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If Bernie Madoff had invested in Berkshire Hathaway, would the ponzi actually have succeeded? | null | I could be wrong, but I doubt that Bernie started out with any intention of defrauding anyone, really. I suspect it began the first time he hit a quarter when his returns were lower than everyone else's, or at least not as high as he'd promised his investors they'd be, so he fudged the numbers and lied to get past the moment, thinking he'd just make up for it the next quarter. Only that never happened, and so the lie carried forward and maybe grew as things didn't improve as he expected. It only turned into a ponzi because he wasn't as successful at investing as he was telling his investors he was, and telling the truth would have meant the probability that he would have lost most of his clients as they went elsewhere. Bernie couldn't admit the truth, so he had to keep up the fiction by actually paying out returns that didn't exist, which required constantly finding new money to cover what he was paying out. The source of that money turned out to be new investors who were lured in by people already investing with Bernie who told them how great he was as a financial wizard, and they had the checks to prove it. I think this got so far out of hand, and it gradually dragged more and more people in because such things turn into black holes, swallowing up everything that gets close. Had the 2008 financial crisis not hit then Bernie might still be at it. The rapid downturns in the markets hit many of Bernie's investors with margin calls in other investments they held, so they requested redemptions from him to cover their calls, expecting that all of the money he'd convinced to leave with him really existed. When he realized he couldn't meet the flood of redemptions, that was when he 'fessed up and the bubble burst. Could he have succeeded by simple investing in Berkshire? Probably. But then how many people say that in hindsight about them or Amazon or Google, or any number of other stocks that turned out similarly? (grin) Taking people's money and parking it all in one stock doesn't make you a genius, and that's how Bernie wanted to be viewed. To accomplish that, he needed to find the opportunities nobody else saw and be the one to get there first. Unfortunately his personal crystal ball was wrong, and rather than taking his lumps by admitting it to his investors, his pride and ego led him down a path of deception that I'm sure he had every intention of making right if he could. The problem was, that moment never came. Keep in mind one thing: The $64 billion figure everyone cites isn't money that really existed in the first place. That number is what Bernie claimed his fund was worth, and it is not the amount he actually defrauded people out of. His actual cash intake was probably somewhere in the $20 billion range over that time. Everything else beyond that was nothing more than the fictionalized returns he was claiming to get for his clients. It's what they thought they had in the bank with him, rather than what was really there. |
Should I make partial pre-payments on an actuarial loan? | null | The contract is not very clear. As much as I can understand it will still help if you make part prepayments. In an Rule 78 or Actuarial method, the schedule is drawn up front and the break-up of interest and principal for each month is calculated ahead. At the beginning both the reducing balance method as well as Actuarial method will give the same schedule. However in Actuarial method, if you make part prepayments, they get applied to the future principals, the interest are ignored. However the future interests are not reduced. Example: Say your schedule looks something like this; Monthly Payments say 100; Month | Principal | Interest 1 | 10 | 90 2 | 20 | 80 3 | 30 | 70 4 | 40 | 60 5 | 50 | 50 6 | 60 | 40 7 | 70 | 30 8 | 80 | 20 9 | 90 | 10 So lets say you have made 3 payments of 100, in the 4th month if you make 150 [in addition to 100], it would get applied to the principal of 4th, 5th and 6th month. So essentially you would save interest of 4th, 5th and 5th month. It would also reduce the total payments to 6. i.e. you will only have 7th, 8th, 9th due. The next payment you make of 100 will get applied to row 7. The disadvantage of this method over reducing balance is that the interest calculated for rows 7,8,9 don't change compared to reducing balance. However if you prepay in full, the unearned interest is calculated and returned as per the Actuarial Tables. |
Do the nasdaq small cap stocks or penny stocks get promoted? | null | Promotion of any stock should be treated with extreme suspicion, since the purpose is generally to make money for the promoter, not to inform the public. |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | null | Gambling is never a wise investment. Even assuming that the stated odds are correct, there can be multiple winners, and the jackpot is shared between the winners, so the individual payout can be significantly less than the total jackpot. If I were to take a dollar from you and a dollar from your buddy on the promise that I'd give the two of you a total of $3 back if you both guessed the result of a single, fair coin toss, would you take the offer? Note, also, that the "jackpot" value is quite misleading: it's the sum of the annual payments, and if you reduce that to present value it's significantly less. |
Risk of buying stock | null | If you buy stock in established companies, it is vey unlikely that they will lose all their value. Spreading your money across multiple stocks -- diversifying -- reduces that risk because it is extremely unlikely that they all lose all their value at once. Spreading them across multiple industries and adding bonds to the mix increases diversification. Of course the trade-off is that if one of the stocks skyrockets you don't benefit as much as if you had been lucky enough to put all your money in that one stock. You need to decide for yourself how much risk you are willing to tolerate in exchange for the chance of gains. Other answers on this site have dealt with this in more detail. |
Why is a “long put” called long if you have a higher net position if the price decreases? | null | Long here does not mean you wish for the underlying stock to increase in value, in fact, as the chart shows, just the opposite is true. "Long means you bought the derivative, and you own the option. The guy that sold it to you is at your mercy, he is short the put, and it's your decision to put the stock to him should it fall in value. The value of the put itself rises with the falling stock price, you are long the put and want the put, itself, to rise in value. |
How can I improve my credit score if I am not paying bills or rent? | null | If credit scoring works in the UK like it does in the US, then I think the fact that you own+use a credit card and pay off your everyday expenses will give you perfectly good credit. Just keep doing what you're doing. I have seen people in the United States with very high credit scores based solely upon owning & occasionally using a credit card, paid in full and on time every month. |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | null | 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. |
What does “profits to the shareholders jumped to 15 cents a share” mean? | null | It's a way to help normalize the meaning of the earnings report. Some companies like Google have a small number of publicly traded shares (322 Million). Others like Microsoft have much larger numbers of shares (8.3 Billion). The meaning depends on the stock. If it's a utility company that doesn't really grow, you don't want to see lots of changes -- the earnings per share should be stable. If it's a growth company, earnings should be growing quickly, and flat growth means that the stock is probably going down, especially if slow growth wasn't expected. |
Sanity check on choosing the term for a mortgage refinance | null | If the best they can do is 1/8th of a percent for a 15 year term, you are best served by taking the 30 year term. Pay it down sooner if you can, but it's nice to have the flexibility if you have a month where things are tight. |
How do I adjust to a new social class? | null | And specifically regarding prices of housing, what factors drive prices in that regard? I mean, the houses are roughly the same... but almost 3 times as expensive. Rent, like so many things, is tied to supply and demand. On the demand side, rent is tied to income. People tend to buy as much house as they can afford, given that mortgage interest is deductible and public schools, financed through property tax, performs better in valuable neighborhoods. Raise the minimum wage and economists expect rents to go up accordingly. When employers and pensions offer COLA adjustments, it feeds into a price loop. During the past ten years, there was also some "animal spirits" / irrational behavior present; people feared that if they didn't buy now, home prices would outpace their growth in income. So even though it didn't make sense at the time, they bought because it would make even less sense later (if you assume prices only go up). There's also the whole California has nicer weather angle to explain why people move to SF or LA. On the supply side, it's all about housing stock. In your old town, you could find vacant lots or farmland in less than 5 minute's drive from anywhere. There's far less room for growth in say, the SF Bay area or NYC. There's also building codes that restrict the growth in housing stock. I'm told Boulder, CO is one such place. You would think that high prices would discourage people from moving or working there, but between the university and the defense contractors triangle, they seem to have an iron grip on the market. (Have you ever seen a cartoon where a character gets a huge bill at a restaurant, and their eyes shoot out of their eye sockets and they faint? Yeah... that's how I felt looking at some of the places around here...) Remember, restaurants have to cover the same rent problem you do. And they have higher minimum wages, and taxes, etc. Moreover, food has to be imported from miles away to feed the city, likely even from out of state. In California, there's also food regulations that in effect raise the prices. If people are footing those higher bills, I wouldn't be surprised if they're racking up debt in the process, and dodging the collectors calling about their Lexus, or taking out home equity loans to cover their lifestyle. |
First job: Renting vs get my parents to buy me a house | null | Seriously. I can't tell you how many times I hear this scenario: Kid graduates college; kid runs out and signs lease on apartment "because that's what you do"**; kid complains that he's in financial trouble and can't make ends meet. Housemate sharing is most famously displayed in hit shows like Big Bang Theory or New Girl. They get a much nicer place with better furnishings for way less money. (However don't hook up with close neighbors or friends of other housemates, they do it for awkward laughs but it really results in awkward departure.) It's more financially responsible. It means the rest of your financial life will have more slack. And when you move, obviously, it's no big deal, you just give all the notice you can, and go to the next town and find another housemate share. ** I suspect a very significant factor is bringing home dates. Well, there's nothing sexy about taking your date to McDonalds because you can't afford anything more. See those shows... it works fine, you just have to be sensible about housemate choices. Pick housemates who view things the same way, and who themselves are invested in making the shared space attractive, and aren't going to mind some ...activities... once in awhile. |
Differences in conditions on shares to private vs. public shareholders? | null | Shares sold to private investors are sold using private contracts and do not adhere to the same level of strict regulations as publicly traded shares. You may have different classes of shares in the company with different strings attached to them, depending on the deals made with the investors at the time. Since public cannot negotiate, the IPO prospectus is in fact the investment contract between the company and the public, and the requirements to what the company can put there are much stricter than private sales. Bob may not be able to sell his "special" stocks on the public exchange, as the IPO specifies which class of stock is being listed for trading, and Bob's is not the same class. He can sell it on the OTC market, which is less regulated, and then the buyer has to do his due diligence. Yes, OTC-sold stocks may have strings attached to them (for example a buy back option at a preset time and price). |
