mandatory Settlement Period after selling stocks? | They're taking advantage of float. Like so many things in the financial world today, this practice is a (strictly legal) fraud. When you make the transaction, the money is available immediately, for reasons that should be intuitively obvious to anyone who's ever used PayPal. It doesn't take 3 minutes for the broker to get that money, let alone 3 days. But if they can hold on to that money instead of turning it over to you, they can make money from it for themselves, putting money that rightfully belongs to you to work for them instead, earning interest on short-term loans, money market accounts, etc. The SEC mandates that this money must be turned over to you within 3 days so it should not surprise anyone that that's exactly how long the "we have to wait for it to clear" scam runs for. Even if it doesn't seem like very much money per transaction, for a large brokerage with hundreds of thousands of clients, all the little bits add up very quickly. This is why they feel no need to compete by offering better service: offering poor service is making them a lot of money that they would lose by offering better service. |
Is income from crypto-currencies taxed? | Mining is income at the value at time of earning, I would use an index like XBX to determine price. Asset appreciation is capital gains. These aspects of crypto-assets are not a gray area in the US financial sector, and have been addressed for almost half a decade now. |
Where to park money low-risk on interactivebrokers account? | The standard low-risk/gain very-short-term parking spot these days tends to be a money market account. However, you have only mentioned stock. For good balance, your portfolio should consider the bond market too. Consider adding a bond index fund to diversify the basic mix, taking up much of that 40%. This will also help stabilize your risk since bonds tend to move opposite stocks (prperhaps just because everyone else is also using them as the main alternative, though there are theoretical arguments why this should be so.) Eventually you may want to add a small amount of REIT fund to be mix, but that's back on the higher risk side. (By the way: Trying to guess when the next correction will occur is usually not a winning strategy; guesses tend to go wrong as often as they go right, even for pros. Rather than attempting to "time the market", pick a strategic mix of investments and rebalance periodically to maintain those ratios. There has been debate here about "dollar-cost averaging" -- see other answers -- but that idea may argue for investing and rebalancing in more small chunks rather than a few large ones. I generally actively rebalance once a year or so, and between those times let maintainng the balance suggest which fund(s) new money should go into -- minimal effort and it has worked quite well enough.,) |
What type of pension should I get? | If your new employer has a Final Salary or defined benefit type pension scheme, join it. DB plans are attractive because they are often less a risk for the employee. If your employer has a defined contribution scheme and contributes to it, join it and contribute at least up to the maximum amount that they will match – otherwise you are leaving free money on the table. You also probably need to sit down with an independent adviser for what to do with your existing pension (is it a DC or DB) and if you want to have a pension outside of your employer. |
Can I claim a tax deduction for working from home as an employee? I work there 90% of the time | The general rule is: Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly: Exclusively seems to be the toughest standard and I do not know exactly how strict the IRS's interpretation is. Working in your living room where you regularly watch TV and have people over on the weekends would seem to fail that test. A separate room with your computer in it would pass it. If it was your only computer and you regularly played online games with it, that would seem to be a grey area. The IRA booklet covering this area is here http://www.irs.gov/pub/irs-pdf/p587.pdf I know people that have rented rooms in other places or made use of rental offices for this purpose. |
What is the correct term to describe (shares owned * share value)? | This is typically referred to as the "market value" of your holdings--it is the revenue you would generate if you sold your holdings at that moment (less any transaction costs, of course) |
What is the difference between Protected-equity loan vs Equity loan? | In simple terms : Equity Loan is money borrowed from the bank to buy assets which can be houses , shares etc Protected equity loan is commonly used in shares where you have a portfolio of shares and you set the minimum value the portfolio can fall to . Anything less than there may result in a sell off of the share to protect you from further capital losses. This is a very brief explaination , which does not fully cover what Equity Loan && Protected Equity Loan really mean |
How smart is it to really be 100% debt free? | Very smart. Let other people pay you interest. Don't pay other people interest. And, yes, I know it's possible to borrow money from one place and lend it to another place at a slightly higher rate, but why bother. |
Analyze stock value | A Bloomberg terminal connected to Excel provides the value correcting splits, dividends, etc. Problem is it cost around $25,000. Another one which is free and I think that takes care of corporate action is "quandl.com". See an example here. |
what is the best way of investment which gives returns forever? | What is the best way that I can invest money so that I can always get returns? If you want something that doesn't require any work on your end, consider having a fee-only financial planner make a plan so that your investments can be automated to generate a cash flow for you or get an annuity as the other classic choices here as most other choices will require some time commitment in one form or other. Note that for stock investments there could be rare instances like what happened for a week in September in 2001 where the markets were closed for 5 days straight that can be the hiccup in having stocks. Bonds can carry a risk of default where there have been municipalities that defaulted on debt as well as federal governments like Russia in the 1990s. Real estate may be subject to natural disasters or other market forces that may prevent there always being a monthly payment coming as if you own a rental property then what happens if there aren't tenants because there was an evacuation of the area? There may be some insurance products to cover some of these cases though what if there are exceptionally high claims all at once that may have an insurance company go under? Would it be to set up an FD in a bank, to buy land, to buy a rental house, to buy a field, or maybe to purchase gold? What investment of your own time do you plan on making here? Both in terms of understanding what your long-term strategy is and then the maintenance of the plan. If you put the money in the bank, are you expecting that the interest rate will always be high enough to give you sufficient cash to live as well as having no financial crisis with the bank or currency you are using? Are there any better investments? You may want to reconsider what assumptions you want to make and what risks you want to accept as there isn't likely to be a single solution here that would be perfect. |
Possibility of donations in an educational site | You can have a way for people to pay, i.e. some kind of payment gateway. Run as Business: Best create a company and get the funds there. This would be treated as income of the website and would be taxed accordingly. One can deduct expenses for running the website, etc. Run as Charity: Register as one, however the cause should be considered as charitable one by the tax authorities. Only then the donations would be tax free. |
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. |
Why doesn't change in accounts receivable on balance sheet match cash flow statement? | It is difficult to reconcile historical balance sheets with historical cash flow statements because there are adjustments that are not always clearly disclosed. Practitioners consider activity on historical cash flow statements but generally don't invest time reconciling historical accounts, instead focusing on balancing projected balance sheets / cash flow statements. If you had non-public internal books, you could reconcile the figures (presuming they are accurate). In regards to Mike Haskel's comment, there's also a section pertaining to operating capital, not just effects on net income. |
Against what income are broker fees deducted? | You don't "deduct" transaction fees, but they are included in your cost basis and proceeds, which will affect the amount of gain/loss you report. So in your example, the cost basis for each of the two lots is $15 (10$ share price plus $5 broker fee). Your proceeds for each lot are $27.50 (($30*2 - $5 )/2). Your gain on each lot is therefore $12.50, and you will report $12.50 in STCG and $12.50 in LTCG in the year you sold the stock (year 3). As to the other fees, in general yes they are deductible, but there are limits and exceptions, so you would need to consult a tax professional to get a correct answer in your specific situation. |
Stock grant, taxes, and the IRS | I went through this too. There's a safe-harbor provision. If you prepay as estimated tax payments, 110% of your previous year's tax liability, there's no penalty for underpayment of the big liquidity-event tax liability. https://www.irs.gov/publications/p17/ch04.html That's with the feds. Your state may have different rules. You would be very wise indeed to hire an accountant to prepare your return this year. If I were you I'd ask your company's CFO or finance chief to suggest somebody. Congratulations, by the way. |
Online stock screener to find stocks that are negatively correlated to another stock/index? | You may want to have a look at DiversifyPortfolio which will give you the info you want plus quite a bit more. They offer various tools all related to stock correlation and diversification. You'll be able to create heatmaps and various other charts showing stock correlations. It also has several scans which allow you to search for stocks that meet your requirements in terms of correlation to existing positions in your portfolio or to specific stocks / ETF's. |
How does a public company turn shares into cash? | how do they turn shares into cash that they can then use to grow their business? Once a Company issues an IPO or Follow-On Public Offer, the company gets the Money. Going over the list of question tagged IPO would help you with basics. Specifically the below questions; How does a company get money by going public in an IPO? Why would a company care about the price of its own shares in the stock market? Why would a stock opening price differ from the offering price? From what I've read so far, it seems that pre-IPO an investment bank essentially buys the companies public shares, and that bank then sells them on the open market. Is the investment bank buying 100% of the newly issued public shares? And then depositing the cash equivalent into the companies bank account? Additionally, as the stock price rises and falls over the lifetime of the company how does that actually impact the companies bank balance? Quite a bit on above is incorrect. Please read the answers to the question tagged IPO. Once an IPO is over, the company does not gain anything directly from the change in shareprice. There is indirect gain / loss. |