Why would anyone want to pay off their debts in a way other than “highest interest” first? | null | It is true that all else being equal, you will pay a lower amount of total interest by paying down your highest interest rate debts first. However, all else is not always equal. I'm going to try to come up with some reasons why it might be better in some circumstances to pay your debts in a different order. And I'll try to use as much math as possible. :) Let's say that your goal is to eliminate all of your debt as fast as possible. The faster you do this, the lower the total interest that you will pay. Now, let's consider the different methods that you could take to get there: You could pay the highest interest first, you could pay the lowest interest first, or you could pay something in the middle first. No matter which path you choose, the quicker you pay everything off, the lower total interest you will pay. In addition to that, the quicker you pay everything off, the difference in total interest paid between the most optimal method and the least optimal method will be less. To put this in mathematical notation: limt→0 Δ Interest(t) = 0 Given that, anything we can do to speed up the time it takes to get to "debt free" is to our advantage. When paying large amounts of debt as fast as possible, sacrifice is needed. And this means that psychology comes into play. I don't know about you, but for me, gamifying the system makes everything easier. (After all, gamification is what gets us to write answers here on SE.) One way to do this is to eliminate individual debts as quickly as possible. For example, let's say that I've got 10 debts. 5 of them are for $1k each. 3 of them are for $5k each, 1 is a $20k car loan, and 1 is a $100k mortgage. Each one has a monthly payment. Let's say that I've got $3k sitting in the bank that I want to use to kickstart my debt reduction. I could pay all $3k toward one of my larger loans, or I could immediately pay off 3 of my 10 loans. Ignore interest for the moment, and let's say that we are going to pay off the smallest loans first. When I eliminate these three loans, three of my monthly payments are also gone. Now let's say that with the money I was paying toward these eliminated debts, and some other money I was able to scrape together $500 a month that I want to use toward debt reduction. In four months, I've eliminated the last two $1k debts, and I'm down to 5 debts instead of 10. Achievement Unlocked! Instead of this strategy, I could have paid toward my largest interest rate. Let's say that was one of the $5k loans. I paid the $3k toward the bank to it, and because I still had all the monthly payments after that, I was only able to scrape together $400 a month extra toward debt reduction. In four months, I still have 10 debts. Now let's say that after these four months, I have a bad month, and some unexpected expenses come up. If I've eliminated 5 of my debts, my monthly payments are less, and I'll have an easier month then I would have had if I still had 10 monthly payments to deal with. Each time I eliminate a debt, the amount extra I have each month to tackle the remaining debts gets bigger. And if your goal is eliminating debt quickly, these early wins can really help motivate you on. It really feels like you are getting somewhere when your monthly bills go down. It also helps you with the debt free mindset. You start to see a future where you aren't sending payments to the banks each month. This method of paying your smaller debts first has been popularized in recent years by Dave Ramsey, and he calls it the debt snowball method. There might be other reasons why you would pick one debt over another to pay first. For example, let's say that one of your loans is with a bank that has terrible customer service. They don't send you bills on time, they process your payment late, their website stinks, they are a constant source of stress, and you are getting sick of them. That would be a great reason to pay that debt first, and never set foot in that bank again. In conclusion: If you have a constant amount of extra cash each month that you are going to use to reduce your debt, and this will never change, then, yes, you will save money over the long run by paying the highest interest debt first. However, if you are trying to eliminate your debt as fast as possible, and you are sacrificing in your budget, sending every extra penny you can scrape together toward debt reduction, the "snowball" method of knocking out the small debts first can help motivate you to continue to sacrifice toward your goal, and can also ease the cash flow situation in difficult months when you find yourself with less extra to send in. |
I might use a credit card convenience check. What should I consider? | null | I tried this a few months ago when I got one from Chase for 0%. Thought it might be fun to play with, maybe make some money with the interest elsewhere over the 6 months. Read the term and called Chase for more information on these and didn't see any issues at first. The big thing that got me was that the rest of my account (not the money from the convenience check) was converted so that interests accrued on a daily basis even if you paid it all off at the end of the month. So even though I was making the required payments that would normally not incur any interest, just by having the convince check balance on my account I was being charged the interest for my normal credit card charges over the month. The amount of charges came out to only be around $10-$20, so wasn't much of a loss really. But something to keep in mind when using these, (I tried it with 0% APR and still couldn't get away from the interest). If I had needed the money this would still be an excellent way to go. But if your trying to beat Chase with this game, it doesn't work... Although if you don't use the card for anything other than the convenience check it's free money (or cheap @ 3.99% in your case) Everything in my account went back to normal after it was paid off, so no harm really, but some things to keep in mind at least. |
Investing using leverage | null | Let's do a real example of leverage on the SPY. Imagine you have $20K today and plan on having $100K by JAN 2018. You could get 100 shares of SPY and ride it out. Maybe buying another 100 shares every few months until 2018, ending up with less than 500 shares to your name ( and zero cash in the bank ). or You could lever with DEC 2017 LEAP CALLS. They'll expire in 2.5 years, so you'd have to re-up sooner than your plan. With 20K starting cash, in my example we'll go with 5 contracts to start with. If we choose the $230 strike they'd cost $1250 each (putting roughly $6250 at risk). The plan in is if the stock market goes up, you've got leverage. You are the proud owner of contracts worth 500 shares of SPY and have only spent 1/3rd of your present day dollars. If the market goes down in the next two years, sure, you lost the entire $6250, but likely saved $93,750 powder dry and can try your luck with the 2021 LEAPS. Probably get down votes for this, but I'll even argue that proper use of leverage can very much reduce your risk. One truth is you'll never get a margin call from holding long options. |
What's the best way to make money from a market correction? | null | Depends on how long you're willing to invest for. Broadly speaking, the best (by which I mean, more reliably repeatable) way to make money from market corrections is to accept them as a fact of life, and not sell in a panic when they happen, such that the money you already invested can ride back up again. Put another way, just invest your money in one or two broad, low cost index funds with dividends reinvested (maybe spreading your investment over the course of six months or so) and then let time do its work. Have you worked out how much you've missed out on by holding your money as cash all this time (I presume you've been saving up a while) instead of investing it as you went? I suspect that by waiting for your correction, you've already missed out on more than you're going to make from that correction. |
PayPal wants me to “add a bank account”, another funding source. Credit card isn't working. Why? | null | I'm guessing that you've reached the value limit of a payment that can be made without linking your account to a bank account. While you want privacy, PayPal wants to not be a money launderer. You may need to seek an alternative way to pay for this if you're trying to be private about it. |
Acquiring first office clothes | null | Like the other answers, I'm not entirely sure the equivalent exists in your country. But in the US there are thrift stores run by charities like GoodWill or the Salvation Army that sell clothes for very little money. When my wife was in a similar situation very early in her career she learned the trick of driving to thrift stores nearest to the richest neighborhoods in town. She often found high dollar designer clothes that had been worn once (to an event or party) and then donated. Apparently it is quite gauche for the well-to-do to be caught dead in the same outfit twice. It wasn't uncommon for her to find clothes/shoes that retailed for hundreds of dollars for $10 or so. |
Super-generic mutual fund type | null | Congrats on having such a nice emergency fund. That's pretty substantial. I don't want to be the one to suggest the One Investment To Rule Them All because I might be wrong. :) I'd investigate other avenues for investment. Here are a few (in no particular order): My two cents but I think you're wise to be wary of investing in US equities now. Hedging (both with your passive investments and with another source of income) is something you can afford to do. (But to answer your question, there are indexes that are broader than the S&P 500. The Wilshire 5000 index has all of them, for example.) |
Stock market vs. baseball card trading analogy | null | Baseball cards don't pay dividends. But many profitable companies do just that, and those that don't could, some day. Profits & dividends is where your analogy falls apart. But let's take it further. Consider: If baseball cards could somehow yield a regular stream of income just for owning them, then there might be yet another group of people, call them the Daves. These Daves I know are the kind of people that would like to own baseball cards over the long term just for their income-producing capability. Daves would seek out the cards with the best chance of producing and growing a reliable income stream. They wouldn't necessarily care about being able to flip a card at an inflated price to a Bob, but they might take advantage of inflated prices once in a while. Heck, even some of the Steves would enjoy this income while they waited for the eventual capital gain made by selling to a Bob at a higher price. Plus, the Steves could also sell their cards to Daves, not just Bobs. Daves would be willing to pay more for a card based on its income stream: how reliable it is, how high it is, how fast it grows, and where it is relative to market interest rates. A card with a good income stream might even have more value to a Dave than to a Bob, because a Dave doesn't care as much about the popularity of the player. Addendum regarding your comment: I suppose I'm still struggling with the best way to present my question. I understand that companies differ in this aspect in that they produce value. But if stockholders cannot simply claim a percentage of a company's value equal to their share, then the fact that companies produce value seems irrelevant to the "Bobs". You're right – stockholders can't simply claim their percentage of a company's assets. Rather, shareholders vote in a board of directors. The board of directors can decide whether or not to issue dividends or buy back shares, each of which puts money back in your pocket. A board could even decide to dissolve the company and distribute the net assets (after paying debts and dissolution costs) to the shareholders – but this is seldom done because there's often more profit in remaining a going concern. I think perhaps what you are getting hung up on is the idea that a small shareholder can't command the company to give net assets in exchange for shares. Instead, generally speaking, a company runs somewhat like a democracy – but it's each share that gets a vote, not each shareholder. Since you can't redeem your shares back to the company on demand, there exists a secondary market – the stock market – where somebody else is willing to take over your investment based on what they perceive the value of your shares to be – and that market value is often different from the underlying "book value" per share. |
Micro-investing: How to effectively invest frequent small amounts of money in equities? | null | Compound interest is your friend. For such a low amount of cash, just pop it into savings accounts or deposits. When you reach about 1.500€ buy one very defensive stock that pays high dividends. With deposits, you don't risk anything, with one stock, you can lose 100% of the investment. That's why it's important to buy defensive stock (food, pharma, ...). Every time you hit 1.500€ after, buy another stock until you have about 10 different stock in different sectors, in different countries. Then buy more stock of the ones you have in portfolio. You're own strategy is pretty good also. |
Free service for automatic email stock alert when target price is met? | null | You can do it graphically at zignals.com and freestockcharts.com. |
How to calculate lump sum required to generate desired monthly income? | null | The product you seek is called a fixed immediate annuity. You also want to be clear it's inflation adjusted. In the US, the standard fixed annuity for a 40year old male (this is the lowest age I find on the site I use) has a 4.6% return. $6000/ yr means one would pay about $130,000 for this. The cost to include the inflation adder is about 50%, from what I recall. So close to $200,000. This is an insurance product, by the way, and you need to contact a local provider to get a better quote. |
How much should a new graduate with new job put towards a car? | null | So many answers here are missing the mark. I have a $100k mortgage--because that isn't paid off, I can't buy a car? That's really misguided logic. You have a reasonably large amount of college debt and didn't mention any other debt-- It's a really big deal what kind of debt this is. Is it unsecured debt through a private lender? Is it a federal loan from the Department of Education? Let's assume the worst possible (reasonable) situation. You lose your job and spend the next year plus looking for work. This is the boat numerous people out of college are in (far far far FAR more than the unemployment rates indicate). Federal loans have somewhat reasonable (indentured servitude, but I digress) repayment strategies; you can base the payment on your current income through income-based and income-continent repayment plans. If you're through a private lender, they still expect payment. In both cases--because the US hit students with ridiculous lending practices, your interest rates are likely 5-10% or even higher. Given your take-home income is quite large and I don't know exactly the cost of living where you live--you have to make some reasonable decisions. You can afford a car note for basically any car you want. What's the worst that happens if you can't afford the car? They take it back. If you can afford to feed yourself, house yourself, pay your other monthly bills...you make so much more than the median income in the US that I really don't see any issues. What you should do is write out all your monthly costs and figure out how much unallocated money you have, but I'd imagine you have enough money coming in to finance any reasonable new or used car. Keep in mind new will have much higher insurance and costs, but if you pick a good car your headaches besides that will be minimal. |
How much is university projected to cost in Canada in 18 years? | null | For a Canadian university education, an October 2009 article at Canada.com says: [...] The study estimates the total price tag of an undergraduate degree at a whopping $137,013 for students living away from home and $101,426 for those staying at home. [...] |
What are the tax implications on selling the Share ISA portfolio? | null | Assets held within an ISA or New ISA are completely free of CGT, so you won't have to pay either income tax or capital gains tax. |