Where can I invest for the Short Term and protect against Inflation? | Emergency funds, car funds etc tend to have to be accessible quickly (which tends to rule out CDs unless you have the patience to work something like a monthly CD ladder, an I don't) and you'll want your principal protected. The latter pretty much rules out any proper investment (ETFs, mutual funds, stock market directly, Elbonian dirt futures etc). It's basically a risk-vs-return calculation. Not much risk, not much return but at least you're not losing from a nominal standpoint). Another consideration is that you normally aren't able to decide freely if and when you want to pull money out of an emergency fund. If it is an emergency, waiting three weeks to see if the stock market goes up a little further isn't an option so you might end up having to take a hit that would be irrelevant if you were investing long term but might hurt badly because you're left with no choice. I'd stick that sort of money into a money market account and either add to it if necessary to keep up with inflation or make sure that my non-retirement investments over and above these funds are performing well, as those will and should become a far bigger part of your wealth in the longer run. |
Are mutual funds safe from defaults? | There are very strict regulations that requires the assets which a fund buys on behalf of its investors to be kept completely separate from the fund's own assets (which it uses to pay its expenses), except for the published fees. Funds are typically audited regularly to ensure this is the case. So the only way in which a default of the fund could cause a loss of invstor money would be if the fund managers broke the regulations and committed various crimes. I've never heard of this actually happening to a normal mutual fund. There is of course also a default risk when a fund buys bonds or other non-equity securities, and this may sometimes be non-obvious. For example, some ETFs which are nominally based on a stock index don't actually buy stocks; instead they buy or sell options on those stocks, which involves a counterparty risk. The ETF may or may not have rules that limit the exposure to any one counterparty. |
Pros and cons of investing in a cheaper vs expensive index funds that track the same index | So, why or why should I not invest in the cheaper index fund? They are both same, one is not cheaper than other. You get something that is worth $1000. To give a simple illustration; There is an item for $100, Vanguard creates 10 Units out of this so price per unit is $10. Schwab creates 25 units out of this, so the per unit price is $4. Now if you are looking at investing $20; with Vanguard you would get 2 units, with Schwab you would get 5 units. This does not mean one is cheaper than other. Both are at the same value of $20. The Factors you need to consider are; Related question What differentiates index funds and ETFs? |
Is it a good investment for a foreigner to purchase a flat/apartment in China? | It is a lousy investment to purchase an apartment in China. Chinese citizens purchase apartments in China because, well... here's how China works: There's some fundamentals driving Chinese property values higher, but mostly it's a bubble caused by those reasons. |
How can I avoid international wire fees or currency transfer fees? | Depending on your income/savings level and who you work for (if you work for a big company check with an HSBC Premier advisor, they may waive the requirements), you may qualify for an HSBC Premier account, which can allow you to open accounts in different countries and transfer money between them without a fee. You can also get a Premier account without meeting the requirements if you are willing to pay a monthly fee, but I doubt that will be worth it in the long run for what you need (worth doing the math though if you travel frequently). NOTE: There may be similar offerings from other banks, but this is just the only one I'm aware of. |
Tax whilst starting a business in full time employment | With a limited company, you'll have to pay yourself a salary through PAYE. With income from your other job taking you over the higher-rate threshold, you should inform HMRC of this and get a tax code of DO for the second job, meaning 40% tax (and also both employer's and employee's National Insurance) will be deducted from the whole amount of the salary. See here. Dividends should be like any other dividend -- you won't pay extra tax when you receive them, but will have to declare them on your tax return and pay the tax later. See the official information here. You'll get a £5,000 tax allowance for dividends, but they'll still count as income for purposes of hitting the higher-rate threshold. I think in practice this means the first £5,000 will be tax-free, and the rest will be taxed at 32.5%. But note that you have to pay yourself at least the minimum wage as salary, not as dividend. I can't see IR35 being an issue. However, I'm not a professional, and this situation is complicated enough to need professional advice. Talk to an accountant or a tax advisor. |
Definition of gross income (Arizona state tax filing requirements) | Disclaimer: I am not a tax professional. Please don't rely on this answer in lieu of professional advice. If your sole source of Arizona income is your commercial property, use the number on line 17 of your federal form 1040. This number is derived from your federal Schedule E. If you have multiple properties (or other business income from S corporations or LLCs), use only the Schedule E amount pertaining to the AZ property. |
How can I invest in an index fund but screen out (remove) certain categories of socially irresponsible investments? | It would involve manual effort, but there is just a handful of exclusions, buy the fund you want, plug into a tool like Morningstar Instant X Ray, find out your $10k position includes $567.89 of defense contractor Lockheed Martin, and sell short $567.89 of Lockheed Martin. Check you're in sync periodically (the fund or index balance may change); when you sell the fund close your shorts too. |
I co-signed a car but i am listed as the primary account holder for the loan | First of all you do not "co-sign a car". I assume what you mean by this is that you co-signed a loan, and the money was used to buy a car. Once you signed that loan YOU OWED THE MONEY. Once a loan exists, it exists, and you will owe the money until the loan is paid. If you do not want to owe the money, then you need to pay back the money you borrowed. You may not think "you" borrowed the money because the car went to someone else. THE BANK AND THE COURTS DO NOT CARE. All they care about is that YOU signed the loan, so as far as they are concerned YOU owe the money and you owe ALL of the money to the bank, and the only way to change that is to pay the money back. |
What is the psychology behind the Dead Cat Bounce Pattern and how can it be traded? | You are correct, a possible Dead Cat Bounce is forming on the stock markets. If it does form it will mean that prices have not reached their bottom, as this pattern is a bearish continuation pattern. For a Dead Cat Bounce to form prices will need to break through support formed by the lows last week. If prices bounce off the support and go back up it could become a double bottom pattern, which is a reversal pattern. The double bottom would be confirmed if prices break above the recent high a couple of days ago. Regarding the psychology of the dead cat bounce pattern, is that after a distinct and quick reversal of prices from recent highs you have 2 groups of market participants who create demand in the market. Firstly you have those who were short covering their short positions to take profits, and secondly you have those who are looking for a bargain buying at what they think is the low. So for a few days you have the bulls taking over the bears. Then as more less positive news comes in, the bears hit the market again. These are more participants opening short positions, but more so those who missed out in selling previously because prices fell too quickly, seeing another opportunity to sell at a better price. So the bears take over again. Unless there is very good news around the corner it is likely that the bears will stay in control and prices will fall further. How to trade a dead cat bounce (assuming you have been stopped out of your long possistions already)? If you are aggressive you can go short as prices start reversing from the top of the bounce (with your stop loss just above the top of the bounce). If you are more conservative you would place your entry for a short position just below the support at the start of the bounce (with your stop above the top of the bounce). You could also place an order for a long position above the top of the bounce if a double bottom eventuated. A One Cancels the Other (OCO) would be an appropriate order for such a situation. |
Am I understanding buying options on stock correctly | Options have legitimate uses as a way of hedging a bet, but in the hands of anyone but an expert they're gambling, not investing. They are EXTREMELY volatile compared to normal stocks, and are one of the best ways to lose your shirt in the stock market yet invented. How options actually work is that you're negotiating a promise that, at some future date or range of dates, they will let you purchase some specific number of shares (call), or they will let you sell them that number of shares (put), at a price specified in the option contract. The price you pay (or are paid) to obtain that contract depends on what the option's seller thinks the stock is likely to be worth when it reaches that date. (Note that if you don't already own the shares needed to back up a put option, you're promising to pay whatever it takes to buy those shares so you can sell them at the agreed upon price.) Note that by definition you're betting directly against experts, as opposed to a normal investment where you're usually trying to ride along with the experts. You are claiming that you can predict the future value of the stock better than they can, and that you will make a profit (on the difference between the value locked in by the option and the actual value at that time) which exceeds the cost of purchasing the option in the first place. Let me say that again: the option's price will have been set based on an expert's opinion of what the stock is likely to do in that time. If they think that it's really likely to be up $10 per share when the option comes due (really unlikely for a $20 stock!!!), they will try to charge you almost $10 per share to purchase the option at the current price. "Almost" because you're giving them a guaranteed profit now and assuming all the risk. If they're less sure it will go up that much, you'll pay less for the option -- but again, you're giving them hard money now and betting that you can predict the probabilities better than they can. Unless you have information that the experts don't have -- in which case you're probably committing insider trading -- this is a very hard bet to win. And it can be extremely misleading, since the price during the option period may cross back and forth over the "enough that you'll make a profit" line many times. Until you actually commit to exercising the option or not, that's all imaginary money which may vanish the next minute. Unless you are willing and able to invest pro-level resources in this, you'd probably get better odds in Atlantic City, and definitely get better odds in Las Vegas. If you don't see the sucker at the poker table, he's sitting in your seat. And betting against the guy who designed and is running the game is usually Not a Good Idea. |
Calculating the cost of waiting longer for money | This looks correct to me, for simple interest. If you are dealing with compound interest, the formula would be: So, A = 500000(1+0.036/365)^(30), or 501,481.57, or an interest of 1481.57, assuming the 3.6% is the annual nominal interest rate and it is compounded daily. Note that you are ignoring the depreciation and also ignoring the percentage of customers who will forfeit their debt in the 30 - 60 day period. |
How much does a landlord pay in taxes? | I'd recommend you use an online tax calculator to see the effect it will have. To your comment with @littleadv, there's FMV, agreed, but there's also a rate below that. One that's a bit lower than FMV, but it's a discount for a tenant who will handle certain things on their own. I had an arm's length tenant, who was below FMV, I literally never met him. But, our agreement through a realtor, was that for any repairs, I was not required to arrange or meet repairmen. FMV is not a fixed number, but a bit of a range. If this is your first rental, you need to be aware of the requirement to take depreciation. Simply put, you separate your cost into land and house. The house value gets depreciated by 1/27.5 (i.e. you divide the value by 27.5 and that's taken as depreciation each year. You may break even on cash flow, the rent paying the mortgage, property tax, etc, but the depreciation might still produce a loss. This isn't optional. It flows to your tax return, and is limited to $25K/yr. Further, if your adjusted gross income is over $100K, the allowed loss is phased out over the next $50K of income. i.e. each $1000 of AGI reduces the allowed loss by $500. The losses you can't take are carried forward, until you use them to offset profit each year, or sell the property. If you offer numbers, you'll get a more detailed answer, but this is the general overview. In general, if you are paying tax, you are doing well, running a profit even after depreciation. |
Is Real Estate ever a BAD investment? If so, when? | As Yishani points out, you always have to do due diligence in buying a house. As I mentioned in this earlier post I'd highly recommend reading this book on buying a house associated with the Wall Street Journal - it clearly describes the benefits and challenges of owning a house. One key takeaway I had was - on average houses have a "rate of return" on par with treasury bills. Its best to buy a house if you want to live in a house, not as thinking about it as a "great investment". And its certainly worth the 4-6 hours it takes to read the book cover to cover. |
Shared groceries expenses between roommates to be divided as per specific consumption ratio and attendance | I asked how often grocery purchases are made in a comment, but I'm going to assume weekly for simplicity. If a roommate is present during the week following a grocery purchase, then they owe a share according to their preferences as you outlined them above. You will have to track the grocery cost by category for that week and calculate the balance owed by the person for that week. If there is a partial week where most expect to leave for a holiday or otherwise, then fewer groceries should be purchased for that week, and the cost of shares will decrease accordingly. One need only indicate preferences once, and weekly attendance thereafter. The only issue remaining is to determine how to record shares. If a normal person consumes 3 shares of milk, and .5 shares of butter, and so on, you simply add up all of the milk shares for the week and divide the milk bill by those shares. Same with the butter. The downside of this method is that you have to predict consumption in advance, so you may instead calculate by consumption after the fact with a deposit paid by all to create the initial grocery supply which will be refunded when that person leaves the grocery purchase co-op, and shares are calculated by who participated in the week prior to the grocery purchase. This also allows for a mid-week refresh if any commodity incurs higher than expected consumption, with the mid-week bill being added to the end of week refresh trip. |
What is the difference between trading and non-trading stock? | A non-trading stock or non-marketable security or unlisted security is one that does not trade continually on an exchange. For tax purposes, this can mean a whole new ball of wax which I would prefer the experts address with an edit to this answer or a new answer. For financial accounting purposes, this is when, say, one owns shares in an unlisted corporation and should be treated very carefully less one delude oneself. For trading stock, the value can be known immediately by checking any valid data provider's price and marking to market. For non-trading stock, the value has to be "marked to model". This can get one into Enron sized trouble. In this case, it's best to either leave the value of the stock at the purchase price and recognize gains upon sale, use a price from another honest transaction by third parties which are most likely difficult to attain, or to use some shorthand measure like applying the market P/E. Be wary of strangely high figures for value from the purchase price by using a market average, and don't throw away the shares just yet if a strangely low one arises. This method can lead to strange results. |
Why do stocks go up? Is it due to companies performing well, or what else? [duplicate] | Supply and Demand, pure and simple! There are two basic forms of this - a change in the quantity demanded/supplied at any given price, and a true change in the amount of demand/supply itself. Please note that this can be distinct from the underlying change in the value of the company and/or its expected future cash flows, which are a function of both financial performance and future expectations. If more people want the stock that are willing to sell it at a given price at a given point in time, sellers will begin to offer the stocks at higher prices until the market is no longer willing to bear the new price, and vice versa. This will reduce the quantity of stocks demanded by buyers until the quantity demanded and the quantity supplied once again reach an equilibrium, at which point a transaction occurs. Because people are motivated to buy and sell for different reasons at different times, and because people have different opinions on a constant flow of new information, prices change frequently. This is one of the reasons why executives of a recent IPO don't typically sell all of their stock at once. In addition to legal restrictions and the message this would send to the market, if they flooded the market with additional quantities of stock supplied, all else being equal, since there is no corresponding increase in the quantity demanded, the price would drop significantly. Sometimes, the demand itself for a company's stock shifts. Unlike a simple change in price driven by quantity supplied versus quantity demanded, this is a more fundamental shift. For example, let's suppose that the current demand for rare earth metals is driven by their commercial applications in consumer electronics. Now if new devices are developed that no longer require these metals, the demand for them will fall, regardless of the actions of individual buyers and sellers in the market. Another example is when the "rules of the game" for an industry change dramatically. Markets are behavioral. In this sense prices are most directly driven by human behavior, which hopefully is based on well-informed opinions and facts. This is why sometimes the price keeps going up when financial performance decreases, and why sometimes it does not rise even while performance is improving. This is also why some companies' stock continues to rise even when they lose huge sums of money year after year. The key to understanding these scenarios is the opinions and expectations that buyers and sellers have of that information, which is expressed in their market behavior. |
Is gold really an investment or just a hedge against inflation? | Another answer to this question occurred to me as I started learning more about historical uses for gold etc. Perhaps it's a crackpot idea, but I'm going to float it anyway to see what you folks think. Investing in Gold is an indirect investment in the Economy and GDP of the nation of India. To that extent is it only a hedge against inflation, so long as the indian economy grows at a more rapid rate than your local inflation rate. Fact, India currently consumes more than 1/3 of gold production, predominantly in the form of Jewelry. And their demand has been growing rapidly, up 69% just between 2009 and 2010 alone. I can't find too many historial consumption numbers for India, but when you look at past articles on this subject, you see phrases like 'one forth' and '20%' being used only a few years go to describe India's consumption levels. Fact, India has virtually no domestic sources of gold. India’s handful of gold mines produce about 2.5 tonnes of the metal each year, a fraction of the country’s annual consumption of about 800 tonnes. Fact. Indian Culture places high value on gold as a visible demonstration of wealth. Particularly in situations such In Indian weddings where the bride brings in gold to show her family's status and wealth and it forms part of the dowry given to bride. It is believed that a bride wearing 24k gold on their wedding to bring luck and happiness throughout the married life. Fact, the recent trends in outsourcing, Indian citizens working abroad sending money home, etc have all lead to a influx of foreign cash to the Indian economy and explosive GDP growth. See the following chart and compare the period of 2000-current with a chart showing the price of gold in other answer here. Notice how the curves parallel each other to a large degree Potentially unfounded conclusion drawn from above numbers. The rapid growth of the Indian economy, coupled with a rich cultural tradition that values gold as a symbol of wealth, along with a sudden rise in 'wealthy' people due to the economy and influx of foreign cash, has resulted in skyrocketing demand for gold from India, and this large 'consumption' demand is the most likely explanation for the sudden rise in the price of gold over the last several years. Investors then jump on the 'rising price bandwagon' as especially does anyone that can make a profit from selling gold to those seeking to get on said bandwagon. As such, as long as indian cultural tradition remains unchanged, and their economy remains strong, the resulting increasing demand for gold will sustain current and perhaps increased prices. Should there be any sudden collapse in the Indian GDP, gold will likely tumble in parallel. disclaimer: not an expert, just observations based off the data I've seen, there may be other parts to the picture of 'gold demand' that I've not considered. |