Why is it possible to just take out a ton of credit cards, max them out and default in 7 years? | null | Well, primarily because that's fraud and fraud prevents a debtor from receiving a discharge in bankruptcy court. Fraud would be pretty easy to prove if you didn't have an income change and you have several lines of credit opened on and around the same day with almost no payments made toward them. Additionally, thanks to the reforms of the bankruptcy code, if your income exceeds the median income of your state you'll be forced in to a Chapter 13 and committed to a repayment plan that allocates all of your "disposable income" to your creditors. Now if whoever posted that will attempt to simply not pay then negotiate repayment plans with their creditors the process will last far longer than 7 years. It takes a long time to be in default for enough time that a consumer creditor will negotiate the debt and this is assuming the creditor doesn't sue you and get a judgement which could apply liens to any property you may own. The judgment(s) will likely cause you to pursue bankruptcy anyway; only now you're at least a few years beyond the point at which you ruined your credit. |
Formula that predicts whether one is better off investing or paying down debt | null | The formula you are looking for is pretty complicated. It's given here: http://itl.nist.gov/div898/handbook/eda/section3/eda3661.htm You might prefer to let somebody else do the grunt work for you. This page will calculate the probability for you: http://stattrek.com/online-calculator/normal.aspx. In your case, you'd enter mean=.114, standard deviation=.132, and "standard score"= ... oh, you didn't say what you're paying on your debt. Let's say it's 6%, i.e. .06. Note that this page will give you the probability that the actual number will be less than or equal to the "standard score". Enter all that and click the magic button and the probability that the investment will produce less than 6% is ... .34124, or 34%. The handy rule of thumb is that the probability is about 68% that the actual number will be within 1 standard deviation of the mean, 95% that it will be within 2 standard deviations, and 99.7% that it will be within 3. Which isn't exactly what you want because you don't want "within" but "less than". But you could get that by just adding half the difference from 100% for each of the above, i.e. instead of 68-95-99.7 it would be 84-98-99.9. Oh, I missed that in a follow-up comment you say you are paying 4% on a mortgage which you are adjusting to 3% because of tax implications. Probability based on mean and SD you gave of getting less than 3% is 26%. I didn't read the article you cite. I assume the standard deviation given is for the rate of return for one year. If you stretch that over many years, the SD goes down, as many factors tend to even out. So while the probability that money in a given, say, mutual fund will grow by less than 3% in one year is fairly high -- the 25 - 35% we're talking here sounds plausible to me -- the probability that it will grow by an average of less than 3% over a period of 10 or 15 or 20 years is much less. Further Thought There is, of course, no provably-true formula for what makes a reasonable risk. Suppose I offered you an investment that had a 99% chance of showing a $5,000 profit and a 1% chance of a $495,000 loss. Would you take it? I wouldn't. Even though the chance of a loss is small, if it happened, I'd lose everything I have. Is it worth that risk for the modest potential profit? I'd say no. Of course to someone who has a billion dollars, this might be a very reasonable risk. If it fails, oh well, that could really cut in to what he can spend on lunch tomorrow. |
How to protect a Stock you still want to own from a downturn? | null | If you really believe in the particular stocks, then don't worry about their daily price. Overall if the company is sound, and presumably paying a dividend, then you're in it for the long haul. Notwithstanding that, it is reasonable to look for a way out. The two you describe are quite different in their specifics. Selling sounds like the simpler of the two, but the trigger event, and if it is automatic or "manual" matters. If you are happy to put in a sell order at some time in the future, then just go ahead with that. Many brokers can place a STOP order, that will trigger on a certain price threshold being hit. Do note, however, that by default this would place a market order, and depending on the price that breaks through, in the event of a flash crash, depending on how fast the brokers systems were, you could find yourself selling quite cheaply. A STOP LIMIT order will place a limit order at a triggered price. This would limit your overall downside loss, but you might not sell at all if the market is really running away. Options are another reasonable way to deal with the situation, sort of like insurance. In this case you would likely buy a PUT, which would give you the right, but not the obligation to sell the stock at the price the that was specified in the option. In this case, no matter what, you are out the price of the option itself (hence my allusion to insurance), but if the event never happens then that was the price you paid to have that peace of mind. I cannot recommend a specific course of action, but hopefully that fleshed out the options you have. |
Why do only a handful of Canadian companies have options trading on their stocks? | null | Corporations are removed from the options markets. They can neither permit nor forbid others from trading them, local laws notwithstanding. No national options market is as prolific as the US's. In fact, most countries don't even have options trading. Some won't even allow options but rather option-like derivatives. Finance in Canada is much more tightly regulated than the US. This primer on Canadian option eligibility shows how much. While US eligibility is also stringent, the quotas are far less restrictive, so a highly liquid small company can also be included where it would be excluded in Canada for failing the top 25% rule. |
How can cold-callers know about my general financial status | null | The cold caller is just a different way to contact you compared to the junk mail that they send. The business gets information from the credit rating companies for households that meet a specific set of criteria. It could be town, age, home ownership, low credit utilization...Or the exact opposite depending on what they are selling. Some business do sell your data. Grocery store know who buys certain products: parents buying diapers may want to start saving for college; ones buying acne medicine may want to talk about lower rates for car insurance. When they call via phone they have a different success rate compared to junk mail, but for that business that may be acceptable for their needs. |
What are my options to deal with Student Loan debt collectors? | null | I had about $16k in student loans. I defaulted on the loans, and they got > passed to a collection type agency (OSCEOLA). These guys are as legitimate as a collection agency can be. One thing that I feel is very sketchy is when they were verifying my identity they said "Does your Social Security Number end in ####. Is your Birthday Month/Day/Year." That is not sketchy. It would be sketchy for a caller to ask you to give that information; that's a common scheme for identity theft. OSCEOLA are following the rules on this one. My mom suggested I should consider applying for bankruptcy Won't help. Student loans can't be discharged in bankruptcy. You have the bankruptcy "reform" act passed during the Bush 43 regime for that. The loan itself is from school. What school? Contact them and ask for help. They may have washed their hands of your case when they turned over your file to OSCEOLA. Then again, they may not. It's worth finding out. Also, name and shame the school. Future applicants should be warned that they will do this. What can I do to aid in my negotiations with this company? Don't negotiate on the phone. You've discovered that they won't honor such negotiations. Ask for written communications sent by postal mail. Keep copies of everything, including both sides of the canceled checks you use to make payments (during the six months and in the future). Keep making the payments you agreed to in the conversation six months ago. Do not, EVER, ignore a letter from them. Do not, EVER, skip going to court if they send you a summons to appear. They count on people doing this. They can get a default judgement if you don't show up. Then you're well and truly screwed. What do you want? You want the $4K fee removed. If you want something else, figure out what it is. Here's what to do: Write them a polite letter explaining what you said here. Recount the conversation you had with their telephone agent where they said they would remove the $4K fee if you made payments. Recount the later conversation. If possible give the dates of both conversations and the names of the both agents. Explain the situation completely. Don't assume the recipient of your letter knows anything about your case. Include evidence that you made payments as agreed during the six months. If you were late or something, don't withhold that. Ask them to remove the extra $4K from your account, and ask for whatever else you want. Send the letter to them with a return receipt requested, or even registered mail. That will prevent them from claiming they didn't get it. And it will show them you're serious. Write a cover letter admitting your default, saying you relied on their negotiation to set things straight, and saying you're dismayed they aren't sticking to their word. The cover letter should ask for help sorting this out. Send copies of the letter with the cover letter to: Be sure to mark your letter to OSCEOLA "cc" all these folks, so they know you are asking for help. It can't hurt to call your congressional representative's office and ask to whom you should send the letter, and then address it by name. This is called Constituent Service, and they take pride in it. If you send this letter with copies you're letting them know you intend to fight. The collection agency may decide it's not worth the fight to get the $4K and decide to let it go. Again, if they call to pressure you, say you'd rather communicate in writing, and that they are not to call you by telephone. Then hang up. Should I hire a lawyer? Yes, but only if you get a court summons or if you don't get anywhere with this. You can give the lawyer all this paperwork I've suggested here, and it will help her come up to speed on your case. This is the kind of stuff the lawyer would do for you at well over $100 per hour. Is bankruptcy really an option Certainly not, unfortunately. Never forget that student lenders and their collection agencies are dangerous and clever predators. You are their lawful prey. They look at you, lick their chops, and think, "food." Watch John Oliver's takedown of that industry. https://www.youtube.com/watch?v=hxUAntt1z2c Good luck and stay safe. |
Why buy insurance? | null | Lots of people make poor decisions in crises. Some panic, and don't make any decision at all. Insurance for affordable things can provide emotional security: If something goes wrong, the purchaser will not have to make a painful financial decision in a crisis. Many people do not want to have the burden of arguing about money, or having to spend precious cash, or borrow money, or raid savings accounts, just at the time they are already reeling from another loss. Having insurance "just take care of it" can save them an emotional double-whammy. Several kinds of insurance fill this perceived need: |
Where should I invest to hedge against the stock market going down? | null | If you believe the stock market will be down 20-30% in the next few months, sell your stock holdings, buy a protective put option for the value of the holdings that you want to keep. That would be hedging against it. Anything more is speculating that the market will fall. |
Gigantic point amount on rewards card - what are potential consequences? | null | If you want to maximize your expected benefits, at minimal risk of financial repercussions or sleepless nights, I would suggest the following. Send an email explaining the situation, and announce that you plan to use the points if they do not advise otherwise. Here is an example message: Dear sir/madam, I recently contacted your helpdesk to mention that I believe my points balance is higher than it should be, and I was told that I could consider the extra points a gift. I assume that settles it, but in case I am mistaken please contact me within 4 weeks. My customer number is xxxx. Kind regards, Note that it is no problem if they don't reply, but you may want to push for a (possibly automated) confirmation of receiving your message. I would not be surprised if they still reduce your balance sometime in the future, but you should be reasonably covered if they try to reclaim any points that you already spent. |
Taxation of shares | null | If you sell your shares for more than their value at the time you received them (i.e. you make a profit) then you will be liable for capital gains tax - but only if the profit exceeds your annual allowance (£11,100, in tax year 2015-16). This is unrelated to how you came by the shares in the first place. (Note that there are certain exemptions to this, which includes some employer share schemes.) |
Tracking my spending, and incoming and outgoing (i.e cashflow) | null | Systems to research that may help you out: Less Accounting and Wave are great because they can import data from banks / credit cards. I know you said your bank doesn't export it but it seems like something as a small business you would want. |
Avoiding sin stock: does it make a difference? | null | This question drives at what value a shareholder actually provides to a corporation, and by extent, to the economy. If you subscribe for new shares (like in an Initial Public Offering), it is very straightforward to say "I have provided capital to the corporation, which it is using to advance its business." If you buy shares that already exist (like in a typical share purchase on a public exchange), your money doesn't go to the company. Instead, it goes to someone who paid someone who paid someone who paid someone (etc.) who originally contributed money to the corporation. In theory, the value of a share price does not directly impact the operation of the company itself, apart from what @DanielCarson aptly noted (employee stock options are affected by share price, impacting morale, etc.). This is because in theory, the true value of a company (and thus, the value of a share) is the present value of all future cashflows (dividends + final liquidation). This means that in a technical sense, a company's share price should result from the company's value. The company's true value does not result from the share price. But what you are doing as a shareholder is impacting the liquidity available to other potential investors (also as mentioned by @DanielCarson, in reference to the desirability for future financing). The more people who invest their money in the stock market, the more liquid those stocks become. This is the true value you add to the economy by investing in stocks - you add liquidity to the market, decreasing the risk of capital investment generally. The fewer people there are who are willing to invest in a particular company, the harder it is for an investor to buy or sell shares at will. If it is difficult to sell shares in a company, the risk of holding shares in that company is higher, because you can't "cash out" as easily. This increased risk then does change the value of the shares - because even though the corporation's internal value is the same, the projected cashflows of the shares themselves now has a question mark around the ability to sell when desired. Whether this actually has an impact on anything depends on how many people join you in your declaration of ethical investing. Like many other forms of social activism, success relies on joint effort. This goes beyond the direct and indirect impacts mentioned above; if 'ethical investing' becomes more pronounced, it may begin to stigmatize the target companies (fewer people wanting to work for 'blacklist' corporations, fewer people buying their products, etc.). |