ETFs are a type of mutual fund, correct? | Your question is one of semantics. ETFs and mutual funds have many things in common and provide essentially the same service to investors with minimal differences. It's reasonably correct to say "An ETF is a mutual fund that..." and then follow up with some stuff that is not true of a typical mutual fund. You could do the same with, for example, a hedge fund. "A hedge fund is a mutual fund that doesn't comply with most SEC regulations and thus is limited to accredited investors." As a matter of practice, when people say "mutual fund" they are talking about traditional mutual funds and pretty much never including ETFs. So is an ETF a mutual fund as the word is commonly used? No. |
Taxes and withholding on unpaid salary | As others have said, make sure you can and do file your taxes on a cash basis (not accrual). It sounds like it's very unlikely the company is going to issue you a 1099 for invoices they never paid you. So you just file last year's taxes based on your income, which is the money you actually received. If they do pay you later, in the new year, you'll include that income on next year's tax return, and you would expect a 1099 at that time. Side note: not getting paid is unfortunately common for consultants and contractors. Take the first unpaid invoice and sue them in small claims court. After you win (and collect!), tell them you'll sue them for each unpaid invoice in turn until they pay you in full. (You might need to break up the lawsuits like that to remain under the small claims limit.) |
What is a mutual fund? | Let's say that you want to invest in the stock market. Choosing and investing in only one stock is risky. You can lower your risk by diversifying, or investing in lots of different stocks. However, you have some problems with this: When you buy stocks directly, you have to buy whole shares, and you don't have enough money to buy even one whole share of all the stocks you want to invest in. You aren't even sure which stocks you should buy. A mutual fund solves both of these problems. You get together with other investors and pool your money together to buy a group of stocks. That way, your investment is diversified in lots of different stocks without having to have enough money to buy whole shares of each one. And the mutual fund has a manager that chooses which stocks the fund will invest in, so you don't have to pick. There are lots of mutual funds to choose from, with as many different objectives as you can imagine. Some invest in large companies, others small; some invest in a certain sector of companies (utilities or health care, for example), some invest in stocks that pay a dividend, others are focused on growth. Some funds don't invest in stocks at all; they might invest in bonds, real estate, or precious metals. Some funds are actively managed, where the manager actively buys and sells different stocks in the fund continuously (and takes a fee for his services), and others simply invest in a list of stocks and rarely buy or sell (these are called index funds). To answer your question, yes, the JPMorgan Emerging Markets Equity Fund is a mutual fund. It is an actively-managed stock mutual fund that attempts to invest in growing companies that do business in countries with rapidly developing economies. |
What can we learn from when the trading volume is much higher/lower than average? | You should not look at volume in isolation but look at it together with other indicators and/or the release of news (good or bad). When there is lower than average volume this could be an indication that the stock is in a bit of a holding pattern, possibly waiting for some company or economic news to come out (especially when accompanied by small changes in price). It could also mean that trading in a certain direction is drying up and the trend is about to end (this could be accompanied with a large move in price). When there is higher than average volume (2 to 3 times more or higher), this could be due to the release of company results, company or economic news, or the start or end of a trend (especially if accompanied by a gap). A large increase in volume accompanied by a large fall in price (usually a gap down) may also be an indication the stock has gone ex-dividend. There could be a range of reasons for variations in volume to the average volume. That is why you need to look at other indicators, company reporting and news, and economic news in combination with the volume changes to get a grasp of what is really happening. |
Where do expense ratios show up on my statement? | For Vanguard: Vanguard does compare its fees with similar funds from its competitors on this tab, but then again, this is Vanguard giving you this information, so take with a grain of salt. |
Why will the bank only loan us 80% of the value of our fully paid for home? | Imagine the bank loaning 100% of the sum of money you needed to buy a house, if the valuation of the house decreases to 90% of the original price after 3 months, would it be unfair for them to ask them for 10% of the original price from you immediately? I suppose the rationale for loaning 80% is so that you will fork our 20% first, and so your property is protected from fluctuations in the market, that they do not need to collect additional money from you as your housing valuation rarely drops below 80% of the original price. Banks do need to make money too, as they run as a business. |
Finding out actual items bought via credit card issuer and not the store receipt? | As a merchant I can tell you that the only thing the bank gets from me. Is the total amount and a category for my business. No detail, not ever. |
Should I pay my Education Loan or Put it in the Stock Market? | The fact that you are planning to sell the property does not make paying down the mortgage a bad idea. Reducing the principal immediately reduces the amount of interest you are paying every month. Run the numbers to see how much money that actually saves you over the time you expect to hold the loan. |
Can Form 1040a, Line 10 be left blank if the broker's 1099-Div shows 0? | Capital gain distribution is not capital gain on sale of stock. If you have stock sales (Schedule D) you should be filing 1040, not 1040A. Capital gain distributions are distributions from mutual funds/ETFs that are attributed to capital gains of the funds (you may not have actually received the distribution, but you still may have gain attributed to you). It is reported on 1099-DIV, and if it is 0 - then you don't have any. If you sold a stock, your broker should have given you 1099-B (which is not the same as 1099-DIV, but may be consolidated by your broker into one large PDF and not provided separately). On 1099-B the sales proceeds are recorded, and if you purchased the stock after 2011 - the cost basis is also recorded. The difference between the proceeds and the cost basis is your gain (or loss, if it is negative). Fees are added to cost basis. |
Why doesn't change in accounts receivable on balance sheet match cash flow statement? | QUICK ANSWER What @Mike Haskel wrote is generally correct that the indirect method for cash flow statement reporting, which most US companies use, can sometimes produce different results that don't clearly reconcile with balance sheet shifts. With regards to accounts receivables, this is especially so when there is a major increase or decrease in the company's allowances for doubtful accounts. In this case, there is more to the company's balance sheet and cash flow statements differences per its accounts receivables than its allowances for doubtful accounts seems responsible for. As explained below, the difference, $1.25bn, is likely owing more to currency shifts and how they are accounted for than to other factors. = = = = = = = = = = DIRTY DETAILS Microsoft Corp. generally sells to high-quality / high-credit buyers; mostly PC, server and other devices manufacturers and licensees. It hence made doubtful accounts provisions of $16mn for its $86,833mn (0.018%) of 2014 sales and wrote off $51mn of its carrying balance during the year. Its accounting for "Other comprehensive income" captures the primary differences of many accounts; specifically in this case, the "foreign currency translation" figure that comprises many balance sheet accounts and net out against shareholders' equity (i.e. those assets and liabilities bypass the income statement). The footnotes include this explanation: Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to other comprehensive income (“OCI”) What all this means is that those two balance sheet figures are computed by translating all the accounts with foreign currency balances (in this case, accounts receivables) into the reporting currency, US dollars (USD), at the date of the balance sheets, June 30 of the years 2013 and 2014. The change in accounts receivables cash flow figure is computed by first determining the average exchange rates for all the currencies it uses to conduct business and applying them respectively to the changes in each non-USD accounts receivables during the periods. For this reason, almost all multinational companies that report using indirect cash flow statements will have discrepancies between the changes in their reported working capital changes during a period and the dates of their balance sheet and it's usually because of currency shifts during the period. |
Can I move my 401k to another country without paying tax penalty? | I doubt that there is an arrangement with any country that would allow you to transfer money out of a 401(k) and roll it over to another country that isn't governed by US Tax Laws without taking a distribution. The US government won't let you pull out like that without taking its cut. There may be, but I'd be surprised. Check around in the appropriate venues. If you're making a distribution that incurs penalties, then that's what you're doing. If you can do so without incurring penalties, then great for you, just deposit into the vehicle of your choice in your country. |
Why is a stock dividend considered a dividend? What makes it different from a stock split? | You can argue that cash dividend is a kind of split as well by this logic. The stock price on ex-dividend gets a hit coincidental with the dividend to be paid, so one can argue that the investor has the same cash value on the day the dividend was paid as if it wouldn't be paid at all. However, for the company to distribute stocks instead of cash may be advantageous if they have low cash reserves but significant amount of treasury stocks, and the stocks are of high liquidity. It is also a way for the company to release treasury stocks without diluting the current shareholders and creating taxable income to the company, that's an important factor to consider. This is in fact the real answer to your question. The main difference between split and stock dividend is that in split, the stock distributions proportions don't change. With stock dividend - they do. While the outstanding share proportions do not change, total proportions do, because of the treasury stocks being distributed. So company has less stocks in its vaults, but everyone else still has the same proportions of ownership. Compare this to split: company's treasury stocks would be split as well, and it would continue essentially sitting on the same proportion of stocks. That shift of treasury stocks to the outside shareholders - this is what makes it a dividend. |