Do I make money in the stock market from other people losing money? | null | The answer is partly and sometimes, but you cannot know when or how. Most clearly, you do not take somebody else's money if you buy shares in a start-up company. You are putting your money at risk in exchange for a share in the rewards. Later, if the company thrives, you can sell your shares for whatever somebody else will pay for your current share in the thriving company's earnings. Or, you lose your money, when the company fails. (Much of it has then ended up in the company's employees' pockets, much of the rest with the government as taxes that the company paid). If the stockmarket did not exist, people would be far less willing to put their money into a new company, because selling shares would be far harder. This in turn would mean that fewer new things were tried out, and less progress would be made. Communists insist that central state planning would make better decisions than random people linked by a market. I suggest that the historical record proves otherwise. Historically, limited liability companies came first, then dividing them up into larger numbers of "bearer" shares, and finally creating markets where such shares were traded. On the other hand if you trade in the short or medium term, you are betting that your opinion that XYZ shares are undervalued against other investors who think otherwise. But there again, you may be buying from a person who has some other reason for selling. Maybe he just needs some cash for a new car or his child's marriage, and will buy back into XYZ once he has earned some more money. You can't tell who you are buying from, and the seller can only tell if his decision to sell was good with the benefit of a good few years of hindsight. I bought shares hand over fist immediately after the Brexit vote. I was putting my money where my vote went, and I've now made a decent profit. I don't feel that I harmed the people who sold out in expectation of the UK economy cratering. They got the peace of mind of cash (which they might then reinvest in Euro stocks or gold or whatever). Time will tell whether my selling out of these purchases more recently was a good decision (short term, not my best, but a profit is a profit ...) I never trade using borrowed money and I'm not sure whether city institutions should be allowed to do so (or more reasonably, to what extent this should be allowed). In a certain size and shortness of holding time, they cease to contribute to an orderly market and become a destabilizing force. This showed up in the financial crisis when certain banks were "too big to fail" and had to be bailed out at the taxpayer's expense. "Heads we win, tails you lose", rather than trading with us small guys as equals! Likewise it's hard to see any justification for high-frequency trading, where stocks are held for mere milliseconds, and the speed of light between the trader's and the market's computers is significant. |
Is this follow-up after a car crash a potential scam? | null | Do not give them any money until you have a signed contract that releases your liability completely. It's imperative that this contract be drafted correctly. The contract needs proper consideration (money in exchange for release of liability), among other things. In other words, talk to a lawyer if you want to go this route. If you just cut them a check, there's nothing stopping them from taking your money and making an insurance claim anyway, or taking your money and then suing for "whiplash" or some other fake injury. The best way is just to go through insurance. It might cost a bit more, but you're covered in case they sue. |
Is engaging in stocks without researching unwise? | null | Stock recommendations and price history are an unwise way to invest. People that recommend stocks are usually compensation for recommending it. They are paid directly by third parties, that can be paid in shares, they can simply own the stock themselves and if the stock goes up they can sell it to new investors at a higher price (or even a lower price, they may not actually care) Price history does not tell you a complete picture, what kind of price history are you even looking at: "this stock went up, let me buy now at the very top and hope it goes higher, am I too late" "this stock went down let me avoid it" if you don't know why, what, who, when, assets, debt, etc, you shouldn't be buying the stock. |
Finding a good small business CPA? | null | Check your local better business bureau. They can tell you who is in business, who's bonded, and who has had a lot of complaints levied against them for shoddy practices. |
Is Amazon's offer of a $50 gift card a scam? | null | It's not a scam. They just want you to be an Amazon customer for many years and you'll be advertising Amazon to anyone who sees your credit card. $50 is known as the cost of "customer acquisition" and it is a very good deal for someone who may become a Prime member and spend $1000s a year on Amazon. |
Where should I park my rainy-day / emergency fund? | null | Something with an FDIC guarentee, so a bank. With an emergency fund, I think the 'return of capital' is more important than the 'return on the capital', so I'm fine with putting it in a standard savings account in a local bank(not an internet account) even if it pays next to nothing. The beauty is that since the bank is local, you can walk in and withdraw it all during any weekday. |
When is it worth it to buy dividend-bearing stocks? | null | You should never invest in a stock just for the dividend. Dividends are not guaranteed. I have seen some companies that are paying close to 10% dividends but are losing money and have to borrow funds just to maintain the dividends. How long can these companies continue paying dividends at this rate or at all. Would you keep investing in a stock paying 10% dividends per year where the share price is falling 20% per year? I know I wouldn't. Some high dividend paying stocks also tend to grow a lot slower than lower or non dividend paying stocks. You should look at the total return - both dividend yield and capital return combined to make a better decision. You should also never stay in a stock which is falling drastically just because it pays a dividend. I would never stay in a stock that falls 20%, 30%, 50% or more just because I am getting a 5% dividend. Regarding taxation, some countries may have special taxation rules when it comes to dividends just like they may have special taxation rules for longer term capital gains compared to shorter term capital gains. Again no one should use taxation as the main purpose to make an investment decision. You should factor taxation into your decision but it should never be the determining factor of your decisions. No one has ever become poor in making a gain and paying some tax, but many people have lost a great portion of their capital by not selling a stock when it has lost 50% or more of its value. |
What is Systematic about Systematic Investment Plan (SIP) and who invented it? | null | Personally, I think you are approaching this from the wrong angle. You're somewhat correct in assuming that what you're reading is usually some kind of marketing material. Systematic Investment Plan (SIP) is not a universal piece of jargon in the financial world. Dollar cost averaging is a pretty universal piece of jargon in the financial world and is a common topic taught in finance classes in the US. On average, verified by many studies, individuals will generate better investment returns when they proactively avoid timing the market or attempting to pick specific winners. Say you decide to invest in a mutual fund, dollar cost averaging means you invest the same dollar amount in consistent intervals rather than buying a number of shares or buying sporadically when you feel the market is low. As an example I'll compare investing $50 per week on Wednesdays, versus 1 share per week on Wednesdays, or the full $850 on the first Wednesday. I'll use the Vanguard Large cap fund as an example (VLCAX). I realize this is not really an apples to apples comparison as the invested amounts are different, I just wanted to show how your rate of return can change depending on how your money goes in to the market even if the difference is subtle. By investing a common dollar amount rather than a common share amount you ultimately maintain a lower average share price while the share price climbs. It also keeps your investment easy to budget. Vanguard published an excellent paper discussing dollar cost averaging versus lump sum investing which concluded that you should invest as soon as you have funds, rather than parsing out a lump sum in to smaller periodic investments, which is illustrated in the third column above; and obviously worked out well as the market has been increasing. Ultimately, all of these companies are vying to customers so they all have marketing teams trying to figure out how to make their services sound interesting and unique. If they all called dollar cost averaging, "dollar cost averaging" none of them would appear to be unique. So they devise neat acronyms but it's all pretty much the same idea. Trickle your money in to your investments as the money becomes available to you. |
What happens to personal data I disclose for joining an employee stock plan? | null | You aren't getting a straight answer because nobody knows why those regulations are the way they are. Everyone has to give this information to open the brokerage account or for any access to the US financial system whether it is with a bank account, or a brokerage account. Everyone also typically gives this information to their employer to be employed at all for IRS regulations. The SEC isn't going to do anything with the data, unless you do something illegal related to the stock market, then they will know who you are. The IRS isn't going to do anything with the data, unless you are noncompliant in paying taxes, then they will know who you are. |
Have plenty of cash flow but bad credit | null | Sign up with credit karma. It will give you two scores for free and will show you credit cards you have a good chance in being approved for. Plus it will evaluate your score showing you the 6 items that effect your score and give you steps to improve them or tell you how long you have to wait until they roll off. Plus I would look at a credit union and see if they have any "fresh start" programs. You should be well on your way. the thing that is probably hurting your credit is your utilization. If you can just use 10% of your available credit. |
Can my employer limit my maximum 401k contribution amount (below the IRS limit)? | null | Highly Compensated Employee Rules Aim to Make 401k's Fair would be the piece that I suspect you are missing here. I remember hearing of this rule when I worked in the US and can understand why it exists. A key quote from the article: You wouldn't think the prospect of getting money from an employer would be nerve-wracking. But those jittery co-workers are highly compensated employees (HCEs) concerned that they will receive a refund of excess 401k contributions because their plan failed its discrimination test. A refund means they will owe more income tax for the current tax year. Geersk (a pseudonym), who is also an HCE, is in information services and manages the computers that process his firm's 401k plan. 401(k) - Wikipedia reference on this: To help ensure that companies extend their 401(k) plans to low-paid employees, an IRS rule limits the maximum deferral by the company's "highly compensated" employees, based on the average deferral by the company's non-highly compensated employees. If the less compensated employees are allowed to save more for retirement, then the executives are allowed to save more for retirement. This provision is enforced via "non-discrimination testing". Non-discrimination testing takes the deferral rates of "highly compensated employees" (HCEs) and compares them to non-highly compensated employees (NHCEs). An HCE in 2008 is defined as an employee with compensation of greater than $100,000 in 2007 or an employee that owned more than 5% of the business at any time during the year or the preceding year.[13] In addition to the $100,000 limit for determining HCEs, employers can elect to limit the top-paid group of employees to the top 20% of employees ranked by compensation.[13] That is for plans whose first day of the plan year is in calendar year 2007, we look to each employee's prior year gross compensation (also known as 'Medicare wages') and those who earned more than $100,000 are HCEs. Most testing done now in 2009 will be for the 2008 plan year and compare employees' 2007 plan year gross compensation to the $100,000 threshold for 2007 to determine who is HCE and who is a NHCE. The threshold was $110,000 in 2010 and it did not change for 2011. The average deferral percentage (ADP) of all HCEs, as a group, can be no more than 2 percentage points greater (or 125% of, whichever is more) than the NHCEs, as a group. This is known as the ADP test. When a plan fails the ADP test, it essentially has two options to come into compliance. It can have a return of excess done to the HCEs to bring their ADP to a lower, passing, level. Or it can process a "qualified non-elective contribution" (QNEC) to some or all of the NHCEs to raise their ADP to a passing level. The return of excess requires the plan to send a taxable distribution to the HCEs (or reclassify regular contributions as catch-up contributions subject to the annual catch-up limit for those HCEs over 50) by March 15 of the year following the failed test. A QNEC must be an immediately vested contribution. The annual contribution percentage (ACP) test is similarly performed but also includes employer matching and employee after-tax contributions. ACPs do not use the simple 2% threshold, and include other provisions which can allow the plan to "shift" excess passing rates from the ADP over to the ACP. A failed ACP test is likewise addressed through return of excess, or a QNEC or qualified match (QMAC). There are a number of "safe harbor" provisions that can allow a company to be exempted from the ADP test. This includes making a "safe harbor" employer contribution to employees' accounts. Safe harbor contributions can take the form of a match (generally totaling 4% of pay) or a non-elective profit sharing (totaling 3% of pay). Safe harbor 401(k) contributions must be 100% vested at all times with immediate eligibility for employees. There are other administrative requirements within the safe harbor, such as requiring the employer to notify all eligible employees of the opportunity to participate in the plan, and restricting the employer from suspending participants for any reason other than due to a hardship withdrawal. |
Is losing money in my 401K normal? | null | Bottom line is our system is broken. For three years running I am 0% return with over 600k in. Yet, the 401k admin institution charges us all enormous fees that most aren't even aware exist. A helpful tip is to also check out your expense ratios and learn how those work as well so you know how much you are paying in hidden fees. |
One company asks for picture of my debit card | null | Although it is strange, there is little risk. The first four numbers are just the card type (Visa, Master, etc.), and the last four alone don't give them much - there are still 8 digits missing that they do not have. There is nothing much they can do with that info, especially without the PIN and the CCV, so as I said, little risk. Maybe they are using this to verify that you are the right person - you probably used that card originally to put money in for the gaming. That would be a way for them to authenticate you. |
Am I considered in debt if I pay a mortgage? | null | The statistic you cited comes from the Federal Reserve Board's Survey of Consumer Finances, a survey that they do every three years, most recently in 2013. This was reported in the September 2014 issue of the Federal Reserve Bulletin. They list the percentage of Americans with any type of debt as 74.5 in 2013, down slightly from 74.9 in 2010. The Bulletin also has a table with a breakdown of the types of debt that people have, and primary residence mortgages are at the top of the list. So the answer is yes, the 75% statistic includes Americans with home mortgages.* The bigger question is, are you really "in debt" if you have a home mortgage? The answer to that is also yes. When you take out a mortgage, you really do own the house. You decide who lives there, you decide what changes you are going to make to it, and you are responsible for the upkeep. But the mortgage debt you have is secured by the house. This means that if you refuse to pay, the bank is allowed to take possession of the house. They don't even get the "whole" house, though; they will sell it to recoup their losses, and give you back whatever equity you had in the house after the loan is satisfied. Is it good debt? Many people think that if you are borrowing money to purchase an appreciating asset, the debt is acceptable. With this definition, a car loan is bad, credit card debt is very bad, and a home mortgage might be okay. Even Dave Ramsey, radio host and champion of the debt-free lifestyle, is not opposed to home mortgages. Home mortgages allow people to purchase a home that they would otherwise be unable to afford. * Interestingly, according to the bulletin appendix, credit card balances were only included as debt for the survey purposes if there was a balance after the most recent bill was paid, not including purchases made after the bill. So people that do not carry a balance on their credit card were not considered "in debt" in this statistic. |
First time homeowner and getting a mortgage? | null | Make sure you shop around and ask a lot of places for a good faith estimate. Last I knew, the good faith document is the same everywhere and long form that makes it easy enough to compare the hard numbers from place to place. I have gotten several estimates for various scenarios and I have had them hand written and printed. (I discounted the hand written ones because that broker seemed pretty disorganized in general) Learn the terms online, and start comparing. Use the good faiths as a negotiation tool to get lower rates or lower costs from other brokers. See how accurate the person is at listening to you and filling out the paperwork. See how responsive they are to you when you call with questions and want some changes. Check with at least four places. The more places you shop, the better idea you will have of what fees are high and what interest rates are low. I might pay a higher fee to get a lower interest rate, so there are lots of trade offs to consider. |
Which is the most liquid market for trading? | null | Depends on how you measure liquidity. There's papers out there that approach this very question. Measured in order book spreads for a consolidated $100m trade, I'd say the second biggest market is FX swaps, followed or par'd by the money market (government bonds). If you disallow OTC venues, it's most definitely exchange listed government bonds. If, however, you happen to think in terms of sheer volume per time, the most liquid market phase could be considered the NYSE closing auction, as you can move billions in a matter of minutes, or expressed in speed terms: several m$/s (million dollars per second). You should pick a definition and we can provide you with a more accurate list of candidates and actual data. |
Buy tires and keep car for 12-36 months, or replace car now? | null | It depends how detailed you want to get in your calculation, but fundamentally, 1K < 25K. On a very basic level, divide the cost (less what you sell it for) by the time you'll have the car for. If you junk it, $1K/12 month = $83/month to buy tires to have a car for a year. If you sell it for $1K, then it become $0/month. (Plus other maintenance, etc..., obviously). If you pay 25K and keep the new car for ten years and sell it for nothing, it becomes roughly $208/month (plus maintenance). If you want to get more accurate, there are a lot of variables you can take into account--time cost of money, financing, maintenance costs of different vehicle types, etc... |
How does UpWork allow US companies to make payments outside of the US? | null | Permanent employees are the distinct opposite of contractors. Upwork can easily have business entities (limited liability company equivalents) in multiple countries, and it can make payments between them. Or they can merely use existing payment infrastructure (paypal, amazon) to accomplish the same thing. Their corporate structure is a red herring and most likely unrelated to what they've accomplished. |
How can I legally and efficiently help my girlfriend build equity by helping with a mortgage? | null | I just wanted to give you a different perspective, as I own a house (purchased with a mortgage), with my girlfriend. I think it can be done safely and fairly, but you do need to involve legal help to do it right. There really is nothing to be terrified about, the extra cost to set this up was almost irrelevant in the bigger picture of legal costs around purchasing and the documents describing the ownership scheme are quite straightforward. Maybe it's a UK thing, but it seems rather commonplace here. We've chosen to hold this as "tenants in common" and use a trust deed for this when we purchased. We had a solicitor write the trust deed and it clearly states what percentage of the house is owned by either party and exactly what the steps would be taken, should we decide to end the trust (e.g. in case of a split-up). This includes things like the right to buy out the other person before selling on the market etc. We also had to make wills separately to indicate what should happen with our percentage of the property in case one of us died as with this type of ownership it doesn't automatically go to the other person. Finally we're both on the mortgage, which I guess is the main difference versus your situation. But again, you could get legal advice as to how this should best be handled. |
Is it true that 90% of investors lose their money? | null | The article "Best Stock Fund of the Decade: CGM Focus" from the Wall Street Journal in 2009 describe the highest performing mutual fund in the USA between 2000 and 2009. The investor return in the fund (what the shareholders actually earned) was abysmal. Why? Because the fund was so volatile that investors panicked and bailed out, locking in losses instead of waiting them out. The reality is that almost any strategy will lead to success in investing, so long as it is actually followed. A strategy keeps you from making emotional or knee-jerk decisions. (BTW, beware of anyone selling you a strategy by telling you that everyone in the world is a failure except for the few special people who have the privilege of knowing their "secrets.") (Link removed, as it's gone dead) |
W-4 was not updated when moving from part-time to full-time, still showed Tax-Exempt. What happens now? | null | Legally, do I have anything to worry about from having an incorrectly filed W-4? What you did wasn't criminal. When you submitted the form it was correct. Unfortunately as your situation changed you didn't adjust the form, that mistake does have consequences. Is there anything within my rights I can do to get the company to take responsibility for their role in this situation, or is it basically my fault? It is basically your fault. The company needs a w-4 for each employee. They will use that W-4 for every paycheck until the government changes the regulation, or your employment ends, or you submit a new form. Topic 753 - Form W-4 – Employee's Withholding Allowance Certificate If an employee qualifies, he or she can also use Form W-4 (PDF) to tell you not to deduct any federal income tax from his or her wages. To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year. However, if the employee can be claimed as a dependent on a parent's or another person's tax return, additional limitations may apply; refer to the instructions for Form W-4. A Form W-4 claiming exemption from withholding is valid for only the calendar year in which it is filed with the employer. To continue to be exempt from withholding in the next year, an employee must give you a new Form W-4 claiming exempt status by February 15 of that year. If the employee does not give you a new Form W-4, withhold tax as if he or she is single, with no withholding allowances. However, if you have an earlier Form W-4 (not claiming exempt status) for this employee that is valid, withhold as you did before. (I highlighted the key part) Because you were claiming exempt they should have required you to update that form each year. In your case that may not have applied because of the timing of the events. When do you submit a new form? Anytime your situation changes. Sometimes the change is done to adjust withholding to modify the amount of a refund. Other times failure to update the form can lead to bigger complication: when your marital status changes, or the number of dependents changes. In these situations you could have a significant amount of under-withheld, which could lead to a fine later on. As a side note this is even more true for the state version of a W-4. Having a whole years worth of income tax withholding done for the wrong state will at a minimum require you to file in multiple states, it could also result in a big surprise if the forgotten state has higher tax rate. Will my (now former) employee be responsible for paying their portion of the taxes that were not withheld during the 9 months I was full-time, tax Exempt? For federal and state income taxes they are just a conduit. They take the money from your paycheck, and periodically send it to the IRS and the state capital. Unless you could show that the pay stubs said taxes were being withheld, but the w-2 said otherwise; they have no role in judging the appropriateness of your W-4 with one exception. Finally, and I am not too hopeful on this one, but is there anything I can do to ease this tax burden? I understand that the IRS is owed no matter what. You have one way it might workout. For many taxpayers who have a large increase in pay from one year to the next, they can take advantage of a safe-harbor in the tax law. If they had withheld as much money in 2015 as they paid in 2014, they have reached the safe-harbor. They avoid the penalty for under withholding. Note that 2014 number is not what you paid on tax day or what was refunded, but all your income taxes for the entire year. Because in your case your taxes for the year 2014 were ZERO, that might mean that you automatically reach the safe-harbor for 2015. That makes sense because one of the key requirements of claiming exempt is that you had no liability the year before. It won't save you from paying what you owe but it can help avoid a penalty. Lessons |
Which types of insurances do I need to buy? | null | It sounds like you're putting all your extra money into insurances because you feel that one can never have too much insurance. That's a very bad idea, financially. Basically it means you'll end up giving your money away to insurance companies in order to satisfy that feeling. Do realize that the expected value of every instuance is negative: on average, you'll pay more money than you'll receive. Otherwise, insurance companies would go bankrupt, so they are very good at ensuring that they get more in premiums than they pay out. Insurance should only be bought to cover essential risks, things that would ruin you: major health problems, death (to cover dependants), disability, liability. For everything else, you should self-insure by saving up money (up to a few months' wages) and putting it into safe and liquid investment vehicles as an emergency fund. That way, you are much more flexible, don't pay for the insurance company's employees, fancy offices and profits, and may even earn some interest. |
Frustrated Landlord | null | You are not a landlord. You have choices: The current situation is charity. And that's ok, so long as you acknowledge it. In the big picture, anything less than market rent is a gift that you are giving the person living in your house. A good tenant might keep the place in better shape, and deserve a lower rent, but that's a quid pro quo. In the end, landlording is a business. If you had 10-20 apartments, they would be proving an income to you and you would have a large chunk of your wealth tied up in it. You would keep the apartments in good shape both to be legal and not a slumlord, but you'd also collect market rent. $100/apt would be $1000-$2000/mo income to you and your family. You wife is right. As always. You have a decision to make to stop the bleeding. |