Why do banks finance shared construction as mortgages instead of financing it directly and selling the apartments in a building? | Why should a bank get into construction specifically? Lots of business opportunities require capital. Conceivably banks could build factories, develop consumer electronics, complete with SpaceX, etc. It's all capital in, profits out, with varying levels of risk and returns. There's nothing special about constructing apartments. The reason banks don't run businesses is because there are plenty of private firms that compete with each other for business. What's the chance that a bank, with all its bureaucracy, can deliver cheaper apartments than an apartment developer? Pretty low in fact, and that's why they would rather lend to an apartment developer rather than building the apartments themselves. Banks are in the business of competing with other banks. The main work they do is to sort out good investments from poor ones. And if they can do that just a bit more efficiently than their competitors, they make big bucks. For example, it might only take a few additional hours to better vet a deal worth millions. Whereas with an apartment building, you wouldn't be able to make that amount of money per hour even if the materials and labor cost you nothing. |
What is the P/E ratio for a company with negative earnings? | Usually their PE ratio will just be listed as 0 or blank. Though I've always wondered why they don't just list the negative PE as from a straight math standpoint it makes sense. PE while it can be a useful barometer for a company, but certainly does not tell you everything. A company could have negative earnings for a lot of reasons, some good and some bad. The company could just be a bad company and could be losing money hand over fist, or the company could have had a one time occurrence such as a big acquisition or some other event that just affected this years earnings, or they could be an awesome high growth company that is heavily investing for their future and forgoing locking in profits now for much bigger profits in the future. Generally IPO company's fall into that last category as they are going public usually because they want an influx of cash that they are going to use to grow the company much more rapidly. So they are likely already taking all incoming $$ and taking on debt to grow the company and have exceeded all of those options and that's when they turn to the stock market for the additional influx of cash, so it is very common for these companies not to have earnings. Now you just have to decide if that company is investing that money wisely and will in the future translate to actual earnings. |
“Infinite Banking” or “Be Your Own Bank” via Whole Life Insurance…where to start? | Why would you give them the money and borrow it back? If you didn't give it to them in the first place you wouldn't need to borrow! It makes no sense at all. It USED to have a different use--as a tax dodge. You would buy "life insurance" for a low amount of coverage and way overfund it. Let the money grow and in your later years you would "borrow" against the extra value you had built up in the policy. Since this was a loan rather than a payout it wasn't income. When you died the tax liability went poof. Thus so long as what you had to pay in life insurance + the inefficiency of the insurance company was less than the tax rate it was a good deal. Congress closed this loophole a long time ago by prohibiting too great overfunding. |
Is having a 'startup fund' a good idea? | I am asking because startups are super risky and 99% of the times you fail and lose the money. First of all, that 99% number is exaggerated. Only 96% of companies fail within ten years. But starting your own business is not a pure game of chance. It mostly depends on how good your business idea is and if you have the necessary skills and resources to succeed with it. Yes, there is luck involved, but a smart businessman can calculate the risks and possible rewards and then decide if a certain business idea is a good or a bad gamble. Also, a business failing does not necessarily mean that the business owner failed. A good business owner knows when to fold. A business might be profitable at first, but market circumstances might change at any time making it unprofitable. A smart business owner notices that early, liquidates the unprofitable business as quickly as possible and refocuses on their next business idea. Only those who can not let go of an unprofitable business or take too long to notice that it is failing are those who get dragged down with it. So should you have a "startup fund"? Saving your disposable income is never a mistake. If you never end up starting a business, it will eventually serve you as a retirement fund. So yes, you should save a part of your money each month. But should you start a company with it? That depends on whether or not you have a business idea where you know you will succeed. How do you know that? When you answered yes to all of these questions, then you might want to consider it. |
Which dividend bearing stock should be chosen by price? | Price doesn't mean anything. Price is simply total value (market capitalization) divided by number of shares. Make sure you consider historical dividends when hunting for big yields. It's very possible that the data you're pulling is only the annualized yield on the most recent dividend payment. Typically dividends are declared in dollar terms. The total amount of the dividend to be issued is then divided by the number of shares and paid out. Companies rarely (probably never but rarely to avoid the peanut gallery comments about the one company that does this) decide dividend payments based on some proportion of the stock price. Between company A and company B paying approximately the same historical yield, I'd look at both companies to make sure neither is circling the tank. If both look strong, I'd probably buy a bit of both. If one looks terrible buy the other one. Don't pick based on the price. |
Does the IRS reprieve those who have to commute for work? | You cannot deduct commute expenses. Regarding your specific example, something to consider is that if the standard of living is higher in San Francisco, presumably the wages are higher too. Therefore, you must make a choice to trade "time and some money for commuting costs" for "even more money" in the form of higher wages. For example, if you can make $50K working 2 hours away from SF, or $80K working in SF, and it costs you $5K extra per year in commute costs, you still come out ahead by $25K (minus taxes). If it ends up costing $20K more to live in SF (due to higher rent/mortgage/food/etc), some people choose to trade 4 extra hours of commuting time to put that extra $20K in their pocket. It's sort of like having an extra part time job, except you get paid to read/watch tv/sleep on the job (assuming you can take a train to work). |
Should I have to pay income tax on contribution to home office rent from company? | This is essentially a reimbursement of your expense. Since you can deduct the expense, the fact that the reimbursement is taxable doesn't affect you much. You deduct your home office expenses on your annual tax return using form 8829. See the IRS site for more details. If you're asking about the UK tax, there may be some other considerations, but from the US tax perspective it is (nearly) a wash. |
I have a horrible 401k plan, with high expenses. Should I stay with it or move my money elsewhere? | 2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser. |
Tax for Basket with Coupon containing two different VAT rates | The vendor needs to do this using apportionment, according to the VAT rules for mixed supplies: If you make mixed supplies and the individual supplies are not liable to VAT at the same rate then you need to work out the tax value of each supply in order to calculate how much tax is due. If the tax value is based on the total price you charge (see paragraph 7.3) you do this by splitting that price between the supplies. This is called an apportionment ... There is no special method of apportionment ... However, your calculations must be fair and you must be able to justify them. It is usually best to use one of the methods shown in section 32. The section 32 referred to really relates to apportioning use between business and non-business purposes, but it implies that splitting up the total price in proportion to the original prices would probably be fair. So in your example the vendor might split the £5 discount equally between the spoon and the carrycot as they had the same gross cost, and pay VAT as if each had cost £7.50 gross. The vendor could also do it in proportion to their net (pre-VAT) prices and thus apportion a bit more of the discount to the carrycot than the spoon, but as this would lead to them paying slightly more tax overall they probably wouldn't choose to. However, none of this is likely to be too relevant to a consumer, since in the UK prices must be presented as the gross (VAT-inclusive) amounts and so the discounts will also apply to those amounts. It will of course affect how much of the purchase price the vendor ends up paying on to the government and thus might indirectly affect what discounts the vendor is willing to offer. |
What is the lifespan of a series of currency? | US currency doesn't expire, it is always legal tender. I can see some trouble if you tried to spend a $10,000 bill (you'd be foolish to do so, since they are worth considerably more). Maybe some stores raise eyebrows at old-style $100's (many stores don't take $100 bills at all), but you could swap them for new style at a bank if having trouble with a particular store. Old-series currency can be an issue when trying to exchange US bills in other countries, just because it doesn't expire here, doesn't mean you can't run into issues elsewhere. Other countries have different policies, for example, over the last year the UK phased in a new five pound note, and as of last month (5/5/2017) the old fiver is no longer considered legal tender (can still swap out old fivers at the bank for now at least). Edit: I mistook which currency you took where, and focused on US currency instead of Canadian, but it looks like it's the same story there. |
Do you know of any online monetary systems? | I recently came across bitcoin, it is what I was really looking for at the time. |
High dividend stocks | Future tax increases on dividends are likely. The Wall Street Journal says. "The millions of Americans who receive dividend income ... need to begin adjusting their investment strategy accordingly." (ref) "Last week the Senate Budget Committee passed a fiscal 2011 budget resolution that includes an increase in the top tax rate on dividends to 39.6% from the current 15%—a 164% increase." ... "You can expect fewer businesses either to offer or increase dividend payouts." |