Alternatives to Intuit's PayTrust service for online bill viewing and bill payment? | null | An old question... but the recent answer for me turned out to be Check (formerly Pageonce) https://check.me/ (NOTE: Check was recently purchased by Intuit and is now MintBills) The only thing Check doesn't do that PayTrust did was accept paper bills from payees that couldn't do eBill... but that's a rare problem anymore (for me anyways). I went through each of my payees in PayTrust and added them into Check, it found almost all of them... I added my security info for their logins, and it was setup. The few that Check couldn't find, it asked me for the details and would contact them to try and get it setup... but in the meantime I just added them to my bank's billpay system with automatic payment rules (my mortgage company was the only one it couldn't find, and I know what my mortgage is every month so it's easy to setup a consistent rule) Check does so much more than PayTrust will ever do... Check has a MOBILE APP, and it is really the centerpiece of the whole system... you never really log into the website from your desktop (except to setup all the payees)... most of the time you just get alerts on your phone when a bill is due and you just click "pay" and choose a funding source, and bam you're done. It's been awesome so far... I highly recommend dumping PayTrust for it! FYI: Check is clearly winning at this point, but some of the competition are are http://manilla.com (not sure if you can pay your bills through them though) and DoxoPay ( https://www.doxo.com/posts/pay-your-bills-on-the-go-with-mobile-doxopay-new-android-app-and-an-updated-iphone-app/ ) |
How to prevent myself from buying things I don't want | null | We all buy stuff from time to time that only satisfies us for a short time. I was able to locate a few expenses that fall under that category. I see a lot answers that focus on not getting these things. I'm going to tell you how to at least attempt to have your cake and eat it too. If you can get these things without paying for them, or by paying pennies on the dollar for them, you'll no longer want to buy them at full price. Begin by making a list of the items you can't stop thinking about. Go to your local library and look for relevant items that are on your list. If they are not yet available, request that the library purchase them, and reserve them for when the items come in. Yes, libraries are usually tax-supported, but to give back, if you can't afford to contribute to the Library immediately, you can still promote their fund-raising or book/media-drive efforts. If you don't mind buying things that may be second hand, thrift stores and garage or yard sales can have anything. The ones near you may have one or two items on your list of things you were looking for - for pennies on the dollar. Other items might be things you can share with friends. Borrow or swap things until you get bored of them. If you don't have a network of friends with shared interests, there may be a local freecycle or relevant meetup group you can join. The key here is to try to contribute more than you take (and you probably have things you don't need that you can start with trading), and don't keep careful score. The upshot is you'll not only save money but make friends while doing it. You can sometimes have your cake and eat it too. These recommendations can get you the short-term happiness you were looking for, without spending the money. And when the happiness is gone, you won't feel like you need to hang on to the item indefinitely - you can pass it on for others to enjoy. |
Line of credit for investment | null | What you are describing is called a Home Equity Line of Credit (HELOC). While the strategy you are describing is not impossible it would raise the amount of debt in your name and reduce your borrowing potential. A recent HELOC used to finance the down payment on a second property risks sending a signal of bad financial position to credit analysts and may further reduce your chances to obtain the credit approval. |
When do I sell a stock that I hold as a long-term position? | null | For what it's worth -- and I realize this isn't directly an answer to the question -- one of the advantages of sticking with mutual funds, beyond their being inherently diversified, is that it removes a lot of the temptation to try to time the market. When you need money, you sell shares in such a way that it maintains your preferred investment ratio, and simply don't worry about which stocks are actually involved. (I've gotten 15% APR this year across all my investments, for absolutely minimal effort. That's quite good enough for me.) |
Are tax deductions voluntary? | null | Legally: gods know. I would strongly recommend asking the Law asre of Stack Exchange to advise on that. Practically: What's the worst that happens? They audit, you say "Yeah, I could probably have claimed these deductions but I didn't want to; is that a problem?", they decide and either nothing happens or they issue you the unwanted refunnd. They aren't going to fine you for overpaying. Unless this would expose something criminal -- or you're a public figure and it would be embarassing -- this strikes me as falling firmly within the bounds of "no harm, no foul". |
What to do when a job offer is made but with a salary less than what was asked for? | null | In my experience of doing software development for a little longer than I care to remember, salaries are always assumed to be negotiable. I know you said you don't like haggling (a lot of people don't) but you'll have to get used to that and you might have to be a little more flexible. Being able to negotiate something as important as your salary is a very important skill. That said, there might be several reasons why they're not willing to offer more: Here's what I would do: |
Why does the share price tend to fall if a company's profits decrease, yet remain positive? | null | It has got to do with market perceptions and expectation and the perceived future prospects of the company. Usually the expectation of a company's results are already priced into the share price, so if the results deviate from these expectations, the share price can move up or down respectfully. For example, many times a company's share price may be beaten down for increasing profits by 20% above the previous year when the expectation was that it would increase profits by 30%. Other times a company's share price may rise sharply for making a 20% loss when the expectation was that it would make a 30% loss. Then there is also a company's prospects for future growth and performance. A company may be heading into trouble, so even though they made a $100M profit this year, the outlook for the company may be bleak. This could cause the share price to drop accordingly. Conversely, a company may have made a loss of $100M but its is turning a corner after reducing costs and restructuring. This can be seen as a positive for the future causing the share price to rise. Also, a company making $100M in profits would not put that all into the bank. It may pay dividends with some, it may put some more towards growing the business, and it might keep some cash available in case cash-flows fluctuate during the year. |
Should I sell my stocks when the stock hits a 52-week high in order to “Buy Low, Sell High”? | null | One possibility is to lock in gains by selling, where a selling price can attempt to be optimized by initiating a trailing stop loss order. You'll have to look at the pros and cons of that kind of order to see if it is right for you. Another possibility is to begin hedging with options contracts, if that security is optionable. Puts with the appropriate delta will cost over time against future gains in the stock's price, but will protect your wealth if the stock price falls from this high point. These possibilities depend on what your investment goals are. For instance, if you are buying no matter what price because you like the forward guidance of the company, then it changes your capital growth and preservation decisions. |
Would every FX currency pair or public stock that is under the 30 level using Relative Strength Index (RSI) be an undervalued pair? | null | No, and using a 37 year old formula in finance that is as simple as: should make it obvious technical analysis is more of a game for retail traders than investment advice. When it comes to currencies, there are a myriad of macroeconomic occurrences that do not follow a predictable timescale. Using indicators like RSI on any time frame will not magically illuminate broad human psychology and give you an edge. It is theoretically possible for a single public stock's price to be driven by a range of technical traders who all buy at RSI 30 and sell at RSI 70, after becoming a favorite stock on social media, but it is infinitely more likely for all market participants to have completely different goals. |
Is there a good options strategy that has a fairly low risk? | null | You may look into covered calls. In short, selling the option instead of buying it ... playing the house. One can do this on the "buying side" too, e.g. let's say you like company XYZ. If you sell the put, and it goes up, you make money. If XYZ goes down by expiration, you still made the money on the put, and now own the stock - the one you like, at a lower price. Now, you can immediately sell calls on XYZ. If it doesn't go up, you make money. If it does goes up, you get called out, and you make even more money (probably selling the call a little above current price, or where it was "put" to you at). The greatest risk is very large declines, and so one needs to do some research on the company to see if they are decent -- e.g. have good earnings, not over-valued P/E, etc. For larger declines, one has to sell the call further out. Note there are now stocks that have weekly options as well as monthly options. You just have to calculate the rate of return you will get, realizing that underneath the first put, you need enough money available should the stock be "put" to you. An additional, associated strategy, is starting by selling the put at a higher than current market limit price. Then, over a couple days, generally lowering the limit, if it isn't reached in the stock's fluctuation. I.e. if the stock drops in the next few days, you might sell the put on a dip. Same deal if the stock finally is "put" to you. Then you can start by selling the call at a higher limit price, gradually bringing it down if you aren't successful -- i.e. the stock doesn't reach it on an upswing. My friend is highly successful with this strategy. Good luck |
What's the process to buy an old house to tear it down and create a new one? | null | Thank you for your response KeithB and Ross. I was researching more about this and looks like I have to follow all these steps (please, correct me if I'm wrong): |
What are the possible metrics for evaluating annual performance of a portfolio? | null | The Investopedia article you linked to is a good start. Its key takeaway is that you should always consider risk-adjusted return when evaluating your portfolio. In general, investors seeking a higher level of return must face a higher likelihood of taking a loss (risk). Different types of stocks (large vs small; international vs US; different industry sectors) have different levels of historical risk and return. Not to mention stocks vs bonds or other financial instruments... So, it's key to make an apples-to-apples comparison against an appropriate benchmark. A benchmark will tell you how your portfolio is doing versus a comparable portfolio. An index, such as the S&P 500, is often used, because it tells you how your portfolio is doing compared against simply passively investing in a diversified basket of securities. First, I would start with analyzing your portfolio to understand its asset allocation. You can use a tool like the Morningstar X-Ray to do this. You may be happy with the asset allocation, or this tool may inform you to adjust your portfolio to meet your long-term goals. The next step will be to choose a benchmark. Given that you are investing primarily in non-US securities, you may want to pick a globally diversified index such as the Dow Jones Global Index. Depending on the region and stock characteristics you are investing in, you may want to pick a more specialized index, such as the ones listed here in this WSJ list. With your benchmark set, you can then see how your portfolio's returns compare to the index over time. IRR and ROI are helpful metrics in general, especially for corporate finance, but the comparison-based approach gives you a better picture of your portfolio's performance. You can still calculate your personal IRR, and make sure to include factors such as tax treatment and investment expenses that may not be fully reflected by just looking at benchmarks. Also, you can calculate the metrics listed in the Investopedia article, such as the Sharpe ratio, to give you another view on the risk-adjusted return. |
Does a larger down payment make an offer stronger? | null | There is some element of truth to what your realtor said. The seller takes the house off the market after the offer is accepted but the contract is contingent upon, among other things, buyer securing the financing. A lower down payment can mean a higher chance of failing that. The buyer might be going through FHA, VA or other programs that have additional restrictions. If the buyer fails to secure a financing, that's weeks and months lost to the seller. In a seller's market, this can be an important factor in how your bid is perceived by the seller. Sometimes it even helps to disclose your credit score, for the same reason. Of course for your situation you will have to assess whether this is the case. Certainly do not let your realtor push you around to do things you are not comfortable with. Edit: A higher down payment also helps in the situation where the house appraisal does not fare well. As @Dilip Sarwate has pointed out, the particular area you are interested in is probably a seller's market, thus giving sellers more leverage in picking bids. All else equal, if you are the seller with multiple offers coming in at similar price level, would you pick the one with 20% down or 5% down? While it is true that realtors have their own motives to push through a deal as quickly as possible, the sellers can also be in the same boat. One less mortgage payment is not trivial to many. It's a complicated issue, as every party involved have different interests. Again, do your own due diligence, be educated, and make informed decisions. |
What is the best way to stay risk neutral when buying a house with a mortgage? | null | How can one offset exposure created by real-estate purchase? provides a similar discussion. Even if such a product were available in the precise increments you need, the pricing would make it a loser for you. "There's no free lunch" in this case, and the cost to insure against the downside would be disproportional to the true risk. Say you bought a $100K home. At today's valuations, the downside over a given year might be, say, 20%. It might cost you $5000 to 'insure' against that $20K risk. Let me offer an example - The SPY (S&P ETF) is now at $177. A $160 (Dec '14) put costs $7.50. So, if you fear a crash, you can pay 4%, but only get a return if the market falls by over 14%. If it falls 'just' 10%, you lose your premium. With only 5% down, you will get a far better risk-adjusted return by paying down the mortgage to <78% LTV, and requesting PMI, if any, be removed. Even if no PMI, in 5 years, you'll have 20% more equity than otherwise. Over the long term, 5 year's housing inflation would be ~ 15% or so. This process would help insure you are not underwater in that time. Not guarantee, but help. |
Tracking the Madrid Interbank Offered Rate (MIBOR) and the Euro Interbank Offered Rate (EURIBOR) | null | You can find both here: http://www.bde.es/tipos/tipose.htm |
“No taxes to be paid with owning Berkshire” | null | It depends on your investment profile but basically, dividends increase your taxable income. Anyone making an income will effectively get 'lower returns' on their investments due to this effect. If you had the choice between identical shares that either give a dividend or don't, you'll find that stock that pays a dividend has a lower price, and increases in value more slowly than stock that doesn't. (all other things being equal) There's a whole bunch of economic theory behind this but in short, the current stock price is a measure of how much the company is worth combined with an estimation of how much it will be worth in the future (NPV of all future dividends is the basic model). When the company makes profit, it can keep those profits, and invest in new projects or distribute a portion of those profits to shareholders (aka dividends). Distributing the value to shareholders reduces the value of the company somewhat, but the shareholders get the money now. If the company doesn't give dividends, it has a higher value which will be reflected in a higher stock price. So basically, all other things being equal (which they rarely are, but I digress) the price and growth difference reflects the fact that dividends are paying out now. (In other words, if you wanted non-dividend shares you could get them by buying dividend shares and re-investing the dividend as new shares every time there was a payout, and you could get dividend-share like properties by selling a percentage of non-dividend shares periodically). Dividend income is taxable as part of your income right away, however taxes on capital gains only happen when you sell the asset in question, and also has a lower tax rate. If you buy and hold Berkshire Hatheway, you will not have to pay taxes on the gains you get until you decide to sell the shares, and even then the tax rate will be lower. If you are investing for retirement, this is great, since your income from other sources will be lower, so you can afford to be taxed then. In many jurisdictions, income from capital gains is subject to a different tax rate than the rest of your income, for example in the US for most people with money to invest it's either 15% or 20%, which will be lower than normal income tax would be (since most people with money to invest would be making enough to be in a higher bracket). Say, for example, your income now is within the 25% bracket. Any dividend you get will be taxed at that rate, so let's say that the dividend is about 2% and the growth of the stock is about 4%. So, your effective growth rate after taxation is 5.5% -- you lose 0.5% from the 25% tax on the dividend. If, instead, you had stock with the same growth but no dividend it would grow at a rate of 6%. If you never withdrew the money, after 20 years, $1 in the dividend stock would be worth ~$2.92 (1.055^20), whereas $1 in the non-dividend stock would be worth ~$3.21 (1.06^20). You're talking about a difference of 30 cents per dollar invested, which doesn't seem huge but multiply it by 100,000 and you've got yourself enough money to renovate your house purely out of money that would have gone to the government instead. The advantage here is if you are saving up for retirement, when you retire you won't have much income so the tax on the gains (even ignoring the capital gains effect above) will definitely be less then when you were working, however if you had a dividend stock you would have been paying taxes on the dividend, at a higher rate, throughout the lifetime of the investment. So, there you go, that's what Mohnish Pabrai is talking about. There are some caveats to this. If the amount you are investing isn't large, and you are in a lower tax bracket, and the stock pays out relatively low dividends you won't really feel the difference much, even though it's there. Also, dividend vs. no dividend is hardly the highest priority when deciding what company to invest in, and you'll practically never be able to find identical companies that differ only on dividend/no dividend, so if you find a great buy you may not have a choice in the matter. Also, there has been a trend in recent years to also make capital gains tax progressive, so people who have a higher income will also pay more in capital gains, which negates part of the benefit of non-dividend stocks (but doesn't change the growth rate effects before the sale). There are also some theoretical arguments that dividend-paying companies should have stronger shareholders (since the company has less capital, it has to 'play nice' to get money either from new shares or from banks, which leads to less risky behavior) but it's not so cut-and-dried in real life. |
Given a certain yearly savings, how much can I spend on a capital improvement? NPV of future cash flow | null | This investment does not have a payback period as the net present value of your investment is negative. Your investment requires an initial cash outlay of $40,000 followed by annual savings of $2060 for the next 20 years. Your discount rate is 5% at which the NPV is $-14327.85 as calculated below by using this JavaScript financial functions library tadJS that is based on a popular tadXL add-in for Excel 2007, 2010 and 2013. |
Tenant wants to pay rent with EFT | null | Other options would be to use paypal, your tenant would only need your e-mail address. Most banks have a similar system to do a person-to-person transfers. My bank uses an e-mail address and only the last 4 digits of the account number. |
Why is day trading considered riskier than long-term trading? | null | Largely, because stock markets are efficient markets, at least mostly if not entirely; while the efficient market hypothesis is not necessarily 100% correct, for the majority of traders it's unlikely that you could (on the long term) find significant market inefficiencies with the tools available to an individual of normal wealth (say, < $500k). That's what frequent trading intends to do: find market inefficiencies. If the market is efficient, then a stock is priced exactly at what it should be worth, based on risk and future returns. If it is inefficient, then you can make more money trading on that inefficiency versus simply holding it long. But in stating that a stock is inefficient, you are stating that you know something the rest of the market doesn't - or some condition is different for you than the other million or so people in the market. That's including a lot of folks who do this for a living, and have very expensive modelling software (and hardware to run it on). I like to think that I'm smarter than the far majority of people, but I'm probably not the smartest guy in the room, and I certainly don't have that kind of equipment - especially with high frequency trading nowadays. As such, it's certainly possible to make a bit of money as a trader versus as a long-term investor, but on the whole it's similar to playing poker for a living. If you're smarter than most of the people in the room, you might be able to make a bit of money, but the overhead - in the case of poker, the money the house charges for the game, in the case of stocks, the exchange fees and broker commissions - means that it's a losing game for the group as a whole, and not very many people can actually make money. Add to that the computer-based trading - so imagine a poker game where four of the eight players are computer models that are really good (and actively maintained by very smart traders) and you can see where it gets to be very difficult to trade at a profit (versus long term investments, which take advantage of the growth in value in the company). Finally, the risk because of leverage and option trading (which is necessary to really take advantage of inefficiencies) makes it not only hard to make a profit, but easy to lose everything. Again to the poker analogy, the guys I've known playing poker for a living do it by playing 10-20 games at once - because one game isn't efficient enough, you wouldn't make enough money. In poker, you can do that fairly safely, especially in limit games; but in the market, if you're leveraging your money you risk losing a lot. Every action you take to make it "safer" removes some of your profit. |
23 and on my own, what should I be doing? | null | Okay, since you work hourly there are two substantial changes you can make: 1) Move out of Astoria and closer to Jersey City, such as, to Jersey City. Move out of NYC into Jersey!? Heresy! But that ship sailed when you started working there. 2) Work more hours now that you aren't spending 2 hours and 30 minutes of your life commuting. You can make an extra $125 per day, in theory. Since this is $625 more a week, and $2500 a month, it is a substantial change you can make. Presupposing that your current contract has more hours to work. |
Does gold's value decrease over time due to the fact that it is being continuously mined? | null | Like anything else, the price/value of gold is driven by supply and demand. Mining adds about 2% a year to the supply. Then the question is, will the demand in a given year rise by more or less than 2%. ON AVERAGE, the answer is "more." That may not be true in any given year, and was untrue for whole DECADES of the 1980s and 1990s, when the price of gold fell steadily. On the other hand, demand for gold has risen MUCH more than 2% a year in the 2000s, for reasons discussed by others. That is seen in the six-fold rise in price, from about $300 an ounce to $1800 an ounce over the past ten years. |
When I calculate “internal rate of return (IRR)”, should I include cash balance? | null | Both are correct depending on what you are really trying to evaluate. If you only want to understand how that particular investment you were taking money in and out of did by itself than you would ignore the cash. You might use this if you were thinking of replacing that particular investment with another but keeping the in/out strategy. If you want to understand how the whole investment strategy worked (both the in/out motion and the choice of investment) than you would definitely want to include the cash component as that is necessary for the strategy and would be your final return if you implemented that strategy. As a side note, neither IRR or CAGR are not great ways to judge investment strategies as they have some odd timing issues and they don't take into account risk. |
Can a stop loss order be triggered by random price? | null | Typically this isn't a random order- having a small volume just means it's not showing on the chart, but it is a vlid price point. Same thing would've happened if it would've been a very large order that shows on the chart. Consider also that this could have been the first one of many transactions that go far below your stop point - would you not have wanted it to be executed then, at this time, as it did? Would you expect the system to look into future and decide that this is a one time dip, and not sell; versus it is a crash, and sell? Either way, the system cannot look in the future, so it has no way to know if a crash is coming, or if it was a short dip; therefore the instrcutions are executed as given - sell if any transfer happens below the limit. To avoid that (or at least reduce the chance for it), you can either leave more distance (and risk a higher loss when it crashes), or trade higher volumes, so the short small dip won't execute your order; also, very liquid stocks will not show such small transaction dips. |
As an investing novice, what to do with my money? | null | A lot of people on here will likely disagree with me and this opinion. In my opinion the answer lies in your own motives and intentions. If you'd like to be more cognizant of the market, I'd just dive in and buy a few companies you like. Many people will say you shouldn't pick your own stocks, you should buy an index fund, or this ETF or this much bonds, etc. You already have retirement savings, capital allocation is important there. You're talking about an account total around 10% of your annual salary, and assuming you have sufficient liquid emergency funds; there's a lot of non-monetary benefit to being more aware of the economy and the stock market. But if you find the house you're going to buy, you may have to liquidate this account at a time that's not ideal, possibly at a loss. If all you're after is a greater return on your savings than the paltry 0.05% (or whatever) the big deposit banks are paying, then a high yield savings account is the way I'd go, or a CD ladder. Yes, the market generally goes up but it doesn't ALWAYS go up. Get your money somewhere that it's inured and you can be certain how much you'll have tomorrow. Assuming a gain, the gain you'll see will PALE in comparison to the deposits you'll make. Deposits grow accounts. Consider these scenarios if you allocate $1,000 per month to this account. 1) Assuming an investment return of 5% you're talking about $330 return in the first year (not counting commissions or possible losses). 2) Assuming a high yield savings account at 1.25% you're talking about $80 in the first year. Also remember, both of these amounts would be taxable. I'll admit in the event of 5% return you'll have about four times the gain but you're talking about a difference of ~$250 on $12,000. Over three to five years the most significant contributor to the account, by far, will be your deposits. Anyway, as I'm sure you know this is not investment advice and you may lose money etc. |