A merchant requests that checks be made out to “Cash”. Should I be suspicious? | They're hiding income. The IRS is a likely candidate for who they are hiding it from but not the only option. Another possibility that comes to mind is someone who had a judgment against them--a check made out to "cash" could be handled by someone else and thus not ever appear in their bank accounts. |
Covered calls: How to handle this trade? | Your broker likely didn't close your position out because it is a covered position. Why interfere with a trade that has no risk to it, from their perspective? There's no risk for the broker since your account holds the shares available for delivery (definition of covered), for if and when the options you wrote (sold) are exercised. And buyers of those options will eventually exercise the options (by expiration) if they remain in-the-money. There's only a chance that an option buyer exercises prematurely, and usually they don't because there's often time value left in the option. That the option buyer has an (ahem) "option" to exercise is a very key point. You wrote: "I fully expected my position to be automatically liquidated by whoever bought my call". That's a false assumption about the way options actually work. I suggest some study of the option exercise FAQs here: Perhaps if your position were uncovered – i.e. you wrote the call without owning the stock (don't try this at home, kids!) – and you also had insufficient margin to cover such a short position, then the broker might have justifiably liquidated your position. Whereas, in a covered call situation, there's really no reason for them to want to interfere – and I would consider that interference, as opposed to helpful. The situation you've described is neither risky for them, nor out of the ordinary. It is (and should be) completely up to you to decide how to close out the position. Anyway, your choices generally are: |
How do dividend reinvestment purchases work? | Many brokers administer their own dividend reinvestment plans. In this case, on dividend payment date, they automatically buy from the market on behalf of their reinvestment customers, and they administer all fractional shares across all customers. All of your shares are in the broker's street name anyway, the fractional share is simply in their account system. The process is well documented for several common online brokers; so any specific questions you may have about differences in policies or implementation should be directed to your broker: https://us.etrade.com/e/t/estation/help?id=1301060000 https://www.tdameritrade.com/retail-en_us/resources/pdf/TDA208.pdf |
Family suggests my first real estate. Advice? | Living in one unit of a multi-family while renting out the others, although not without its risks, can be a viable (if gradual) way to build wealth. It's been rebranded recently as "house hacking", but the underlying mechanics have been around for many years (many cities in the Northeast in particular remain chock full of neighborhoods of 3-family homes built and used for exactly that purpose for decades, though now frequently sub-divided into condos). It's true you'd need to borrow money, but there are a number of reasons why it's certainly at least worth exploring (which is what you seem to be asking -- should you bother doing the homework -- tl;dr: yes): And yes, you would be relying on tenants to meet your monthly expenses, including a mortgage bill that will arrive whether the other units are vacant or not. But in most markets, rental prices are far less volatile than home prices (from the San Francisco Federal Reserve): The main result from this decomposition is that the behavior of the price-rent ratio for housing mirrors that of the price-dividend ratio for stocks. The majority of the movement of the price-rent ratio comes from future returns, not rental growth rates. (Emphasis added) It's also important to remember that rental income must do more than just cover your mortgage -- there's lots of other expenses associated with a rental property, including insurance, taxes, maintenance, vacancy (an allowance for the periods when the property will be empty in between tenants), reserves for capital improvements, and more. As with any investment, it's all about whether the numbers work. (You mentioned not being interested in the "upkeep work", so that's another 8-10% off the top to pay for a property manager.) If you can find a property at an attractive price, secure financing on attractive terms, and can be reasonably confident that it will rent in the ballpark of 1.5-2% of the purchase price, then it might be a fine choice for you, assuming you are willing and able to handle the work of being a landlord -- something worth at least as much of your research time as the investment itself. It sounds like you're still a ways away from having enough for even an FHA down payment, which gives you a great opportunity to find and talk with some local folks who already manage rental properties in your area (for example, you might look for a local chapter of the national Real Estate Investment Association), to get a sense of what's really involved. |
What does the average log-return value of a stock mean? | Log-returns are very commonly used in financial maths, especially quantitative finance. The important property is that they're symmetrical around 0 with respect to addition. This property makes it possible to talk about an average return. For instance, if a stock goes down 20% over a period of time, it has to gain 25% to be back where you started. For the log-return on the other hand the numbers are 0.223 down over a period of time, and 0.223 up to get you back to square 1. In this sense, you can simply take an arithmetic average and it makes sense. You can freely add up or subtract values on the log-return scale, like log-interest rates or log-inflation rates. Whereas the arithmetic mean of (non-log) returns is simply meaningless: A stock with returns -3% and +3% would have 0% on average, when in fact the stock has declined in price? The correct approach on direct price-returns would be to take a different mean (e.g. geometric) to get a decent average. And yet it will be hard to incorporate other information, like subtracting the risk-free rate or the inflation rate to get rate-adjusted average returns. In short: Log-returns are easier to handle computationally, esp. in bulk, but non-log-returns are easier to comprehend/imagine as a number of their own. |
How can I diversify investments across currencies in ISA? | Just buy a FTSE-100 tracker. It's cheap and easy, and will hedge you pretty well, as the FTSE-100 is dominated by big mining and oil companies who do most of their business in currencies other than sterling. |
What happened to GOOG-stock? Why isn't it 1.000 USD? | The stock split, it is similar to what happened to Apple a little while back. When Google split 2 to 1, it means that each share holder got 2 shares for each 1 share they had and each share was 1/2 the price. |
Price Earnings Ratio | Your question asks us to explain why a false statement is true. From the point of view of an investor, a high price to earnings ratio is not necessarily desirable. From the point of view of an investor, a desirable stock is one that is likely to provide future dividends or price increases that more than compensates for the risk of the stock. This information cannot be inferred from the P/E ratio. So what does the P/E ratio tell us? The P/E ratio measures a stock's current price (i.e., the market's belief about its future earnings) divided by its recent past earnings. A high ratio means the market thinks earnings in the future will be higher than they are now and have therefore bid the price up. These can thought of as expensive stocks, and are often called "growth" stocks because their price is driven by the market's belief in future growth. Some individual high P/E stocks do live up to or exceed the market's expectation, but there's no evidence that this happens enough that they are more desirable as a group than low P/E stocks. If anything, the empirical evidence goes the other way. |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | The whole point of a credit report and, by extension, a credit score, is to demonstrate (and judge) your ability to repay borrowed funds. Everything stems from that goal; available credit, payment history, collections, etc all serve to demonstrate whether or not you personally are a good investment for lenders to pursue. Revolving credit balances are tricky because they are more complicated than fixed loans (for the rest of this answer, I'll just talk about credit cards, though it also applies to lines of credit such as overdraft protection for checking accounts, HELOCs, and other such products). Having a large available balance relative to your income means that at any time you could suddenly drown yourself in debt. Having no credit cards means you don't have experience managing them (and personal finances are governed largely by behavior, meaning experience is invaluable). Having credit cards but carrying a high balance means you know how to borrow money, but not pay it back. Having credit cards but carrying no balance means you don't know how to borrow money (or you don't trust yourself to pay it back). Ideally, lenders will see a pattern of you borrowing a portion of the available credit, and then paying it down. Generally that means utilizing up to 30% of your available credit. Even if you maintain the balance in that range without paying it off completely, it at least shows that you have restraint, and are able to stop spending at a limit you personally set, rather than the limit the bank sets for you. So, to answer your question, 0% balance on your credit cards is bad because you might as well not have them. Use it, pay it off, rinse and repeat, and it will demonstrate your ability to exercise self control as well as your ability to repay your debts. |
Insurance, healthcare provider, apparent abuse, lack of transparency | I wouldn't classify your treatment as abuse. Medical billing has become more complex not less complex. You need to learn to ask even more questions regarding expenses, you probably need to see these price quotes in writing. You did several things correctly. Staying in-network generally is best because many plans have two deductible limits: In-network, and out-of-network. You need to make sure that the insurance company does credit you with having paid the new patient fee. That will qualify as an expense toward the deductible and your maximum out of pocket for the year. Some doctors offices don't send to insurance companies items that they know will not be covered, not remembering that these costs are critical under the High deductible plans with a health savings account. Doctors offices have problems determining how much the cost to you will be. It depends not just on the insurance company but also which type of plan you have, which sub-plan you have, and are you covered by more than one plan. Not to mention individual deductibles, family deductibles, and annual out-of-pocket amount. All this is wanted prior to the doctor seeing the patient. Most doctors offices will work with you, they know that each insurance plan treats each medical billing code differently, sometimes they make a mistake. Talk to them. |
Buying under my bid price | It definitely depends on the exchange you are trading on. I'm not familiar with Scottrade, but a standard practice is to fulfill limit orders in the order they are placed. Most of the time, you wouldn't see stocks trade significantly under your bid price, but since penny stocks are very volatile, it's more likely their price could drop quickly past your bid and then return above it while only fulfilling a portion of the orders placed. Example 1. Penny stock priced at $0.12 2. Others place limit orders to buy at $0.10 3. You place limit order to buy at $0.10 4. Stock price drops to $0.07 and some orders are filled (anything $0.07 or higher) based on a first-come first-served basis 5. Due to the increase in purchases of the penny stock, the price rises above $0.10 before your order is filled ***EDIT*** - Adding additional clarification from comment section. A second example If the price drops from $0.12 to $0.07, then orders for all prices from $0.07 and above will start to be filled from the oldest order first. That might mean that the oldest order was a limit buy order for 100 shares at $0.09, and since that is above the current ask price, it will be filled first. The next order might be for 800 shares at $0.07. It's possible for a subset of these to be filled (let's say 400) before the share's price increases from the increased demand. Then, if the price goes above $0.10, your bid will not be filled during that time. |
What US tax laws apply to a 13 year old game developer? | After doing a little research, I was actually surprised to find many internet resources on this topic (including sites from Intuit) gave entirely incorrect information. The information that follows is quoted directly from IRS Publication 929, rules for dependents First, I will assume that you are not living on your own, and are claimed as a "dependent" on someone else's tax return (such as a parent or guardian). If you were an "emancipated minor", that would be a completely different question and I will ignore this less-common case. So, how much money can you make, as a minor who is someone else's dependent? Well, the most commonly quoted number is $6,300 - but despite this numbers popularity, this is not true. This is how much you can earn in wages from regular employment without filing your own tax return, but this does not apply to your scenario. Selling your products online as an independent game developer would generally be considered self-employment income, and according to the IRS: A dependent must also file a tax return if he or she: Had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. So, your first $400 in earnings triggers absolutely no requirement to file a tax return - blast away, and good luck! After that, you do not necessarily owe much in taxes, however you will need to file a tax return even if you owe $0, as this was self-employment income. If you had, for instance, a job at a grocery store, you could earn up to $6,300 without filing a return, because the store would be informing the IRS about your employment anyway - as well as deducting Medicare and Social Security payments, etc. How much tax will you pay as your income grows beyond $400? Based upon the IRS pages for Self-Employment Tax and Family Businesses, while you will not likely have to pay income tax until you make $6,300 in a year, you will still have to pay Social Security and Medicare taxes after the first $400. Roughly this should be right about 16% of your income, so if you make $6000 you'll owe just under $1000 (and be keeping the other $5000). If your income grows even more, you may want to learn about business expense deductions. This would allow you to pay for things like advertisement, software, a new computer for development purposes, etc, and deduct the expenses out of your income so you pay less in taxes. But don't worry - having such things to wonder about would mean you were raking in thousands of dollars, and that's an awfully good problem to have as a young entrepreneur! So, should you keep your games free or try to make some money? Well, first of all realize that $400 can be a lot harder to make when you are first starting in business than it probably sounds. Second, don't be afraid of making too much money! Tax filing software - even totally free versions - make filing taxes much, much easier, and at your income level you would still be keeping the vast majority of the money you earn even without taking advantage of special business deductions. I'd recommend you not be a afraid of trying to make some money! I'd bet money it will help you learn a lot about game development, business, and finances, and will be a really valuable experience for you - whether you make money or not. Having made so much money you have to pay taxes is not something to be afraid of - it's just something adults like to complain about :) Good luck on your adventures, and you can always come back and ask questions about how to file taxes, what to do with any new found wealth, etc! |
Should I continue to invest in an S&P 500 index fund? | Cycle analysis indicates that the current bear market, which began in May/June, should last until late 2016 / early 2017. So if you want to trade the short side, then it's a great time to be short for the next 15-18 months. |
Covered call when stock position is at a loss | An expired option is a stand-alone event, sold at $X, with a bought at $0 on the expiration date. The way you phrased the question is ambiguous, as 'decrease toward zero' is not quite the same as expiring worthless, you'd need to buy it at the near-zero price to then sell another covered call at a lower strike. Edit - If you entered the covered call sale properly, you find that an in-the-money option results in a sale of the shares at expiration. When entered incorrectly, there are two possibilities, the broker buys the option back at the market close, or you wake up Sunday morning (the options 'paperwork' clears on Saturday after expiration) finding yourself owning a short position, right next to the long. A call, and perhaps a fee, are required to zero it out. As you describe it, there are still two transactions to report, the option at $50 strike that you bought and sold, the other a stock transaction that has a sale price of the strike plus option premium collected. |
How to evaluate an annuity | Guaranteed 8.2% annual return sounds too good to be true. Am I right? Are there likely high fees, etc.? You're right. Guaranteed annual return is impossible, especially when you're talking about investments for such a long period of time. Ponzi (and Madoff) schemed their investors using promises of guaranteed return (see this note in Wikipedia: In some cases returns were allegedly determined before the account was even opened.[72]). Her financial advisor doesn't charge by the hour--he takes a commission. So there's obviously some incentive to sell her things, even if she may not need them. Definitely not a good sign, if the advisor gets a commission from the sale then he's obviously not an advisor but a sales person. The problem with this kind of investment is that it is very complex, and it is very hard to track. The commission to the broker makes it hard to evaluate returns (you pay 10% upfront, and it takes awhile to just get that money back, before even getting any profits), and since you're only able to withdraw in 20 years or so - there's no real way to know if something wrong, until you get there and discover that oops- no money! Also, many annuity funds (if not all) limit withdrawals to a long period, i.e.: you cannot touch money for like 10 years from investment (regardless of the tax issues, the tax deferred investment can be rolled over to another tax deferred account, but in this case - you can't). I suggest you getting your own financial advisor (that will work for you) to look over the details, and talk to your mother if it is really a scam. |
What are the tax guidelines for a Canadian freelancer working for a US company? | I do NOT know the full answer but I know here are some important factors that you need to consider : Do you have a physical location in the United States? Are you working directly from Canada? With a office/business location in the United States your tax obligation to the US is much higher. Most likely you will owe some to the state in which your business is located in Payroll Tax : your employer will likely want to look into Payroll tax, because in most states the payroll tax threshold is very low, they will need to file payroll tax on their full-time, part-time employees, as well as contractor soon as the total amount in a fiscal year exceeds the threshold Related to No.1 do you have a social security number and are you legally entitled to working in the States as an individual. You will be receiving the appropriate forms and tax withholding info Related to No.3 if you don't have that already, you may want to look into how to obtain permissions to conduct business within the United States. Technically, you are a one person consulting service provider. You may need to register with a particular state to obtain the permit. The agency will also be able to provide you with ample tax documentations. Chances are you will really need to piece together multiple information from various sources to resolve this one as the situation is specific. To start, look into consulting service / contractor work permit and tax info for the state your client is located in. Work from state level up to kick start your research then research federal level, which can be more complex as it is technically international business service for Canada-US |
Mutual Fund with Dividends | There are two independent sets of terms we need to define in order to answer your question. I am trying to understand the difference between Value, Blend, and Growth These are different categories of mutual funds: Value: discounted or undervalued stocks. This is often measured by a difference between the stock's price and the Net Asset Value (NEV). Growth: stocks that fund managers believe are poised for significant growth (increase in stock price and NEV). Blend: a blend of two categories of stocks. In this context it probably refers to a combination of growth and value stocks, but it just depends on the context. I want to receive dividend and Growth These are ways to receive earnings from a stock or fund. Dividend: a direct cash payment from owning a stock or a fund. Stocks and funds who pay out 100% of their profits don't have any money leftover to grow themselves and either stagnate or shrink. Growth: an increase manifesting itself in capital gains. If a stock or fund pays out zero dividends, then all profits are invested back into the company for fund, increasing its value. If you intend to automatically reinvest dividends, then receiving dividends is essentially the same as receiving profit through capital gains. If you intend to sell stocks or funds periodically to get some extra spending cash, then receiving profits through capital gains is essentially the same as dividends. |