After Market Price change, how can I get it at that price? | null | Buying stocks is like an auction. Put in the price you want to pay and see if someone is willing to sell at that price. Thing to remember about after hours trading; There is a lot less supply so there's always a larger bid/ask price spread. That's the price brokers charge to handle the stocks they broker over and above the fee. That means you will always pay more after the market closes. Unless it is bad news, but I don't think you want to buy when that happens. I think a lot of the after market trading is to manipulate the market. Traders drive up the price overnight with small purchases then sell their large holdings when the market opens. |
How to acquire assets without buying them? | null | Your question seems to be premised on your personal understanding of economics, and asking that people present to you an explanation of business transactions that is consistent with your own personal worldview. But your premises are flawed, so an accurate answer should not accept them. The basics of trade is that something is worth more to one person than another; a wheat farmer has more wheat that they could possibly eat, and so it has no value other than what they can get by selling it, while an accountant will starve if they do not have any food and thus is willing to pay what the market demands. The two parties can both be better off by having a transaction. The other motivation for transactions is that parties may disagree as to what something is worth; even if one party will lose from the transaction, they may both believe they will profit. |
Tenant wants to pay rent with EFT | null | It isn't EFT, but you might mention to your tenant, that many banks offer a Bill Pay service (example) where the bank will automatically mail a check to the right person for you. I have my rent setup this way. My bank will send a rent check directly to my landlord 5 days before it is due. |
Computer vendor not honoring warranty. What's the next step? | null | Give him a second chance to fix it. Some computer problems are hard to nail down. THIS: So you're a tech. It's common to work a problem, do procedure A and B that should've fixed it, test repeatedly to make sure it's fixed, and hand it back to the customer... and then the customer, under his operating conditions, has it fail again. If it comes back to you, you have the foreknowledge that A and B didn't work. And you immediately try C and get it fixed. This knowledge does not magically transfer to other shops. So the user goes into Yelp Mode and storms off angry to another shop... they blindly try A and B again, burn in, send him home, it fails again, user's even madder. This is how computers DON'T get fixed. 5% discount for cash is reasonable. If you want to know why that's normal, sign up for Square. Credit cards and checks have a significant overhead, including the risk of bounces and chargebacks, and that adds up to about 5%. Only a few businesses actively solicit it, but many family-owned businesses would accept it if you offered. So firstoff, does the shop give you a creep factor other than your feelings about him not fixing it the first time? If so, cut your losses and bolt. You will definitely need to pay cash to have this fixed properly. Otherwise take it back to him and give him a chance to fix it properly. Having dealt with a lot of customers, what you say sounds an awful lot like "problem so minor I was able to use it for 9 months before bothering to get it fixed which I'm only doing because the warranty is ending", and therefore, "I am resentful about having to give it up for an extended period of time to have it fixed because the problem Just Isn't That Important". If that's true, you're in a values conflict and you might just be better off recognizing that. Cheap PCs are cheap. But the vast majority of niggling PC problems are not in fact hardware problems, they are just MS-Windows being MS-Windows. |
Why are some long term investors so concerned about their entry price? | null | If you think of it in terms of trying to get an annual return on your investment over the long haul, you can do a simple net present value analysis to decide your buy price. If you're playing conservative with the investments and taking safety over returns, you will still have some kind of expectation of that return will be. Paying slightly more will drag down your returns, perhaps less than what you want to get. If you really want to get your desired X%, then stick to your guns and don't go down the slippery slope of reaching. If 1% off isn't bad, then 2% off isn't all that bad, and maybe 3% is OK too for the right situation, etc. Gotta have rules and stick to them. You never know what opportunities will be around tomorrow. The possible drops in value should be built into your return expectations. |
Can paying down a mortgage be considered an “investment”? | null | Paying down your mortgage saves lots of interest. With a long term mortgage you end up paying twice us much to the bank than the sales price of the house. Even low mortgage interests are higher than short term bonds. The saving of those interest are as much an investment as the interest you get from a bond. However, before paying off a mortgage other higher interest loans should be paid off. Also it should be considered if the mortgage interest create a tax reduction in the comparison with any other options. |
How to manage paying expenses when moving to a weekly pay schedule and with a pay increase? | null | Unlike other responses, I am also not good with money. Actually, I understand personal finance well, but I'm not good at executing my financial life responsibly. Part is avoiding tough news, part is laziness. There are tools that can help you be better with your money. In the past, I used YNAB (You Need a Budget). (I'm not affiliated, and I'm not saying this product is better than others for OP.) Whether you use their software or not, their strategy works if you stick with it. Each time you get paid, allocate every dollar to categories where your budget tells you they need to be, prioritizing expenses, then bills, then debt reduction, then wealth building. As you spend money, mark it against those categories. Reconcile them as you spend the money. If you go over in one category (eating out for example), you have to take from another (entertainment). There's no penalties for going over, but you have to take from another category to cover it. So the trick to all of it is being honest with yourself, sticking to it, recording all expenditures, and keeping priorities straight. I used it for three months. Like many others, I saved enough the first month to pay the cost of the software. I don't remember why I stopped using it, but I wish I had not. I will start again soon. |
Why should I trust investment banks' ratings? | null | Investment banks will put out various reports and collect revenues from that along with their banking activity. I don't read them or care to read them myself. If banks can make money from something, they will likely do it, especially if it is legal. To take the Tesla stock question for a moment: Aren't you ruling out that yesterday was the day that Tesla was included in the Nasdaq 100 and thus there may be some people today exiting because they tried to cash in on the index funds having to buy the stock and bid it up in a sense? Or as @littleadv points out there could be those tracking the stocks not in the index that would have been forced to sell for another idea here. The Goldman note is a possible explanation but there could well be more factors in play here such as automated trading systems that seek to take advantage of what could be perceived as arbitrage opportunities. There can be quick judgments made on things which may or may not be true in the end. After all, who knows exactly what is causing the sell-off. Is it a bunch of stop orders being triggered? Is it people actually putting in sell order manually? Is it something else? There are lots of questions here where I'm not sure how well one can assign responsibility here. |
Company revenue increased however stock price did not | null | looking over some historical data I cannot really a find a case where a stock went from $0.0005 to $1 it almost seem that once a stock crosses a minimum threshold the stock never goes back up. Is there any truth to that? That would be a 2000X (200,000%) increase in the per-share value which would be extraordinary. When looking at stock returns you have to look at percentage returns, not dollar returns. A gain of $1 would be minuscule for Berkshire-Hathaway stock but would be astronomical for this stock,. If the company is making money shouldn't the stock go up? Not necessarily. The price of a stock is a measure of expected future performance, not necessarily past performance. If the earnings had been more that the market expected, then the price might go up, but if the market sees it as an anomaly that won't continue then there may not be enough buyers to move the stock up. looking at it long term would it hurt me in anyway to buy ~100,000 shares which right now would run be about $24 (including to fee) and sit on it? If you can afford to lose all $24 then no, it won't hurt. But I wouldn't expect that $24 to turn into anything higher than about $100. At best it might be an interesting learning experience. |
Suitable Vanguard funds for a short-term goal (1-2 years) | null | If you are younger, and you not under undue pressure to buy a home at any particular time, investing in the market is a reasonable way to prepare. Your risk tolerance should be high. Understand that this means you may buy in 3-4 years instead of 1-2 if the market takes a down turn. It took ~3-4 years for the S&P 500 to recover from the 2008 crash. I doubt anything that severe is in the making, but there is always an element of risk involved in investing. If you and your family will be busting at the seams of your current rental in a year, then maybe the bond fund advice others have provided is a better option. If you are willing to be flexible, a more aggressive strategy might be appropriate. Likely, you want something along the lines of the Vanguard S&P 500 mutual fund - something that is diversified (a large number of stocks), in relatively safe companies (in this case the 500 companies that Standard and Poor's think are most likely to repay corporate bonds), and 'indexed' vice 'actively managed' (indexed funds have lower fees because they are using 'rules' to pick the stocks rather than paying a person to evaluate them.) It's going to depend on you and your situation - and regardless of what you choose consistency will be key: put your investment on automatic so it happens every month without your input. |
Is it common in the US not to pay medical bills? | null | Personal story here: I ended up at the Santa Monica hospital without insurance and left with a bill of $30k-$35k. They really helped me, so I felt like I had a duty to pay them. However, close inspection revealed ridiculous markups on some items which I would have disputed, but I noticed that I had been billed for a few thousands of services not rendered. I got very mad at them for this, they apologized, told me they'd fix it. I never heard back from them and they never put it in collection either. I'm assuming they (rightfully) got scared that I'd go to court and this would be bad publicity. Sometimes I feel guilty I didn't pay them anything, sometimes I feel like they tried to screw me. |
Why buy insurance? | null | People's value of money is not always linear. Consider an individual with $1000 in the bank. I'm going to look at amounts of debt by orders of magnitude: Now its pretty easy to see a order of magnitude increase in impact from $100 to $1000, and it becomes slightly worse for the $10,000 case due to debt. However, one more order of magnitude, going to $100,000, and suddenly it becomes hard to argue that there's a mere "order of magnitude more hurt" than the $10,000 case. From the cases I've read, those sorts of situations can be far far worse than the monetary cost could convey. Insurance companies are in a good position to absorb $100,000 of debt if something happens, far better position than the individual. They rely on the central limit theorem: in general, they don't have to pay out all at once. The insurance companies have their limits too. When hurricane Katrina came through, the insurance companies had a tremendously difficult time dealing with so many claims all at once. Just like the individuals, they found a sudden change in how much value they had to put on their monetary debts! |
Risks associated with investing in dividend paying stocks for short term income. Alternatives? | null | Usually when a company is performing well both its share price and its dividends will increase over the medium to long term. Similarly, if the company is performing badly both the share price and dividends will fall over time. If you want to invest in higher dividend stocks over the medium term, you should look for companies that are performing well fundamentally and technically. Choose companies that are increasing earnings and dividends year after year and with earnings per share greater than dividends per share. Choose companies with share prices increasing over time (uptrending). Then once you have purchased your portfolio of high dividend stocks place a trailing stop loss on them. For a timeframe of 1 to 3 years I would choose a trailing stop loss of 20%. This means that if the share price continues going up you keep benefiting from the dividends and increasing share price, but if the share price drops by 20% below the recent high, then you get automatically taken out of that stock, leaving your emotions out of it. This will ensure your capital is protected over your investment timeframe and that you will profit from both capital growth and rising dividends from your portfolio. |
Should I invest my money in an ISA or Government bonds? (Or any other suggestion) | null | I recommend investing in precious metals like gold, considering the economic cycle we're in now. Government bonds are subject to possible default and government money historically tends to crumble in value, whereas gold and the metals tend to rise in value with the commodies. Stocks tend to do well, but right now most of them are a bit overvalued and they're very closely tied to overvalued currencies and unstable governments with lots of debt. I would stick to gold right now, if you're planning on investing for more than a month or so. |
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