Choosing a vehicle to invest a kid's money on their behalf (college, etc.)? | Roth is currently not an option, unless you can manage to document income. At 6, this would be difficult but not impossible. My daughter was babysitting at 10, that's when we started her Roth. The 529 is the only option listed that offers the protection of not permitting an 18 year old to "blow the money." But only if you maintain ownership with the child as beneficiary. The downside of the 529 is the limited investment options, extra layer of fees, and the potential to pay tax if the money is withdrawn without child going to college. As you noted, since it's his money already, you should not be the owner of the account. That would be stealing. The regular account, a UGMA, is his money, but you have to act as custodian. A minor can't trade his own stock account. In that account, you can easily manage it to take advantage of the kiddie tax structure. The first $1000 of realized gains go untaxed, the next $1000 is at his rate, 10%. Above this, is taxed at your rate, with the chance for long tern capital gains at a 15% rate. When he actually has income, you can deposit the lesser of up to the full income or $5500 into a Roth. This was how we shifted this kind of gift money to my daughter's Roth IRA. $2000 income from sitting permitted her to deposit $2000 in funds to the Roth. The income must be documented, but the dollars don't actually need to be the exact dollars earned. This money grows tax free and the deposits may be withdrawn without penalty. The gains are tax free if taken after age 59-1/2. Please comment if you'd like me to expand on any piece of this answer. |
Retirement formula for annual compound interest with changing principal | The equation is the same one used for mortgage amortization. You first want to calculate the PV (present value) for a stream of $50K payments over 20 years at a10% rate. Then that value is the FV (future value) that you want to save for, and you are looking to solve the payment stream needed to create that future value. Good luck achieving the 10% return, and in knowing your mortality down to the exact year. Unless this is a homework assignment, which need not reflect real life. Edit - as indicated above, the first step is to get that value in 20 years: The image is the user-friendly entry screen for the PV calculation. It walks you though the need to enter rate as per period, therefore I enter .1/12 as the rate. The payment you desire is $50K/yr, and since it's a payment, it's a negative number. The equation in excel that results is: =PV(0.1/12,240,-50000/12,0) and the sum calculated is $431,769 Next you wish to know the payments to make to arrive at this number: In this case, you start at zero PV with a known FV calculated above, and known rate. This solves for the payment needed to get this number, $568.59 The excel equation is: =PMT(0.1/12,240,0,431769) Most people have access to excel or a public domain spreadsheet application (e.g. Openoffice). If you are often needing to perform such calculations, a business finance calculator is recommended. TI used to make a model BA-35 finance calculator, no longer in production, still on eBay, used. One more update- these equations whether in excel or a calculator are geared toward per period interest, i.e. when you state 10%, they assume a monthly 10/12%. With that said, you required a 20 year deposit period and 20 year withdrawal period. We know you wish to take out $4166.67 per month. The equation to calculate deposit required becomes - 4166.67/(1.00833333)^240= 568.59 HA! Exact same answer, far less work. To be clear, this works only because you required 240 deposits to produce 240 withdrawals in the future. |
Is working on a W2 basis, with benefits paid to me, a good idea? | It's hard to answer without knowing all of the details (i.e. what was your salary for each of the options), but I think you probably made a good choice. 1099: Would have required you to pay self-employment tax, but also would have allowed you to deduct business expenses. W2 with benefits: Likely would have been beneficial if you needed healthcare (since group plans can be cheaper than individual plans, and healthcare payments aren't taxed), but if you don't use the healthcare, that would have been a waste. W2, no benefits: Assuming your salary here falls between the 1099 and the W2 with benefits, it seems like a good compromise for your situation. |
Why are some long term investors so concerned about their entry price? | Because buying at discount provides a considerable safety of margin -- it increases the likelihood of profiting. The margin serves to cushion future adverse price movement. Why is so much effort made to get a small percentage off an investment, if one is then willing to let the investment drop another 20% or more with the reason of being in it for the long term? Nobody can predict the stock price. Now if a long term investor happens to buy some stocks and the market crashes the next day, he could afford to wait for the stock prices to bounce back. Why should he sells immediately to incur a definite loss, should he has confidence in the underlying companies to recover eventually? One can choose to buy wisely, but the market fluctuation is out of his/her control. Wouldn't you agree that he/she should spend much efforts on something that can be controlled? |
How to spend more? (AKA, how to avoid being a miser) | The key question is this - What brings you happiness? How much is this behavior actually making you miserable? It's possible, and important, to find balance between frugality and as you say, being a miser. It's also important to understand the diminishing return, and to value not just your hour of time but your happiness-hour. By this I mean there's a distinction between an hour arguing with a customer service rep and spending an hour on a project yourself. There are countless people who push a lawn mower around every Saturday even though they have the money to hire a mowing company. Fresh air, exercise, quiet time, for them it makes sense. We pick and choose. The happy mower is in a good place. The miserable mower who hates doing it and just won't spend the money, not so much. Frugal simply means not wasteful, but it can be misunderstood to mean cheap. When our brand of TP is on sale, I'll use coupons, and stock up. Unless you visited and peeked into a cabinet, all seems normal. A visit to a friend's summer home taught us the value of packing a few rolls for a weekend visit into the unknown. Her cheap brand was like sandpaper and every item in her house was a strange brand I'd never heard of, including food items well beyond expiration. She took cheap to a new level. In the end, this question is less about finance than about psychology. |
What does “Yield Curve” mean? | Great question! A Yield Curve is a plot of the yields for different maturities of debt. This can be for any debt, but the most common used when discussing yield curves is the debt of the Federal Government. The yield curve is observed by its slope. A curve with a positive slope (up and to the right) or a steepening curve, i.e. one that's becoming more positively sloped or less negatively sloped, may indicate several different situations. The Kansas City Federal Reserve has a nice paper that summarizes various economic theories about the yield curve, and even though it's a bit dated, the theories are still valid. I'll summarize the major points here. A positively sloped yield curve can indicate expectations of inflation in the future. The longer a security has before it matures, the more opportunities it has to be affected by changes in inflation, so if investors expect inflation to occur in the future, they may demand higher yields on longer-term securities to compensate them for the additional inflationary risk. A steepening yield curve may indicate that investors are increasing their expectations of future inflation. A positively sloped yield curve may also reflect expectations of deprecation in the dollar. The publication linked before states that depreciation of the dollar may have increased the perceived risk of future exchange rate changes and discouraged purchases of long-term Treasury securities by Japanese and other foreign investors, forcing the yields on these securities higher. Supply shocks, e.g. decreases in oil prices that lead to decreased production, may cause the yield curve to steepen because they affect short-term inflation expectations significantly more than long-term inflation. For example, a decrease in oil prices may decrease short-term inflation expectations, so short-term nominal interest rates decline. Investors usually assume that long-term inflation is governed more by fundamental macroeconomic factors than short-term factors like commodity price swings, so this price shock may lead short-term yields to decrease but leave long-term relatively unaffected, thus steepening the yield curve. Even if inflation expectations remain unchanged, the yield curve can still change. The supply of and demand for money affects the "required real rate," i.e. the price of credit, loans, etc. The supply comes from private savings, money coming from abroad, and growth in the money supply, while demand comes from private investors and the government. The paper summarizes the effects on real rates by saying Lower private saving, declines in the real money supply, and reduced capital inflows decrease the supply of funds and raise the required real rate. A larger government deficit and stronger private investment raise the required real rate by increasing the demand for funds. The upward pressure on future real interest rates contributes to the yield curve's positive slope, and a steepening yield curve could indicate an increasing government deficit, declines in private savings, or reduced capital coming in from abroad (for example, because of a recession in Europe that reduces their demand for US imports). an easing of monetary policy when is economy is already producing near its capacity ... would initially expand the real money supply, lowering required short-term real interest rates. With long-term real interest rates unchanged, the yield curve would steepen. Lower interest rates in turn would stimulate domestic spending, putting upward pressure on prices. This upward price pressure would probably increase expected inflation, and as the first bullet point describes, this can cause long-term nominal interest rates to rise. The combination of the decline in short-term rates and the rise in long-term rates steepens the yield curve. Similarly, an inverted yield curve or a positively sloped yield curve that is becoming less steep may indicate the reverse of some or all of the above situations. For example, a rise in oil prices may increase expectations of short-term inflation, so investors demand higher interest rates on short-term debt. Because long-term inflation expectations are governed more by fundamental macroeconomic factors than short-term swings in commodity prices, long-term expectations may not rise nearly as much as short term expectations, which leads to a yield curve that is becoming less steep or even negatively sloped. Forecasting based on the curve slope is not an exact science, just one of many indicators used. Note - Yield Curve was not yet defined here and was key to my answer for What is the "Bernanke Twist" and "Operation Twist"? What exactly does it do? So I took the liberty of ask/answer. |
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